The poultry industry comprises the rearing of birds such as chicken, turkeys, ducks and geese for their eggs and meat, by the process of poultry farming. The most popular form of meat demanded is chicken meat, globally. The demand of the poultry industry is seasonal, and usually fixed. It depends on a variety of factors such as population growth, tastes and preferences of consumers, outbreak of poultry epidemics or other diseases etc. Demand and prices expected are forecasted by farmers to estimate production levels and enable sales forecasting. The egg price forecast is a function of investments in poultry farming, scale of operations, quality of feed, output quality, demand dynamics and prices quoted by competitors in the same industry.
A major driver of egg prices is the cost of feed. As with any industry related to the biological sector, for example – the dairy industry and the biotechnology industry, the health of the living organisms contributes to higher quality of raw material. This leads to a better output and producers can demand premium prices, based on superior production methods. There exist various methods of poultry farming and aids like organic fertilizers, hormonal aids and antibiotics for the animals reared. The poultry industry is very fragmented and scattered across the globe, with players competing on a regional level. This is because of the nature of the industry, perishable raw material and also finished products.
The importance of logistics and handling in the poultry farming industry
The nature of the finished products – eggs and meat warrant quick transportation to the consumers. Logistical networking plays an important role for suppliers of poultry products to the end consumer. Apart from the transport networks, even handling of the products needs to be taken care of by the producers. This function can be outsourced to specialist agencies with skilled workers for the job, or sourced through in-house employees. The workers must be trained to detect any flaws in quality, or outbreak of any kind of disease or epidemic. The reputation of the poultry farmers runs a high risk of bad publicity, in case health and hygiene is compromised or lost in oversight.
Quality management for high egg prices
The price expectation for eggs produced can be determined with more clarity when the eggs are scientifically tested for quality. The advancement in science and technology has enabled the growth of various techniques to determine the sound health of the birds being reared and quality management of the finished products. Forecasts on pricing can be more analytical and scientific after the eggs are tested for quality. The factors that are usually tested to determine optimum quality are – eggshell thickness, egg weight, yolk color, size of the egg etc. As there are many breeds of birds reared in poultry farms, there are also various grades or variants of the finished products. Prices are forecasted based on the grade quality of the finished products. Premium priced products are targeted at different segments of consumers, as compared to more basic versions of the eggs.
Market competition in the current scenario
As mentioned earlier, the consumer markets for the poultry farming industry is spread across the globe. Producers are of diverse scales of operations ranging from small, mid-sized to large corporations. The poultry farming industry is intensely competitive owing to a standardized output product, high entry barriers and minimal capital investment requirement. Competition in the industry is also intense, due to extrinsic factors like – dependence on climatic conditions, quality of feed, finished product handling, logistical support, overall infrastructure for business management and tastes and preferences of end consumers.
The poultry industry is hugely dynamic, owing to the ever-changing raw material prices, competitors and potential customers. Prices of eggs are a function of the market demand and supply dynamics. Sometimes, producers have to sell at a price that is not remunerative, as it is the going rate. Charging a premium without additional features or higher quality is not feasible in the eggs and meat industry.
Market competition is also a function of knowledge on livestock rearing, careful handling and ensuring adequate quality controls. New entrants in the industry often face issues in handling competition due to a knowledge gap in livestock rearing, disease control and prevention and technical know-how related to the specific expertise required in breeding poultry. This can be a limiting factor for new players in the market.
The economics of the eggs pricing and poultry market
Demand for eggs is ever growing on account of the health benefits of the same, and the rapid growth of non-vegetarianism around the world. Eggs pricing is a factor of various elements like knowledge on poultry farming, adequate capital investments, quality control, careful handling and transportation, dealer networking, feed prices and finished products quality. The dynamism of the business environment warrants poultry farmers to be active on their feet while making strategic decisions like pricing, logistical networking and handling the fragmented market and high level of competition.