World’s largest in extent and arguably longest in duration lockdown (from March 22, 2020 till 3rd of May, and most likely to be extended further in certain urban areas) with an estimated 1.3 billion people staying at homes, is having a particularly heavy toll on India’s animal farmers in myriad ways.
The most affected segments of animal health industry are Dairy Animals and Poultry segment followed by Aqua and Companion Animals as explained here.
Drop in demand of milk and milk products
India is world’s largest milk producer (~17% of global share) though not an efficient producer on account of very high numbers of unproductive or sub-optimal productive animals. With 70 million rural households involved in dairy farming – the scale of unfolding tragedy is as huge.
From an initial spurt in demand of all kinds of milk and milk products (panic buying and hoarding) when lockdown was enforced on 22nd of March 2020 –the current demand in milk and milk products has seen more than 20% drop as narrated by multiple dairy farmers contacted for this piece.
HORECA (Hotels, Restaurants and Catering Services) demand – a significant source of highly profitable revenue for dairy farmers - is virtually non-existent due to ongoing lockdown and is unlikely to return soon. There have been many news reports of dairy farmers throwing away milk or offering it free of cost to poor people as they could not find buyers.
Similar is the case with Ice-cream segment which is witnessing an unprecedented meltdown in the most important summer months – 65% of ice creams sales in India are reported in March-April-May and the ongoing lockdown during these precise months has ensured a complete washout and resultant increased misery for dairy farmers. Industry insiders estimate a loss of INR 50 Billion on account of sales loss of ice creams in these 3 months.
The significance of livestock for farmer incomes is immense. The sector (excluding fisheries) contributes 30% to India’s agriculture gross domestic product (GDP) and is valued at over INR 9 trillion (USD 130 Billion; 1 USD = INR 75).
Yet, during the ongoing lockdown, policy and remedial interventions by the federal government have largely focused on crops and not on dairy farmers. The churn in livestock sector is yet to come to the fore, but signs of distress are palpable.
Farmers are feeding livestock lesser than normal quantities not just due to lower feed availability but also as a way to lower milk production. Organized dairies are procuring less milk from farmers. Sales of value-added products like cream, cheese and ice-cream has plunged since retail outlets are open for fewer hours, and hotels and restaurants are shut.
Only faint silver lining so far has been the continued procurement of milk by large dairy cooperatives across leading milk producing provinces in India – albeit at reduced prices. Co-operatives like AMUL, Mother Dairy, Nadini, Mahanand and Lactalis India have increased their milk procurements but at 10 – 15% lower prices and have not passed on this benefit to end users who continue to pay pre-Covid19 prices. Dairy cooperatives are using excess milk to convert into SMP – the prices of which also have come down to INR 230 per Kg from INR 340 per Kg pre-Covid19. (1 USD = INR 75)
Buffalo meat exports – slaughter houses remain shut
India is 2nd largest exporter of bovine meat and offal after Brazil but this comprises only male buffaloes as well as spent female buffaloes but not cows. The closure of the USD 4 Billion (INR 250 Billion) buffalo meat export industry has inflicted additional pain on dairy farmers and traders alike. Farmers are not only unable to sell their spent buffaloes, but they are also incurring the added cost of feeding them.
Since the lock down came into effect - buffalo meat exporting units have lost business worth USD 600 million so far. In February and March, export units also lost business due to the shutdown in major markets like China which was in the middle of a lockdown of its own.
The Chinese and South East Asian markets have opened up since, and the ongoing month of Ramzan means higher demand from West Asia—but a strict lockdown in India has forced many export units to stay shut. Although export units and all agricultural activities have now been allowed to function from 20th of April but many buffalo meat exporters are yet to resume production on account of ongoing supply chain disruptions and timely availability of animals to process and labour to resume production.
Poultry segment – tale of 2 meats
While the current downturn in the dairy sector is largely driven by restrictions on retail trade and restaurants, the lockdown impacted sales of chicken meat and goat meat in very different ways.
In February, even before Covid-19 got a toehold in India, the poultry industry valued at over USD 15 Billion, was hit as consumers shunned chicken meat and eggs. Cheap data, ubiquitous smartphones and widespread usage of WhattsApp for business delivered a perfect storm for India’s poultry industry. Wide spread rumors fueled by swift “forwards” over social media led to a crash in demand for chicken meat and eggs in the second week of February.
The drawdown in demand and financial losses of poultry farmers forced the usually reticent Agriculture Ministry to step in to quell the misinformation but the damage was already done.
Farmers in many states were forced to dump chicken as farm gate prices crashed to as low as INR 10 per kg against a production cost of INR 80 per Kg. Many farmers dumped live chickens to save on feed costs. Almost 2 months later now, the demand is growing partly on account of start of Ramzaan and farm gate prices of recovered to INR 90-100 per kg but still not lucrative enough to bring back poultry farmers into increased chick placements. (1 USD = INR 75)
Price rise in Goat Meat
Intriguing is the current trend in prices of Goat / Lamb Meat – which have witnessed an increase of more than 50% in prices since the start of lockdown. No, this increase in prices is not driven by the increased demand but is only on account of serious disruptions in supply chains across the country. Goats / Lambs are reared only in a few provinces of India and are supplied to urban consumption centers by transport vehicles.
From a pre-Covid19 price of INR 500 per Kg (1 USD = INR 75) – retail prices have almost doubled —selling upwards of INR 900 per kg in Delhi; in Mumbai, where retail outlets are shut, home-delivered red meat can cost up to INR 1,000 per kg (equivalent to USD 14 per Kg). Most retailers said supplies have dried up from the back end hence the increase in retail prices.
Transport of goats and lambs for slaughter is a hassle since state borders are sealed and suppliers are unwilling to risk police intimidation. There is confusion too: the home ministry has exempted animal husbandry farms from the lockdown list but unlike milk, the ministry did not specify if collection and trade of meat products is allowed.
Shrimp exports – in a slump
Unlike Dairy and Poultry segments which are impacted largely by domestic factors – shrimp industry is impacted by spread of Covid-19 in overseas destinations and consumption centers. India does an annual exports of around USD 7 Billion of Marine products – largely shrimps – but exports in last 2 months have stalled as many of exports markets such as US and Japan started buying selectively. While European markets remain largely off bounds, even China has also cut down imports as it recovers from novel corona virus.
D Ramraj, President, All India Shrimp Hatcheries Association, pointed out that farmers are beginning to panic, with the virus scare forcing them to go for premature harvest. Concerned over the market conditions, many of them had even reduced their stocks, which are down around 60 per cent, especially in the East-West Godavari and Krishna districts of Andhra Pradesh.
They are also worried over the air traffic disruption in view of the possible delay in brood stock arrivals to India. “We are depending fully on imported brood stocks from the US and any disturbance in their shipments will affect us seriously.”
The farm gate price of shrimps has come down to INR 350 (1 USD = INR 75) per kg for 40 counts as on March 15 from INR 385 in February end. The stagnant seafood sector and sluggish exports have virtually hampered fishing activities across the Kerala coast, putting the traditional fishing sector in a serious crisis.
Admitting that the export market was sluggish due to the virus scare, senior officials in the Marine Products Exports Development Authority (MPEDA) maintained that logistics restrictions and public movements have resulted in a lull.
They are expecting a dip owing to the slowdown in the global market. However, it is expected that there will be a revival in three months and exports will slowly gather momentum. Increased sale of value-added, ready-to-eat/ready-to-cook products in domestic market is filling in the loss of demand in exports markets, in the interim.
The pain in constituent animal health segments is likely to spill over to Animal HealthCare companies as they prepare to announce quarterly numbers. CY Q1’ 2020 (Q4 FY 2019-2020 for local companies) may not be much impacted as lockdown started on March 22nd – however, CY Q2’ 2020 would certainly not be a pretty picture.