Required Report - public distribution

**Date:** 9/14/2006

**GAIN Report Number:** IN6083

IN6083

**India**

**Poultry and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy, New Delhi

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

Post forecasts India's 2007 poultry meat production to grow by 10
percent to 2.2 million tons. This higher production forecast is
supported by an expected surge in domestic demand and an increasing
trend towards integrated poultry operations.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[SECTION I: SITUATION AND OUTLOOK 3](#section-i-situation-and-outlook)

[Production 3](#production)

[AI Crisis 3](#ai-crisis)

[Poultry Feed Developments 4](#poultry-feed-developments)

[Production Policy 4](#production-policy)

[Consumption 4](#consumption)

[Trade 5](#trade)

[Market Opportunities 5](#market-opportunities)

[SECTION II: STATISTICAL INFORMATION
6](#section-ii-statistical-information)

[Table 1: Commodity, Poultry, Meat, Broiler; PSD table
6](#table-1-commodity-poultry-meat-broiler-psd-table)

[Table 2: Trade Treatment/Tariff Tables for Imports of Poultry and Feed
Ingredient
7](#table-2-trade-treatmenttariff-tables-for-imports-of-poultry-and-feed-ingredient)

# SECTION I: SITUATION AND OUTLOOK 

Note: Data included in the report is not official USDA data.

## Production

India's broiler meat production, which was growing at over 15 percent
per annum in recent years, was badly hit by the HPAI outbreak in
February/March 2006. Assuming the country remains free of HPAI, broiler
meat production in calendar year (CY) 2007 is forecast to grow by 10
percent to 2.2 million tons. Production growth is supported by likely
strong growth in domestic poultry meat demand in response to affordable
prices and increasing incomes, an increasing trend towards integrated
poultry operations, and improving bird weights and dressing yields due
to better genetics.

Post's broiler meat production estimate for CY 2006 is revised downward
to 2.0 million tons due to losses caused by the avian influenza outbreak
in February/March in some of the producing regions. Poultry meat prices
dipped below the cost of production for several months[^1], resulting in
colossal financial losses to the industry and forcing several units to
scale down or close operations. Although market prices have recovered
since May, high corn prices continue to affect profit margins. Maize
prices will soften with the harvest of new crop in October.
Consequently, market sources expect a strong recovery in broiler
production in the last quarter of CY 2006.

The market share of integrators in India's total poultry meat production
is gradually expanding in all parts of the country[^2], which should
result in better production efficiency (better bird weight, higher FCR,
lower mortality) in the sector. The poultry sector in India employs
three million people and contributes rs. 260 billion (\$5.7 billion) to
the national income.

## AI Crisis

On February 18, 2006, India notified the OIE of an outbreak of HPAI
virus subtype H5N1 in poultry birds in western India. Between January 27
and April 18, 2006, several outbreaks were reported in two districts
(Navapur and Jalgaon) of Maharashtra and adjoining areas in Gujarat and
Madhya Pradesh. Control measures initiated included culling the entire
poultry population, destruction of eggs, feeds, consumables, litter, and
other potentially infected material in a 10 kilometer radius of the
outbreak location, restrictions on the movement of poultry, poultry
products and personnel to and from the affected areas, and cleaning and
sanitization of the infected area. More than one million birds and over
1.5 million eggs were destroyed, which is a fraction of a percent of the
country's total bird and egg production, and farmers were compensated
for their losses[^3].

The government carried out surveillance (clinical, virological, and
serological) in a 15 kilometers radius of the outbreak area.
Surveillance was also carried out throughout the country through random
sampling and sampling of observed abnormal mortality of poultry and wild
migratory birds. On August 11, 2006, the government declared that India
had regained its notifiable AI-free country status per the OIE
regulations[^4]. The surveillance of poultry and wild migratory birds is
continuing. For more on government's bird flu action plan, please refer
the website - <http://dahd.nic.in/birdflue.htm>

The wide media coverage of the HPAI outbreak panicked consumers, with
most of them avoiding poultry meat. Broiler meat prices crashed, forcing
several poultry units to close or scale down operations to minimize
losses. The poultry industry initiated a media campaign on the safety of
poultry meat to regain consumer confidence. In early April, the
government announced a relief package[^5] for the poultry industry.

With the scaling down of production and increasing consumer demand,
poultry meat prices have recovered since May. More and more units are
getting back to production. Financial losses due to AI have prompted
several small poultry operators to switch to contract agreements with
large poultry integrators, to minimize price risk[^6].

## Poultry Feed Developments

Industry sources estimate CY 2006 poultry feed consumption at 14.0
million tons compared to 13.2 million tons in CY 2005, with the major
ingredients being corn (7.0 million tons) and soybean meal (1.8 million
tons). Poultry feed prices have soared in CY 2006, with the current
prices 14 percent higher than a year ago, largely due to high corn
prices, which are currently at a record \$158 per ton. Although the
government has supplied small quantities of corn from its stocks to the
poultry industry at a lower than market rates, it was not enough to
contain the price rise. The poultry industry is now seeking duty free
imports of corn to ease the supply situation, which the government is
unlikely to permit in view of the impending corn harvest.

## Production Policy

The government's poultry development programs are mainly focused on
disease surveillance and control, as well as development and supply of
improved breeding stocks, feed and production practices. The Indian
Council of Agricultural Research conducts research and development
activities in these areas at the national level. The state agricultural
universities, regional research institutions, and various state
agricultural extension agencies further support these efforts. The total
central government funding in Indian fiscal year (IFY) 2005/06 (Apr-Mar)
was Rs. 415 million (\$ 9.0 million) for poultry development activities,
and rs. 678 million (\$ 14.7 million) for animal disease control[^7]
activities. Furthermore, the Agricultural and Processed Food Export
Development Authority (APEDA) of the government assists with
infrastructure developments for exports.

## Consumption

Due to wider consumer acceptance[^8] and affordable prices, poultry meat
is the major meat consumed in India, with per capita consumption in CY
2006 estimated at 1.9 kg. High muttons prices, religious restrictions on
beef and pork, and availability of fish mainly in coastal regions has
made poultry meat the most preferred and consumed meat in India.
Expanding domestic production and increasing integration has pushed
poultry meat prices downward and stimulated consumption. The integrators
have established price leadership in their markets by reducing the
number of middlemen and forcing the wholesalers and retailers to reduce
their margins.

Indians typically prefer fresh chicken meat, mostly slaughtered in small
corner shops. The processed poultry meat market (chilled/frozen
dressed/cut chicken) is limited, largely confined to institutional
sales. Its market share is currently estimated at 10 percent, but is
growing at 15 to 20 percent per annum. Some of the leading integrators
market branded packed chilled chicken products at the retail level. The
market for processed poultry meat products is constrained by inadequate
cold chain facilities and consumer preference.

## Trade

India's poultry product exports are mainly confined to table eggs and
egg powder[^9], which are growing due to cost competitiveness, improving
hygienic standards, and logistical advantages. Poultry meat exports are
negligible due to high costs, inadequate meat processing facilities, and
infrastructure bottlenecks. In recent years, some South Indian based
integrators have been exploring the possibility of exporting poultry
meat to the Middle East and South East Asian markets. The recent AI
outbreak jeopardized their efforts, with most of them shelving their
export development plans.

There are no restrictions on exports of poultry and poultry products.
The government provides some transportation subsidies (Rs. 3.0--15.0 per
kg) for its exports (see <http://www.apeda.com/apeda/Ta06-07.pdf>)

Please refer to Table 2 for India's policy treatment and tariffs on
poultry and poultry products. Although India does not impose any
quantitative restrictions on imports of poultry meat, high tariffs,
restrictive and non-science based sanitary import regulations, and lack
of cold chain facilities constrain imports. India's import health
protocol[^10] for poultry meat has unjustified and highly restrictive
conditions which the US export certification agencies cannot meet.

## Market Opportunities

Most integrators do not have their own grandparent operations, and
regularly import breeding stocks. Most of the broiler breeds in the
country are from American strains such as Cobb, Hubbard, Arbor Acres and
Hyline. Although currently India is more or less self sufficient in
corn, trade sources believe that demand will outstrip supplies in the
near future leading to corn imports. Currently, domestic corn prices are
about 70 percent (\$68/ton) greater than interior U.S. corn prices.
However, this price spread would likely need to increase further in the
future to cover all sea and internal transportation costs. U.S. corn
supplies also face a restrictive 15 percent duty for in-quota (500,000
tons) imports and a 50 percent duty for out-of-quota imports.
Furthermore, prohibitive biotech requirements, which were recently
implemented, would likely restrict U.S. corn imports into India.

# SECTION II: STATISTICAL INFORMATION

## Table 1: Commodity, Poultry, Meat, Broiler; PSD table

+------------------+---------+-----+------+-----+------+-----+------+
| **India**        |         |     |      |     |      |     |      |
+------------------+---------+-----+------+-----+------+-----+------+
| **Poultry, Meat, |         |     |      |     |      |     |      |
| Broiler**        |         |     |      |     |      |     |      |
+------------------+---------+-----+------+-----+------+-----+------+
|                  | *       | **  | **20 | **E | **20 | **F | **U  |
|                  | *2005** | Rev | 06** | sti | 07** | ore | OM** |
|                  |         | ise |      | mat |      | cas |      |
|                  |         | d** |      | e** |      | t** |      |
+------------------+---------+-----+------+-----+------+-----+------+
|                  | *       | **P | **   | **P | **   | **P | *    |
|                  | *USDA** | ost | USDA | ost | USDA | ost | * ** |
|                  |         | E   | Offi | E   | Offi | E   |      |
|                  | **Off   | sti | cial | sti | cial | sti |      |
|                  | icial** | mat | \    | mat | \    | mat |      |
|                  |         | e** | [Old | e** | [Old | e** |      |
|                  | **\[    |     | \]** |     | \]** |     |      |
|                  | Old\]** | **  |      | **  |      | **  |      |
|                  |         | \[N |      | \[N |      | \[N |      |
|                  |         | ew\ |      | ew\ |      | ew\ |      |
|                  |         | ]** |      | ]** |      | ]** |      |
+------------------+---------+-----+------+-----+------+-----+------+
| **Market Year    |         | 0   |      | 0   |      | 0   | MM/  |
| Begin**          |         | 1/2 |      | 1/2 |      | 1/2 | YYYY |
|                  |         | 005 |      | 006 |      | 007 |      |
+------------------+---------+-----+------+-----+------+-----+------+
| **Inventory      | 0       | 0   | 0    | 0   | 0    | 0   | (MIL |
| (Reference)**    |         |     |      |     |      |     | H    |
|                  |         |     |      |     |      |     | EAD) |
+------------------+---------+-----+------+-----+------+-----+------+
| **Slaughter      | 0       | 0   | 0    | 0   | 0    | 0   | (MIL |
| (Reference)**    |         |     |      |     |      |     | H    |
|                  |         |     |      |     |      |     | EAD) |
+------------------+---------+-----+------+-----+------+-----+------+
| **Beginning      | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Stocks**         |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Production**   | 1900    | 1   | 2200 | 2   | 0    | 2   | (    |
|                  |         | 900 |      | 000 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Whole,         | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Parts,         | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Intra EC       | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Other          | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **TOTAL          | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **TOTAL SUPPLY** | 1900    | 1   | 2200 | 2   | 0    | 2   | (    |
|                  |         | 900 |      | 000 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Whole,         | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Exports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Parts,         | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Exports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Intra EC       | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Exports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Other          | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Exports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **TOTAL          | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Exports**        |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Human          | 1900    | 1   | 2200 | 1   | 0    | 2   | (    |
| Consumption**    |         | 900 |      | 998 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Other Use,     | 0       | 0   | 0    | 2   | 0    | 0   | (    |
| Losses**         |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Total Dom.     | 1900    | 1   | 2200 | 2   | 0    | 2   | (    |
| Consumption**    |         | 900 |      | 000 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **TOTAL Use**    | 1900    | 1   | 2200 | 2   | 0    | 2   | (    |
|                  |         | 900 |      | 000 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Ending         | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Stocks**         |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **TOTAL          | 1900    | 1   | 2200 | 2   | 0    | 2   | (    |
| DISTRIBUTION**   |         | 900 |      | 000 |      | 200 | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+
| **Calendar Yr.   | 0       | 0   | 0    | 0   | 0    | 0   | (    |
| Imp. from U.S.** |         |     |      |     |      |     | 1000 |
|                  |         |     |      |     |      |     | MT)  |
+------------------+---------+-----+------+-----+------+-----+------+

Note: Not official USDA Data.

## Table 2: Trade Treatment/Tariff Tables for Imports of Poultry and Feed Ingredient 

  ----------- ----------------------------- ------------------- --------------
  **HTS       **Commodity**                 **Trade Policy**    **Tariff/1**
  Code**                                                        

  010511      Poultry Grand Parent Stock    Subject to Sanitary 35.9
                                            Import Permit/2     

  0207        Poultry Meat (cuts and offal) Subject to Sanitary 100.0/3
                                            Import Permit/2     

  0407        Eggs (Table/Hatching)         Subject to Sanitary 30.6
                                            Import Permit/2     

  0408        Egg Yolks                     Subject to Sanitary 35.9
                                            Import Permit/2     

  100590      Corn for Feed                 TRQ /4              15.3/51.0

  100700      Sorghum                       State Trading       51.0

  230120      Fish Meal                     Subject to Sanitary 5.1
                                            Import Permit/2     

  2306        Oil Meals                     Free                15.3

  2309 9020   Concentrates for Compound     Subject to Sanitary 30.6
              Feeds                         Import Permit/2     

  2309 9010   Compounded Poultry Feed       Subject to Sanitary 30.6
                                            Import Permit/2     
  ----------- ----------------------------- ------------------- --------------

**Notes:**

**/1:** Total effective import tariff inclusive of special additional
tariff and educational cess, as applicable for the category.

**/2:** Imports of livestock and livestock product are allowed subject
to the conditions of the Sanitary Import Permit. The import permits are
issued by:

Joint Secretary (Trade)

Department of Animal Husbandry, Dairying, and Fisheries

Ministry of Agriculture

Krishi Bhawan

New Delhi -- 110 001

**/3:** Whole Birds, Dressed, Fresh/Chilled (ITC/HS 020711 & 020712)
attracts a duty of 35.9 percent.

Poultry meat Cuts and Offals (ITC/HS 020714) attracts a duty of 108
percent.

**/4:** 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).

[^1]: After the outbreak of HPAI, broiler prices in various markets
    crashed from Rs. 32-35 per kg live weight to rs. 2-15 per kg live
    weight in February/March. The cost of production of broiler ranges
    from rs. 30-33 per kg live weight.

[^2]: Industry sources estimate the market share of integrators by the
    end of CY 2006 in south India at 85 percent (vs. 80 percent in CY
    2005), west India at 75 percent (vs. 50 percent), east India at 50
    percent (vs. 25 percent) and north India at 30 percent (vs. 10
    percent).

[^3]: Government offered a compensation of rs. 10 per chick, rs. 20 per
    growing bird, rs. 40 per adult bird, and rs. 1.0 per egg to the
    farmer in the outbreak area.

[^4]: For more details, refer <http://dahd.nic.in/flu/OIEfinal.doc>

[^5]: For details refer
    <http://rbidocs.rbi.org.in/rdocs/notification/PDFs/69677.pdf>

[^6]: Under integration systems, poultry growers receive all inputs
    (day-old chicks, feed, medicine and extension services) and get a
    fixed incentive based fee for rearing the broilers. The integrators
    organize production of grand parent, parents, hatching eggs, feed,
    medicine, etc, and procure the broilers from the growers for sale in
    the market through wholesalers or directly to consumers. Many
    integrators also have processing facilities for producing chilled
    and frozen meat and products for institutional and retail sales. For
    more, refer to USDA/ERS report on India's Poultry Sector
    <http://www.ers.usda.gov/publications/>

[^7]: All animals.

[^8]: Consumption of poultry is not taboo in any of the religious
    communities unlike beef and pork.

[^9]: Exports of egg (0407) and egg powder (0408) in Indian fiscal year
    (IFY) 2005/06 (April/March) were \$ 70.5 million compared to \$61.7
    million in IFY 2004/05. Exports of poultry meat in IFY 2005/06 were
    0.6 million compared to 1.4 million previous year.

[^10]: For health protocol for processed poultry meat, please refer to
    <http://dahd.nic.in/heath_protocol.htm>. The import health protocol
    for unprocessed poultry meat and products has additional
    requirements like certifying for several diseases. The protocol
    stipulates that each consignment has to be sampled and tested for
    the listed diseases and MRL levels per codex standards before it is
    cleared.