Sri Lanka's poultry industry was badly hit by state price controls on chicken and import controls imports to 'protect' maize farmers as the expense of chicken farmers.
Maize import controls pushed chicken feed prices up and meat price controls, hit farmer incomes discouraging farmers, who had stopped production from re-entering the business.
"The main challenge faced by the Company and the Group was the Government’s resistance for price increase as the Government desired to control price of chicken," Yakooth Naleem chief executive of Bairaha Farms, a listed firm told shareholders in the annual report.
"However, after a prolonged delay a satisfactory price increase was eventually granted in February 2010."
Bairaha said the state also relaxed its controls on maize after the crisis in the poultry industry.
"Since the Government has been encouraging the local cultivation of maize it did not allow imports in spite of the 35 percent Cess even though there was a shortage of maize in the country during certain months of the year," the company said.
"However, there was a change of policy after the authorities realised that there was an acute shortage of maize in the country.
"A limited quantity of maize was then allowed to be imported under a special permit scheme.
"The current maize price is around Rs. 34/- per kg but at one time it shot up to Rs. 51/- per kg during a few months in the year under review due to restricted imports as well as the high Cess on imported maize."
The economies of both India and Sri Lanka lagged behind the rest of the world due to what is now called the 'permit raj'. In the 1970's when Sri Lanka reached the height of its 'permit raj' unemployment hit over 20 percent.
Self service supermarkets in particular, which did not sell at 'blackmarket prices' were frequently out of chicken last year due to price controls.
Such 'shortages' and 'blackmarkets' are a direct result of price controls and were common in the controlled economy era in the 1970s.
High grain prices, cause protein prices to go up by a multiple factor as a number of kilograms of grain is needed to produce a kilogram of meat.
Analysts say high grain prices can not only increase the price of poultry but also the price of close substitutes like fish.
Bairaha says increased tourist arrivals are now creating more demand for poultry and demand is also coming from the North and the East of the island, after the end of a war.
"It took nearly 10 years for the Sri Lankan Poultry Industry to double its production and consumption, and now with the potential for massive growth, doubling production in a shorter period is not too far away, provided the consumption grows as expected," chairman M T A Furkhan told shareholders.
Furkhan said finance secretary P B Jayasundera had said the industry should double output within five year given the projected increase in tourist arrivals and rising incomes.
Bairaha sells chicken meat and also processed meat products. The firm said it had started distributing products in north and the east of Sri lanka and also participated in a trade fair in Jaffna in April.
"We expect the Group’s production of day-old-chicks to increase by 15 percent this year, helping to strengthen and dominate its market position," Naleem said.
"Also on the cards is the introduction of existing processed meat products in new packaging aimed at further improving and enhancing the brand status in the market."
The firm said Fortune G-P Farms (Lanka) Ltd, a group firm had exported two consignments of Broiler parent chicks to Nepal. The unit was the largest of two broiler parent breeders in the island, the firm said.
The firm said it revenues increased from to 2.06 billion in the year to March 2010 from 1.83 billion a year earlier. Group profits rose to 134.1 million rupees from 2.5 million a year earlier.
source - www.lbo.lk
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