Commodity prices; Efficiency of Broiler Production in Brazil

Commodity prices

In the last fortnight, there has been no major changes in the corn prices variety wise, the average prices in some states has shown a drastic increase. Prices in Rajasthan are up from Rs.6264 ($144) per ton to Rs.6525 ($150) per ton, while in Maharashtra the prices are up from Rs.5263 ($121) per ton to Rs.5481 ($126) per ton.

Arrivals in markets all over the country have been slow and the only markets that have seen consistent supplies have been the markets in Karnataka. It is estimated that the Karnataka farmers in the Khariff crop of 2004-05 produced close to 2.5 MMT of corn and also the Rabi area has shown a slight increase in Karnataka. Markets in Davangere are showing consistent arrivals of about 300 – 400 tons or corn every day.

The future prices for April 2005 and May 2005 deliveries were set at Rs.5445 ($125) and Rs.5565 ($128) per ton respectively. The spot prices in Nizamabad and Davangere were Rs.5256 ($121) and Rs.5287 ($122) per ton respectively.

Corn on Chicago Board of Trade (CBOT) did not some volatility, but was settled lower for May 2005 delivery at $2.196 per bushel ($86.43 per ton) as against a previous high of $2.234 per bushel ($87.93 per ton). The June delivery was settled at $2.274 per bushel ($89.50 per ton) against a previous high of $2.312 per bushel ($91 per ton). The FOB US Gulf values will be much higher at $104 per MT.

Efficiency of Broiler Production in Brazil

The cost of production of broiler is dependent on the feed cost, as it contributes almost 65 percent in the cost of production of broiler. Within feed though there are all components, corn is a major contributor and any increase is corn price gets reflected in the cost of production of broiler.

The cost of production of corn in Brazil is as under:

1. Rs.3480 ($80) per ton when productivity is 3 tons / hac
2. Rs.3349 ($77) per ton when productivity is 6.5 tons / hac
3. Rs.3088 ($71) per ton when productivity is 10 tons / hac

The cost of production of live broiler is about Rs.19.6 ($0.45) per kg, which is reflected in its export price as well.

A small analysis

1. In 2004, Brazil produced 8,409,000 MT of broiler meat of which 28.8 percent was exported. The average price realized was $1055 per MT of poultry meat.

2. In the period 00/04 the industry grew by 40.59 percent (10.14% per year), exports grew by 167.4 percent (41.85 percent per year), value of export products grew by 217.70 percent (54.42 percent per year), average price realization grew by 18.81 percent (4.70 percent per year) and the per capita consumption grew by 13.71 percent (3.42 percent per year)

3. One factor that effects the per capita consumption is the price of chicken. For the period 1990/2000, the average price realization was down by 16.85 percent (1.68 percent per year), while the per capita consumption increased by 123.13 percent (12.31 percent per year). The export with the same period grew by 203.02 percent (20.30 percent per year). The industry during the same period grew by 163.79 percent (16.38 percent per year).

This was by no means a mean feat. When will India fall in that league is a big question that will have to be answered by the policy makers, who think India can be a food factory to the world without realizing, that our cost of production is much higher for inputs thus affecting the industry’s competitiveness and growth.

If you have any comments on the above analysis, please feel free to forward the same to undersigned.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com