ipex presentation

7/27/2019 IPEX Presentation

1/37

Present, Future and the WayForward Poultry Industry in

PakistanSeptember 26, 2013

By:

Khalil SattarChairman

Pakistan Poultry Association


2/37

Present Status ofPoultry Industry in Pakistan (2012)

Broiler Parent Stock Placement 12 Million

Broiler Day Old Chicks 1.2 Billion

Broiler (Table Birds) Produced1.05 Billion

Average Annual Growth 12.5%

Live Weight1.84 Billion Kg

Broiler Meat including Giblets 1.34 Billion Kg

Per Capita Poultry Meat Availability 7.4 Kg

Layer Parent Stock 0.75 Million

Table Egg Layers 40 Million

Total Table Egg Production 11.2 Billion

Feed 7 Million MT

Contribution to GDP 1.7%

Processing/Value Addition 1% only

Note:

Statistics provided in Economic Survey of Pakistan with regard to poultry are incorrect


3/37

More than 70% of Broiler Production

About 80% of Egg Production

About 85% of Feed Production

100% Processing and Value Addition

Punjabs Contributionto Poultry Production


4/37

Contribution of Poultry Industryto the National Economy

Poultry is by far the largest consumer of agro-residue andby-products, such as, oilseed meals, wheat bran, ricepolishing, broken rice, corn gluten meal, guar meal, fishmeal, animals by-product meal.

During 2011-12, about 7 million ton of poultry feed wasproduced, comprising about 3.5 million tons of theseresidues and by-products; thus providing extremely valuablecontribution towards reduction in the cost of principal fooditems, like edible oils, Atta, rice, fish, meat, sugar, glucose,etc. Thus poultry not only made possible their availability at

lower prices to the consumers, but also enabled the agroindustries to pay a higher price for the crops which served asan incentive to produce more.


5/37

Contribution of Poultry Industryto the National Economy

In addition to the agro residue utilisation,poultry sector, during 2011-12, consumed about3.5 million tons i.e. 61% of Maize and Rice Tip

Production. The increase in production wassustained by higher prices offered in the poultrysector, which has directly benefited the farmersin the rural areas of Pakistan to produce more.


6/37

Poverty Alleviation

1.7 Million Jobs:

Poultry, during 2011-12, has provided approximately 1.7 million jobsto skilled, semi-skilled and unskilled workers deep into the rural areas;thereby reducing the influx of the rural population into urban areas insearch of jobs.

Low Investments:

In addition, since it can be started with low investment, it is animportant means of self-employment and provides an opportunity towomen to be self-employed. It has thus played an important role inpoverty alleviation by improving rural economy.

Produce Across the Country:

Poultry, as an alternate food, is now produced in remote areas of thecountry, like, Gilgit, Skardu, Turbat, Kalat, Mastung, Parachinar,Tahrparkar, D. G. Khan, Loralai, Zohb, Mianwali, etc. Thus, poultry hascontributed to the national economy in many a surpassing ways.


7/37

Comparison of Deflated Pricesof Selected Food Items

2001-02 vs. 2011-12

ItemsPrice per Kg Inflation

CorrectedPrice (Rs.) *

InflationCorrected

Increase (%)

AverageAnnual

Increase2001-02 2011-12

A B C D EChicken 52.04 125.73 59.59 14.50 1.4Eggs (Farm) Per Dozen

28.57 81.63 38.69 35.41 3.5

Beef (withbone)

55.19 250.27 189.56 89.56 9.0

Mutton (Avg.quality)

111.53 477.48 354.80 254.80 25.4

* Deflated to the extent of (%): 110.00

Current Price per Kg (B) / Deflation % = Inflation Corrected Price (C)125.73 / 2.11 = Inflation Corrected Price (C)59.59 = Inflation Corrected Price (C)

Inflation Corrected Price (C) - Previous Price per Kg (A) / Previous Price per Kg (A) x 100 = InflationCorrected Increase (D)59.59 52.04 / 52.04 x 100 = Inflation Corrected Increase % (D)

7.55 / 52.04 x 100 = 14.50 Inflation Corrected Increase % (D)Data Source: Economic Survey of Pakistan

Note: For the year 2012-13, over 2001-02, deflated prices are 64% lower


8/37

Wholesale Price Movement of Broilers

in Lahore

Jan,

02

Mar

MayJul

Sep

Nov

Jan,

03

Mar

MayJul

Sep

Nov

Jan,0

4

Mar

MayJul

Sep

Nov

Jan,

05

Mar

MayJul

Sep

Nov

Jan,

06

Mar

MayJul

Sep

Nov

Jan,0

7

Mar

MayJul

Sep

Nov

Jan,0

8

Mar

MayJul

Sep

Nov

Jan,

09

Mar

May

July

Sep

Nov

an,

2010

Mar

May

July

Sep

Nov

an,

2011

Mar

May

July

Sep

Nov

an,

2012

Mar

May

July

Sep

Nov

an,

2013

Mar

May

25

35

45

55

65

75

85

95

105

115

125

135

145

155

165

175

Price (in Rupees)

2002 2005 2006 2007 2008 2009 2010 2013201120042003 2012


9/37

Price Mechanism of Poultry Products

Since poultry products, Day Old Chicks, Broilersand Table Eggs are perishable generic products,they are sold as a commodity.

The prices are truly governed by demand-supplyin a free market mechanism.

The demand is highly elastic; a decrease in pricewidens the consumer base and an increase in

price narrows the consumer base.


10/37

Factors Affecting Demand of Poultry Products

Prices influenced by supplementary food items:

Both broiler and egg demand is influenced by the prices of supplementaryfood items like beef, mutton, pulses, etc.

Climatic Changes:

Broiler and egg demand is influenced by fluctuating climate changes. Eggdemand decreases during summers and with the school closures andincrease during winters

Islamic Calendar:Broiler and egg demand also reacts to Islamic calendars. For instance,during the month of Muharram, Ramadan, Safar and Zul Hajj chicken meatdemand goes down and during the month of Shaban, Shawwal and Rabi-al-Awwal, being wedding season, demand goes up.

Demand also changes with the percentage increase in per capita income.


11/37

Poultry Fluctuating Fortunes

July 1996 Sales Tax:

In July 1996, imposition of sales tax on poultry feedcaused a steep rise in price of poultry feed, forcing

farmers to sell products below the cost of production,closing about 40% of farms due to heavy losses.Listening to genuine demands of farmers, Govt. ofPakistan withdrew the sales tax on poultry feed inSeptember 1997.

Marriage Wasteful Expenditures:In 1997, Prohibition of Wasteful Expenditures on

Marriages Ordinance resulted in a ban on serving foodon marriages. The poultry industry lost 40% of itsproduction.


12/37

Disease A huge cost 3% vs. 12%

2004 Bird Flu:

2004 saw a 40% reduction in production due tosevere losses and adverse impact of Bird Flu.

2007 Bird Flu:

Once again in 2007, faced with Bird Flu and a 70%

increase in feed prices, industry suffered heavylosses. Day Old Chicks were distributed Free of Costand eventually embryos were pulled out of incubatorsand destroyed resulting in closure of more than 50%broiler breeding farms, dropping the production backto 430 million broilers.



13/37

Chinas Example

During recent Avian Influenza outbreak in China,

the Chinese Government provided US$ 96.77million subsidy to support the poultry industry

Poultry farmers were given 15 Yuan (US$ 2.4)against each bird

Government of China also purchased chickenfrom farmers to help them offset the losses

No such compensations were given to PoultryFarmers in Pakistan, yet they bounced back inproduction



14/37

THE FUTURE


15/37

Expected Production 2018

1.4 billion broilers by 2018

The sector at current rate of growth, by the endof 2018, would be producing 1.4 billion broilers

from current 1.02 billion.

In order to sustain the existing growth rate of15% production, the production of feedingredients have to be increased particularly ofcorn at 15% per annum.


16/37

Major Constraints and Recommendations

to Sustain Growth in Production

Disease Control

Diagnostic Facilities and Services have notincreased at the same rate as the demand for

services.

Well equipped Government VeterinaryLaboratories capable of carrying out serologyand virus isolation need to be established atdistrict levels in all intensive poultry producingareas of the country.


17/37

Price Control A Serious Constraint

to Recovery of Lost Production

Market Interventions Counter Productive: Ministry ofFood & Agriculture has already advised the ProvincialChief Secretaries against price fixation and control ofpoultry products. Nonetheless, frequent price fixation

and controls by the Administration by use of coercivemeasures of arrest and fines, particularly in theabsence of any relief during periods of severe losses,is unjustified.

Hoarding or manipulation of perishable genericcommodity produced by over 30,000 farms is notpossible.

It sends wrong signals to the farmers and discouragesthem to place replacement flocks. The practice mustbe forcefully discouraged.


18/37

Major Constraints and Recommendations

to Sustain Growth in Production

Live Bird Markets

Live bird markets have neither expended nor arecapable of handling growing production. Distribution

of live birds costs not only the producers, thewholesalers, retailers, the consumers and thenational economy on account of transit mortalitiesand loss of weights

Price Instability

The frequent boom and burst to be prevented bybringing in stability through poultry processing.

Value Addition the next Step Forward.


19/37

The Next Step ForwardProcessing and Value Addition


20/37

Benefit to Consumers

Generic Commodity Converted to BrandedProducts

Price Stabilization

Diversification in Products

Convenience

Competitive Pricing


21/37

Benefit to Consumers

Branding Benefits

Safeguarding Brand Equity brings about:

Quality Assurance: Free of Bacteria, Virus, Toxins,

Chemicals and Drug Residues (Vertical Integration)Food Safety (Vertical Integration An ImportantFactor)

Over 250 Known Food borne Illnesses; someimportant ones are:

Campylobacteriosis

E-Coli

Salmonellosis, Etc.


22/37

Benefit to the State

Means to Enhances Poultrys contribution in GDP byover 250%

(Rs 138 to yield Rs 512)

Current Processing is about 1% of Production

Other major producing countries process 80 to 100%

Exportable Products

Brings Foreign Exchange Earnings

Safeguards Health of the Nationals

Less Illness Reduces Subsidies for Public HealthCare


23/37

Exports

World Halal Food Trade of US$ 661 Billion

Possible after Processing only

Potential: World Halal Food Trade in 2010 is worth US$ 661 Billion

Middle Eastern Countries US$ 3.87 Billion

Countries of our interest, because of being in close proximity orbeing Muslim countries, requiring Halal products, imported chickenmeat in the year 2010 to the tune of US $3.874 billion, growingapproximately @ 5-10% per annum

Pakistan, being predominantly a Muslim country, stands tobenefit from growing demand of Halal food world over

US$440 Million from 10% Value Added Exports

10% Export of the Current Live Birds, when converted to ValueAdded Products i.e. 80,000 MT @ US$5500/MT, could fetch over$440 Million per annum


24/37

Way Forward- Government to be a factor

Fiscal Incentives

Fiscal incentives to reduce cost of production to bringabout economy of scales.

Zero rating must be restored.

Withdrawal of Zero Rating of Sales Tax on Processedand Value Added Products has increased the cost ofproduction by Rs 20 45/Kg. This would reduce thedemand and defeat the economy of scale.

Removal of Anomalies: Lysine, Methionine

Import of Machinery, Equipment and Implements: Freeof Advance Income Tax to reduce cost of investment.


25/37


Fiscal Incentives

The UK VAT Act 1994 Schedule-8 Group-1specifies food of a kind used for humanconsumption is Zero Rated. The term foodincludes products eaten as part of a meal or asa snack. Food items are not only exempted but

are zero rated and entitled to input tax credit.In USA too, many States exempt all food itemswhether processed or unprocessed frompayment of VAT.


26/37

Way Forward

- Government to be a factor

Free Trade Agreements

Free Trade Agreement should, in fact, be Fair TradeAgreements.

No FTAs and MFN should include poultry and poultryproducts unless both the countries have same regulationsand protocols ensuring both countries have level playingfield to have equal opportunities to export to one another.The poultry sector must be taken on board for evaluatingprotocols and regulations for every FTA or MFN where

poultry is to be included. In the face of power outages and existing rate of import

duties on inputs, level playing field would be difficult.


27/37


Fiscal Incentives

For the purpose of exports, enact rules andregulations for food security to the satisfaction

of the importing countries without whichexports cannot take place.

Import duties on processed and value addedproducts are only 25% and under FTAs areeither free of import duties (Malaysia) or attractvery low rate of import duty as in the case ofChina.


28/37


Fiscal Incentives

Import Duties to be Enhanced

The Indian Example: On entry of and commencing

imports by multinational fast food chains, theIndian Government clamped 100% import duty onimportation of chicken meat and its value addedproducts. Our Government reduced the importduty from 50% to 25%. Though the bonded rate of

duty filed by the Government of Pakistan underWTO regime was 100%.

In view of higher cost of production, a minimumprotective rate of duty should be increased from25% to 50%.


29/37


Fiscal Incentives

Imported inputs for producing value addedproducts covered under PCT Headings

0904.1200, 0910.9100, 1905.9000, 2103.9000and 2501.0090 are subject to 15% to 35% rateof import duty and 17% sales tax. On the otherhand, finished products are imported free ofduty.

Import duties and sales tax on the above PCTheadings needs to be withdrawn for the poultryprocessing sector under specific requirements.


30/37

Thank You!


31/37

CHICKEN MEAT IMPORTED BY COUNTRIES

OF OUR INTEREST IN 2010

Country 000's of US$

UAE

484,390

Saudia Arabia 1,230,568

Oman

116,630

Kuwait

322,442Yemen

169,242

Russia

823,966

CIS


32/37

Value Addition to Chicken Increases GDP

ESTIMATED PRODUCTION OF BROILERS PERANNUM

ANo ofBirds

1 Billion

BIRDS SOLD IN LIVE FORM

Average Weight of a Live Bird B Kg 1.75

Average Selling Price C Rs/LWKg 138.15

Average Selling Price per Bird - (B x C) D Rs241.7

6

REVENUE from live Chicken: (A x D) Rupees 242 Billion

INITIAL VALUE ADDITION BIRDS SOLD AS DRESSED WHOLE CHICKEN

Average Price of Raw Skinless Carcass E Rs/Kg277.2

2

Live bird yield of 55% F Grams962.5

0

Meat Value per bird (E x F) G Rs266.8

2

Bye-parts Recovery per Bird H Rs 24.71

Revenue per bird (G + H) I291.5


33/37

Value Addition to Chicken Increases GDP

BIRDS SOLD AS BONELESS MEAT

Average Price of Raw Meat L Rs/Kg497.0

0

Boneless Meat per bird at yield of 22.70% M Grams397.2

5

Meat Value per bird (F x G) N Rs197.4

3

Drumsticks, wings, bone carcass & byeparts Recovery/Bird

O Rs107.8

9

Revenue per bird (H + I) P305.3

3

Percentage Addition over live 26%

REVENUE From Boneless Meat (A x P) Rupees 305 Billion

VALUE ADDITION TO MEAT

Average Price of Value Added Products Q Rs/Kg511.5

8

Birds required to Produce Boneless Meatfor 1 kg of Value Added Products

R 1.26


34/37


35/37


36/37

Comparison of Deflated Prices

of Selected Food Items

2001-02 vs. 2011-12


Corrected Price(Rs.) *

InflationCorrected

Increase (%)2001-02 2011-12

A B C D

Chicken 52.04 150.45 71.30 37Eggs (Farm) Per Dozen

28.57 89.43 42.38 48

Beef (with bone) 55.19 250.27 118.61 114.91Mutton (Avg.quality)

111.53 477.48 226.29 103



Inflation Corrected Price (C) - Previous Price per Kg (A) / Previous Price per Kg (A) x 100 = InflationCorrected Increase (D)71.30 52.04 / 52.04 x 100 = Inflation Corrected Increase % (D)19.26 / 52.04 x 100 = 37 Inflation Corrected Increase % (D)Data Source: Economic Survey of Pakistan

Note: For the year 2012-13, over 2001-02, deflated prices are 64% lower


37/37

Comparison of Deflated Prices

of Selected Food Items

2001-02 vs. 2011-12


Corrected Price(Rs.) *

InflationCorrected

Increase (%)2001-02 2011-12

A B C D

Chicken 43.25 125.73 59.59 38Eggs (Farm) Per Dozen

52.00 81.63 38.69 (26)

Beef (with bone) 55.19 250.27 118.61 114.91Mutton (Avg.quality)

111.53 477.48 226.29 103



Inflation Corrected Price (C) - Previous Price per Kg (A) / Previous Price per Kg (A) x 100 = InflationCorrected Increase (D)59.59 43.25 / 43.25 x 100 = Inflation Corrected Increase % (D)16.34 / 43.25 x 100 = 37.78 Inflation Corrected Increase % (D)Data Source: Economic Survey of Pakistan

Note: For the year 2012 13 over 2001 02 deflated prices are 64% lower

ipex presentation

Documents