Required Report - public distribution

**Date:** 8/26/2005

**GAIN Report Number:** IN5093

IN5093

**India**

**Poultry and Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

V. Shunmugam

**Report Highlights:**

Post forecasts India's 2006 poultry production to grow by 16 percent to
2.2 million tons, assuming better feed availability, the growing
preference for birds with higher dressing yields, and relatively stable
poultry meat prices.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[Production 3](#production)

[Production Developments 3](#production-developments)

[Consumption 3](#consumption)

[Production Policy 4](#production-policy)

[Trade 4](#trade)

[Market Opportunities 4](#market-opportunities)

[Table 1: Trade Treatment for Poultry and Feed Ingredient Imports
5](#table-1-trade-treatment-for-poultry-and-feed-ingredient-imports)

[Table 2: Commodity, Poultry, Meat, Broiler; PSD table
6](#table-2-commodity-poultry-meat-broiler-psd-table)

# Production

India\'s broiler production is forecast to grow by 16 percent to 2.2
million tons in CY 2006, due to the likely larger availability of feed
and the growing demand for poultry meat in response to affordable prices
and rising consumer income. A trend toward forward integration in
poultry operations, growing farmer preference for birds with higher
dressing yields, and price stabilization measures initiated by the
industry are also factors supporting production growth.

# Production Developments

The broiler industry's forward integration, which had been confined
largely to southern India, is now spreading into northern India due to
higher profits for entrepreneurs, stable income for growers, and better
production controls. Under this system, growers receive day-old chicks,
feed, medicines, other services, and the assurance that their birds will
be purchased at a contracted price. Input costs are deducted from the
payment to the grower, and they are given an incentive bonus if the feed
conversion rate (FCR) and/or mortality rate is better than the
contracted level. This arrangement has encouraged a number of small
farmers to enter the poultry business in order to supplement their
income with a stable return on their investment.

Heavy losses incurred in north India in 2004 due to the Asian bird flu
prompted poultry growers in this region to embrace vertical integration
to revive the industry. These poultry farmers have now started paying
increased attention to FCRs and nutrition and quality standards for
feeds. In some areas, vertical integration was extended up to the retail
level to improve profitability and to make poultry meat more affordable
to consumers. It also helped entrepreneurs to control meat production
through better-coordinated efforts aimed at overcoming problems of
seasonality (less poultry is consumed in summer and during certain
religious festivals).

Only, about eight percent of total poultry meat production in 2004 was
processed, as consumers still prefer fresh meat. With rising incomes,
changing lifestyles, and increased promotional efforts to popularize
processed meat, its share is estimated to increase to nine percent in
2005. Many of the poultry integrators already have built, or are
building, poultry processing facilities to produce chilled and frozen
meat and products for the institutional and the retail segments. Some
are looking at export possibilities to Asian and Middle Eastern
countries by reducing costs and introducing strict bio-security
measures.

Consumption of compound feed continues to grow alongside rising
awareness among growers about its nutritional qualities and feed
conversion efficiency, and is estimated at 4.8 million tons in 2004.
According to trade sources, comparatively lower prices for soybean meal
led to its increased usage in 2004, estimated at 1.5 million tons, up 15
percent over 2003. Corn prices remained higher due to lower production,
with prices currently at \$141 per ton. Industry sources estimate corn
requirements by the compound feed sector to reach 15 million tons by
2010.

# Consumption

Post forecasts poultry meat consumption in 2005 at 1.9 million tons, or
1.8 kg per capita. It is the major meat consumed in India and has wider
regional acceptance, given the high price of mutton, cultural
restrictions on consumption of pork and beef, and fish largely being
confined to the coastal regions. Lower retail prices, resulting from
expanding vertical integration, have also stimulated consumption.
Integrators have established wholesale-and retail-price leadership in
their markets, mostly in south India, by reducing the number of
middlemen and forcing wholesalers and retailers to reduce their margins.
In other regions, particularly in the northern region, where the
traditional wholesale traders still dominate the markets, the marketing
margins and retail prices are considerably higher than in the south.

The Indian poultry industry remains primarily live bird-oriented,
although there is a growing market for chilled products, especially in
the restaurant and hotel sector. Most birds for home consumption are
purchased live and slaughtered in small local shops. Movement of live
poultry from the low-cost growing areas to high-cost consumption areas
is constrained by the high mortality and high transport and shrinkage
costs. This results in significant price variations. Frozen poultry meat
product consumption is restricted by inadequate cold storage facilities,
a lack of consumer preference, and high import duties. Although a shift
toward chilled products is likely to continue in urban areas, in part
due to slaughter restrictions imposed by major cities like Delhi due to
waste disposal problems, frozen product demand growth will likely remain
weak over the near-to-medium term.

# Production Policy

Poultry receives far less government assistance than other agricultural
sectors, a situation that limits the growth of the industry. It does not
receive any government production subsidy. Poultry businesses are taxed
at the same rates as industry, whereas agricultural income generally is
tax-free. However, the government funds poultry research by government
institutions and universities, and the Agricultural and Processed
Products Exports Development Authority (APEDA) assists with
infrastructure development for export. APEDA also provides an airfreight
subsidy for exports of eggs and egg products, mostly to the Middle East.
Poultry meat exporters are asking for the extension of airfreight
subsidy for poultry meat, but their efforts are unlikely to succeed.
Total government support for the poultry sector was rs. 105 million
(\$1.8 million) in Indian Fiscal Year 2004/05 (Apr-Mar), compared with
rs. 98 million (\$1.6 million) in 2003/04.

# Trade

Table egg and egg powder exports from India are increasing due to cost
competitiveness, improving hygiene standards, and logistical advantages.
Poultry meat exports are relatively small, due to India's higher cost
vis-à-vis Brazil, although several efficient poultry integrators are
currently exploring the possibility of exporting to lucrative markets
such as Japan, South Korea, and the Middle East.

Although there are no quantitative restrictions on imports of poultry
meat, numerous unjustified sanitary conditions and high import tariffs
constrain imports. Government policy allows imports of grandparent
breeding stock and pureline stock on the basis of special permits issued
by the Department of Animal Husbandry, Dairying, and Fisheries, Ministry
of Agriculture. Grandparent hatching eggs and grandparent day-old chicks
attract a 30.6 percent tariff. Feed additives such as lysine,
methionine, and choline are mostly imported, as are Specific Pathogen
Free eggs and vaccines and vaccine-related raw materials.

# Market Opportunities

Despite increasing vertical integration and private investments in the
poultry industry, most integrators do not have their own grandparent
operations and are therefore potential regular importers of breeding
stock. Most of the existing broiler breeds derive from American strains
such as Cobb, Hubbard, Arbor Acres, and Hyline. The current changes in
production conditions also provide an opportunity for US-based pureline
genetics companies to start breeding operations in India. Although India
is currently self-sufficient in corn, trade sources forecast that the
corn demand may outstrip supplies by 2010, creating export opportunities
for US corn.

# Table 1: Trade Treatment for Poultry and Feed Ingredient Imports

  ----------- ----------------------------- ------------------- ----------------
  **HTS       **Commodity**                 **Trade Policy**    **Tariff\*\***
  Code**                                                        

  010511      Poultry Grand Parent Stock    Subject to Sanitary 30.6
                                            Import Permit\*     

  0207        Poultry Meat (cuts and offal) Subject to Sanitary 100.00 1/
                                            Import Permit\*     

  0407        Eggs (Table/Hatching)         Subject to Sanitary 30.6
                                            Import Permit\*     

  0408        Egg Yolks                     Subject to Sanitary 30.6
                                            Import Permit\*     

  100590      Corn for Feed                 TRQ 2/              15.1/51.0

  100700      Sorghum                       State Trading       51.0

  230120      Fish Meal                     Subject to Sanitary 5.1
                                            Import Permit\*     

  2306        Oil Meals                     Free                15.3

  2309 9020   Concentrates for Compound     Subject to Sanitary 30.6
              Feeds                         Import Permit\*     

  2309 9010   Compounded Poultry Feed       Subject to Sanitary 30.6
                                            Import Permit\*     
  ----------- ----------------------------- ------------------- ----------------

1/ "Whole Birds, Dressed, Fresh/Chilled" (020712) attract a GATT-bound
duty of 30.6 percent.

2/ Corn imports are subject to TRQ of 500,000 tons, with an in-quota
tariff of 15.1 percent and out-of-quota tariff of 51.0 percent
(inclusive of education cess).

\* Livestock and livestock product imports are permitted with sanitary
import permits issued by:

Joint Secretary (Trade)

Department of Animal Husbandry, Dairying, and Fisheries

Ministry of Agriculture

Krishi Bhawan

New Delhi -- 110 001

\*\* Inclusive of additional tariffs and educational cess, as applicable
for the respective commodities.

# Table 2: Commodity, Poultry, Meat, Broiler; PSD table 

+-------------------+-----+-----+-----+-----+-------+-----+-------+
| **PSD Table**     |     |     |     |     |       |     |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| **Country**       | **I |     |     |     |       |     |       |
|                   | ndi |     |     |     |       |     |       |
|                   | a** |     |     |     |       |     |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| ###### Commodity  | **P |     |     |     | (1000 |     |       |
|                   | oul |     |     |     | MT)   |     |       |
|                   | try |     |     |     |       |     |       |
|                   | ,** |     |     |     | (MIL  |     |       |
|                   |     |     |     |     | HEAD) |     |       |
|                   | **M |     |     |     |       |     |       |
|                   | eat |     |     |     |       |     |       |
|                   | ,** |     |     |     |       |     |       |
|                   |     |     |     |     |       |     |       |
|                   | **  |     |     |     |       |     |       |
|                   | Bro |     |     |     |       |     |       |
|                   | ile |     |     |     |       |     |       |
|                   | r** |     |     |     |       |     |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
|                   | 2   | R   | 2   | Es  | 2006  | Fo  | UOM   |
|                   | 004 | evi | 005 | tim |       | rec |       |
|                   |     | sed |     | ate |       | ast |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
|                   | U   | P   | U   | P   | USDA  | P   |       |
|                   | SDA | ost | SDA | ost |       | ost |       |
|                   |     |     |     |     | Off   |     |       |
|                   | Of  | Es  | Of  | Es  | icial | Es  |       |
|                   | fic | tim | fic | tim |       | tim |       |
|                   | ial | ate | ial | ate | \[    | ate |       |
|                   |     |     |     |     | Old\] |     |       |
|                   | \   | \   | \   | \   |       | \   |       |
|                   | [Ol | [Ne | [Ol | [Ne |       | [Ne |       |
|                   | d\] | w\] | d\] | w\] |       | w\] |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| **Market Year     |     | 0   |     | 0   |       | 0   | MM    |
| Begin**           |     | 1/2 |     | 1/2 |       | 1/2 | /YYYY |
|                   |     | 004 |     | 005 |       | 006 |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Inventory         | 0   | 0   | 0   | 0   | 0     | 0   | (MIL  |
| (Reference)       |     |     |     |     |       |     | HEAD) |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Slaughter         | 0   | 0   | 0   | 0   | 0     | 0   | (MIL  |
| (Reference)       |     |     |     |     |       |     | HEAD) |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Beginning Stocks  | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Production        | 1   | 1   | 1   | 1   | 0     | 2   | (1000 |
|                   | 650 | 650 | 800 | 900 |       | 200 | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Whole, Imports    | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Parts, Imports    | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Intra EC Imports  | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Other Imports     | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| TOTAL Imports     | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| **TOTAL SUPPLY**  | **  | **  | **  | **  | **0** | **  | (1000 |
|                   | 165 | 165 | 180 | 190 |       | 220 | MT)   |
|                   | 0** | 0** | 0** | 0** |       | 0** |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Whole, Exports    | 0   | 5   | 0   | 0   | 0     | 1   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Parts, Exports    | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Intra EC Exports  | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Other Exports     | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| TOTAL Exports     | 0   | 0   | 0   | 0   | 0     | 1   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Human Consumption | 1   | 1   | 1   | 1   | 0     | 2   | (1000 |
|                   | 650 | 650 | 800 | 900 |       | 199 | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Other Use, Losses | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Total Dom.        | 1   | 1   | 1   | 1   | 0     | 2   | (1000 |
| Consumption       | 650 | 650 | 800 | 900 |       | 199 | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| TOTAL Use         | 1   | 1   | 1   | 1   | 0     | 2   | (1000 |
|                   | 650 | 650 | 800 | 900 |       | 200 | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Ending Stocks     | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
|                   |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| **TOTAL           | **  | **  | **  | **  | **0** | **  | (1000 |
| DISTRIBUTION**    | 165 | 165 | 180 | 190 |       | 220 | MT)   |
|                   | 0** | 0** | 0** | 0** |       | 0** |       |
+-------------------+-----+-----+-----+-----+-------+-----+-------+
| Calendar Yr. Imp. | 0   | 0   | 0   | 0   | 0     | 0   | (1000 |
| from U.S.         |     |     |     |     |       |     | MT)   |
+-------------------+-----+-----+-----+-----+-------+-----+-------+