Required Report - public distribution

**Date:** 8/29/2003

**GAIN Report Number:** IN3080

IN3080

**India**

**Poultry and Products**

**Annual**

**2003**

**Approved by:**

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

U.S. Embassy, FASNEWDELHI

**Prepared by:**

V. Shunmugam

**Report Highlights:**

India\'s broiler meat production is forecast to grow by 13 percent to
1.8 million tons in CY 2004 due to increasing demand, affordable prices
for poultry meat, and anticipated better availability of feed materials.
The expansion of integrated poultry operations is likely to help sustain
high growth in meat production and also create an increasingly
competitive and cost-conscious industry that will generate increased
demand for corn.

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 4](#consumption)

[Production Policy 4](#production-policy)

[Trade 4](#trade)

[Market Opportunities 5](#market-opportunities)

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

[Table 2: Commodity, Poultry Meat, Chicken-16 weeks, PSD table
7](#table-2-commodity-poultry-meat-chicken-16-weeks-psd-table)

#   {#section-1 .unnumbered}

# Production

India\'s broiler meat production is forecast to grow by 13 percent to
1.8 million tons in CY 2004 due to increasing demand, affordable prices
for poultry meat, and anticipated better availability of feed materials.
Increasing vertical integration in the industry, mainly in the southern
and western regions, also supports higher production. CY 2003 production
is estimated higher at 1.6 million tons notwithstanding higher feed
prices caused by drought in many states.

Despite high corn and soybean meal prices, consumption of commercial
feed rose by 10 percent to an estimated 3.5 million tons in 2002. This
was due to an increasing awareness about the benefits of balanced
feeding among farmers (thanks, in part, to the market promotion
activities of the American Soybean Association and the US Grain
Council), increasing commercialization in the industry, and flourishing
vertical integration. Poultry processing is largely concentrated in and
around urban centers. Consumer preference is mostly for fresh meat.
However, a positive attitude towards processed meat is slowly emerging
in major metropolitan cities.

# Production Developments

In southern India, vertical integration in the broiler industry has been
the trend due to better returns. Custom growers receive day-old chicks,
feed, medicines, and other services from integrators with the assurance
that their birds will be purchased at a contracted price. Input costs
are deducted from the payment to the farmer, and he is provided bonuses
if feed conversion ratios (FCR) are above stipulated levels. Some
entrepreneurs have extended the level of integration to the retail level
in order to improve margins and to reduce retail meat prices. This
contract arrangement has encouraged a number of small farmers to enter
the poultry business to supplement their incomes with low risk and an
assured return. Integration also helped entrepreneurs to control
production to some extent through coordinated efforts. For example,
during a glut period in early 2003, the integrators in the south, mainly
in Andhra Pradesh and Tamil Nadu, jointly agreed to discipline the
industry through placement cuts and destruction of hatching eggs. The
integration in the poultry industry is slowly spreading to the eastern
and western parts of the country following recent high feed prices.
However, the industry in the north still remains un-integrated, with the
poultry entrepreneurs here regarded as \"risk adverse.\" Hence, very
little attention is paid to improving feed conversion ratios, nutrition,
or quality.

Processed meat constituted only about 7 percent of total poultry meat
production in 2002. This share is gradually increasing, spurred by
rising consumer income, changing lifestyles, and efforts by the industry
to popularize processed meat. Many of the poultry integrators have
already built or are in the process of building processing facilities to
produce chilled and frozen meat and products to cater to institutional
demand and for retail sale. Two processors are now exporting frozen
whole birds to the Middle East. The poultry integrators are the main
advocates and promoters of chilled and frozen products.

Despite higher soybean meal and corn prices in 2002, related to drought,
use of these inputs by industry increased due to limited availability of
alternative protein and energy sources. Corn prices have recently
declined in response to expected higher production following excellent
monsoon rains this year. Industry sources forecast corn demand by the
compound feed sector to reach 9.0 million tons by 2005, of which only
6.0 million tons would be met from domestic supplies. Despite higher
prices of soybeans, use of soybean meal in the poultry sector during
this year is expected to be higher by 12 percent at 1.3 million tons.

# Consumption

CY 2004 poultry consumption is forecast to increase by 13 percent to an
estimated 1.8 million tons due to lower prices encouraged by cheaper
feed supplies. Growth in consumption is estimated to be stronger during
CY 2003 at 1.6 million tons, despite drought-reduced feed supplies and
high meat prices. This is due to the strong demand for alternative
protein sources in the absence of drought-affected production of pulses
and other protein sources.

Lower retail prices appear to have stimulated consumption, with per
capita consumption in southern India, where integrators have been most
active, reported to be four times the national average of 1.5 kg. Given
pricey mutton and restricted availability of fish to the coastal regions
of the country, poultry meat has wider regional acceptance than any
other meat.

The Indian poultry industry remains primarily a live bird market.
Although there is a growing trend in consumption of chilled and frozen
poultry products in restaurants and hotels, most consumers prefer fresh
poultry meat. Birds for home consumption are typically purchased live
and slaughtered in small local or roadside shops. Demand for frozen
poultry products will continue to remain constrained by inadequate cold
chain facilities. Luxury hotels account for most of the consumption of
processed poultry products such as sausages, salami, etc.

Movement of birds from low cost to high cost areas within the country is
restricted by the high mortality rate among birds, inadequate
transportation facilities, and significant weight loss in birds during
hot weather, resulting in significant temporal and spatial variation in
producer prices of poultry. Currently poultry meat prices range from
\$1.1 per kg in south India to \$1.74 per kg in North India.

# Production Policy

The poultry sector receives much less government assistance and
subsidies compared to other agriculture sectors. Furthermore, income
from the poultry industry is taxed unlike other agricultural income. The
government, however, funds several poultry research activities. The
Agricultural and Processed Products Exports Development Authority, a
government export promotion agency, provides infrastructure support such
as cold storage and also provides airfreight subsidies for export of
eggs and egg products, mainly to the Middle East. Overall government
assistance to the poultry sector in 2003/04 (April-March) is budgeted at
rs. 85 million (\$1.8 million) compared to rs. 72 million (\$1.6
million) in 2002/03.

Most of the existing broiler breeds are derivatives of American strains
such as Cobb, Arbor Acres, and Hyline. Though some of the producers have
adapted their breeds to domestic conditions, most of the integrators who
own breeding operations still depend on imported grandparents to
replenish their genetic stocks.

# Trade

Imports of poultry meat and meat products are effectively banned by high
tariffs and ambiguous sanitary requirements. Although luxury hotels are
allowed to import poultry meat and products at a tariff rate of 25
percent, such imports are negligible as hotels locally source most of
their requirements.

Government policy permits imports of grandparent breeding stock, subject
to importers getting an advance special import permit from the
Department of Animal Husbandry, Ministry of Agriculture. Grandparent
hatching eggs and the grandparent day old chicks carry a tariff of 35.2
percent. Some feed additives such as lysine, methionine, choline, and
vaccines/vaccine related raw materials are mostly imported.

Export of poultry meat is looking up, as integrators/processors in south
and west India are able to supply chicken at competitive prices.
Integrators are currently exploring the possibility of exporting their
product to the Middle East.

# Market Opportunities

The expansion of integrated poultry operations is likely to help sustain
high growth in meat production and also create an increasingly
competitive and cost-conscious industry that will generate increased
demand for corn. The industry may become increasingly sensitive to
fluctuations in feed prices, especially corn, prompting them to lobby
for better access for imported corn at a lower tariff. Since most of the
integrators do not have their own grandparent operations, they are
regular importers of grand parent stocks, which provides an opportunity
for US suppliers. Although India is currently a substantial exporter of
soybean meal (competing against the U.S. in certain markets), the rapid
growth in poultry feed demand is beginning to erode the exportable
surplus. This has been an objective of the American Soybean
Association's work in India.

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

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

  010511      Poultry Grand Parent Stock    Free                35.2

  0207        Poultry Meat                  Free                108.0

  0407        Eggs (Table/Hatching)         Free                35.2

  0408        Egg Yolks                     Free                35.2

  100590      Corn, for Feed                Free 1/             15/50

  100700      Sorghum                       Canalized           0

  230120      Fish Meal                     Free                0

  2306        Oil meals                     Free                35.2

  2309 9020   Concentrates for Compound     Free                35.2
              Feeds                                             

  2309 9010   Compounded Poultry Feed       Free                35.2
  ----------- ----------------------------- ------------------- ----------------

1/ Corn imports are subject to a TRQ. The in quota tariff for 500,000
tons is 15 percent and out quota tariff is 50 percent

\* Livestock and livestock product imports are permitted against
sanitary import permit to be issued by Joint Secretary (Trade),
Department of Animal Husbandry, Ministry of Agriculture.

\*\* Inclusive of special and additional tariffs as applicable for the
respective commodities.

Note: All tariffs are equal to or below GATT bindings. Whole Birds,
Dressed Fresh/Chilled (0207.12) attracts a GATT bound duty of 35
percent.

# Table 2: Commodity, Poultry Meat, Chicken-16 weeks, PSD table

  ---------------- --------- --------- ------ --------- ----- --------- --------------
  PSD Table                                                             

  Country:         India                                                

  Commodity:       Plty,                                                
                   Meat,                                                
                   Chicken                                              
                   -16 wks                                              

                             2002             2003            2004      UOM

                   Old       New       Old    New       Old   New       

  Calendar Year              01/2002          01/2003         01/2004   (MONTH/YEAR)
  Begin                                                                 

  Inventory        0         0         0      0         0     0         (MIL HEAD)
  (Reference)                                                           

  Slaughter        0         0         0      0         0     0         (MIL HEAD)
  (Reference)                                                           

  Beginning Stocks 0         0         0      0         0     0         (1000 MT)

  Production       1400      1400      1500   1600      0     1800      (1000 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     1400      1400      1500   1600      0     1800      (1000 MT)

  Whole, Exports   2         2         5      5         0     10        (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    2         2         5      5         0     10        (1000 MT)

  Human            1398      1398      1495   1595      0     1790      (1000 MT)
  Consumption                                                           

  Other Use,       0         0         0      0         0     0         (1000 MT)
  Losses                                                                

  Total Dom.       1398      1398      1495   1595      0     1790      (1000 MT)
  Consumption                                                           

  TOTAL Use        1400      1400      1500   1600      0     1800      (1000 MT)

  Ending Stocks    0         0         0      0         0     0         (1000 MT)

  TOTAL            1400      1400      1500   1600      0     1800      (1000 MT)
  DISTRIBUTION                                                          

  Calendar Yr.     0         0         0      0         0     0         (1000 MT)
  Imp. from U.S.                                                        
  ---------------- --------- --------- ------ --------- ----- --------- --------------