Rising raw material costs throw spanner on feed industry’s recovery
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MONDAY, JANUARY 30, 2023
Rising raw material costs throw spanner on feed industry’s recovery

Industry

Salah Uddin Mahmud
20 November, 2021, 03:15 pm
Last modified: 20 November, 2021, 04:06 pm

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Rising raw material costs throw spanner on feed industry’s recovery

The skyrocketing freight cost comes on top of imported raw materials that continue to be very expensive

Salah Uddin Mahmud
20 November, 2021, 03:15 pm
Last modified: 20 November, 2021, 04:06 pm
Costly raw materials leave feed industry in trouble

Rising raw material prices have now put a spoke in the wheel of the feed industry that had been running on a recovery track with the reboot of economic activities after the pandemic had eased off. 

Industry insiders say they are now going through a time worse than Covid-19, with raw material prices both at domestic and global markets shooting up to 40% on average.

Khondaker Monsur Hossain, managing director of Aleya Feeds Ltd that produces poultry and fish feed, told The Business Standard, "We are still going through a bad patch only because of rising raw material prices even though economic activities have reopened."

On many occasions, many of them are having to sell feed even at a loss of up to Tk5 per kg as they could not raise prices, considering the survival of poultry and fish farms on which their business relies, he said.

"We are now buying maize at Tk30-Tk31 per kg although we would usually get it for Tk22 per kg at this time of a year," he noted. Maize has a 55% presence in poultry feed.

This feed raw material now costs $330 per tonne in the global market, with a massive jump from only $180 per tonne, Monsur also said, adding that they still have to import 40% of raw material meant for producing feed.

To rub salt into their wounds, the skyrocketing freight cost comes on top of imported raw materials that continue to be very expensive, the industry people say. 

But feed mill owners cannot entirely pass on the growing cost burden, which is translating into a frequent rise in their production costs, to their consumers – poultry, shrimp, fishery and cattle farms that are also trying to ride out pandemic shocks.

They could only hike feed prices by 10%. So, many small mills had to shut down for failing to bear rising costs, leading to a 20%-25% drop in production, feed producers say. 

"The rising costs of raw materials are seriously hurting feed producers and marginal farmers," said Md Ahsanuzzaman, general secretary of Feed Industries Association of Bangladesh. 

The mills cannot raise feed prices in keeping with rising production costs, considering the interest of farm owners. Besides, they are not timely getting payments from sales on credit to dealers, he also said.

Only middlemen are profiting by charging high for feed, much to the suffering of marginal farm owners, Ahsanuzzaman said. 

"At a time when we are trying to dispel pandemic blues, an unusual hike in raw material prices put us in a tight spot," he pointed out.

He demanded that the government slash a tax on their profits to 5% from the existing 15%.

Farm owners buy 80% feed for poultry, 5%-10% for cows and 50% for fish. The demand for feed in the country now stands at 70-75 tonnes a year, 99% of which is supplied by local companies.

"But we still need to import shrimp feed," Ahsanuzzaman said.

Performance of three publicly-listed feed makers 

In the July-September quarter of the current fiscal year, three publicly-listed feed makers –Aman Feed Mills, Index-Agro Limited and National Feed Mills put up a mixed performance. 

Aman Feed Mills saw a little rise in profit, while Index-Agro Limited suffered a 5% fall in sales and National Feed Mills registered a 40% slump in revenue, according to their financial statements. 

Abu Jafar Ali, company secretary at Index Agro, said, "Our business has made a complete recovery, but rising raw material prices have put us into a new trouble as we cannot hike feed prices, given the market situation." 

Feed industry outlook

The industry has registered an around 25% expansion in the last decade, driven by a surge in poultry farming as well as fish and cattle farming.

Rapid growth of the hotel and restaurant business has given a boost to the poultry industry as chicken constitutes a significant portion on their menus, which in turn has benefited feed production to a great extent.

The poultry sector's investment now stands at approximately $4.16 billion, which is expected to double over the next decade. The number of poultry farms is increasing by 15% on an average annually.

Dairy has made significant progress as well and the market value of dairy milk has been estimated at Tk8,420 crore annually. The country is looking for self-sufficiency in milk in 2029, doubling production from nearly 1 crore tonnes now, a survey of the livestock department shows.

The feed industry supplies three major sub-sectors of poultry, cattle, and fish, which saw significant growth over the years.

Industry people say currently, the annual demand for animal feed in Bangladesh is around 75 lakh tonnes. 

Of this, Nourish Poultry Feed, ACI, Kazi Farms, Provita Feed, Aftab Feed, New Hope Feed, and Aman Feed have now gained more than 70% of the market share.

United Feed, City poultry, CP Bangladesh, RRP Agro, Quality Feeds, AIT Feeds and AG Agro are also significant players in the feed market.

According to the Bangladesh Poultry Industries Central Council, the apex body of poultry associations, the number of registered feed mills is 261 and 135-140 companies renewed licences from the livestock department. Besides, more than 200 feed mills are unregistered. 

Economy / Top News

Raw material / raw material cost / raw material cost skyroket / raw materials / Feed industry

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