Excessive corn protectionist policy to swell chicken prices, jeopardise industry

Excessive measure by authorities to protect corn farmers would have devastating impact on the chicken industry in Sri Lanka, warns industry specialists.

Sri Lankans rely heavy in chicken to meet their required protein needs and the increase in prices will limit to a large extent the consumption of chicken, resulting in malnutrition. 

The annual per capita consumption of chicken in Sri Lanka, which was barely 2.5 kg a decade ago, has now reached 10.5kg and is likely increase further in the near future. While consumption has risen more than three-fold, prices have remained virtually unchanged during this period in comparison to inflation.

The Government in a bid to prevent chicken prices from increasing introduced a control price of Rs. 380 per kilo and the price remains at Rs. 420 per kilo even after the control priced was removed by the government. But this situation can change quickly if authorities continue the policy to protect corn farmers and levy taxes on corn which will further increase corn prices, allege industry sources.

Furthermore, chicken producers in Sri Lanka has been able to keep chicken prices in reasonable levels in by adopting extremely efficient practices across their production, processing and distribution systems. They have implemented global best practices in technology and breeding, which has led to more efficient production and significant reduction in costs, which they have passed on to the consumer.

Similarly chicken producers are heavily taxed by the Government which is high as Rs. 85 per kilo. The total tax income from the chicken industry is colossal. Current corn prices are on the rise and have increased from Rs. 42 to Rs. 52. This will have a direct impact on chicken prices, resulting in price a hike of at least Rs. 20 per kilo. This is in the backdrop where world market prices of corn stands at Rs. 35. 

The Government’s measures to impose a tax of Rs. 10.50 per kilo of corn will further jeopardise the poultry industry in Sri Lanka. The repercussion of the poultry industry suffering will in turn have a very negative effect on the corn industry which will lose its market in the face of low demand for corn. 

Furthermore in the wake of the local poultry industry weakening the Government coffers will suffer heavily losing the Rs. 85 per kilo tax revenue and will need to import chicken which will cost the country $ 20 m per month of foreign currency.

Despite all these drawbacks chicken producers such as Crysbro have gone a step further by fully integrating their entire operations. Crysbro carries out virtually every activity that is required to produce its ‘fresh upcountry chicken’. 

From producing grains in its extensive farmlands, converting the grains into poultry feed at its feed mill plant, to raising parent birds and broilers, processing meat and packaging it – right down to delivering the chicken to supermarkets and retail outlets. In fact, Crysbro is Sri Lanka’s first chicken producer to achieve full vertical integration.

Yet, rising costs remain an issue that chicken producers have to constantly battle against. On top of this maintaining a corn protectionist policy by the Government will further jeopardise the chicken industry in Sri Lankan leading to increase in chicken prices and putting at stake the livelihoods of thousands employed in the industry.

The excessive corn protectionist policy also may seem unusual, when one considers the fact that the poultry industry continues to make a significant contribution towards the national economy. In addition to saving millions in foreign exchange, which would otherwise be spent on importing chicken, the industry offers direct and indirect employment to hundreds of thousands of people. Crysbro alone offers employment to thousands of people as contract breeders, helping their families rise above the poverty line.

In making chicken affordable to a majority of people by keeping prices low through efficient production practices, chicken producers have played a singular role in increasing the per capita consumption of animal protein, which is vital for the physical development and well-being of the population, especially the youth. It should be noted that chicken remains the most affordable source of non-plant based protein in Sri Lanka.

If the authorities are serious in maintaining the current chicken prices it is required to give relief to chicken producers, providing them with more incentives, as well as a conducive regulatory and fiscal climate could help the industry grow. In fact, if one considers the international per capita consumption of chicken which currently stands at 17 kg, about twice our national average. 

Sri Lanka’s chicken industry still has a long way to go but the corn protectionist policy and increase of corn prices will have a very negative impact on it.  Sri Lanka’s poultry industry is one of the most efficient industries but now at the risk of facing destruction due to the incorrect short-sighted policies of the Government, an industry specialist said.