Pakistan Poultry Industry History & Prospects

Prepared By : Kashif Hussain COPYRIGHT NOTICE Copyright 2009 by Habib Bank Limited
All rights reserved. This material is confidential & proprietary to Habib Bank Limited and no part of this material may be reproduced, published in any form by any means electronic or mechanical including photocopy or any electronic storage or retrieval system nor should the material be disclosed to third parties without the express written authorization of Habib Bank Limited.

History & Birth

Prior to 1963 the native breed "Desi" was mainly raised which produced a maximum of 73 eggs per year under local conditions. An improved breed "Lyallpur Silver Black" was evolved in 1965-66 in the department of Poultry Husbandry, University of Agriculture, Faisalabad. The layers of this breed are capable of producing 150 egg/year and gaining 1.4 kg weight in 12 weeks of age under favorable management and feeding conditions.

Poultry in Pakistan was kept as backyard business for household needs. In early sixties the need of commercial poultry was felt which resulted in 1963, in the form of a national campaign to enhance the production of feed products in the country. Under this campaign the government announce a tax exemption policy on the income derived from poultry farming. Pakistan International Airlines (PIA) in collaboration with Shaver Poultry Breeding Farms of Canada started first commercial hatchery in Karachi. Simultaneously, a commercial poultry feed mill was started by Lever Brothers (Pvt), Pakistan Ltd., at Rahim Yar Khan, which was followed by other pioneers like Arbor Acres Ltd.

Special emphasis was laid by the Government on development of poultry industry in the country during 1965-75. The Government made major policy decisions to provide all possible facilities to poultry industry in the annual development plans. The incentives provided to poultry farmers/poultry industry included.

1. Tax exemption on income derived from poultry farming.

2. Import of flock and incubators was permitted under free list.

3. Allotment of state land on lease for poultry farming at very nominal rates.

4. Established poultry research institutes at Karachi and Rawalpindi through Food and Agricultural Organization (FAO) of the United Nations to facilitate research services specifically concerning disease control programs.

5. Two meatless days were announced to encourage poultry meat consumption.

6. Subsidy on grains to form low cost quality ration, through UNDP-grains.

7. Loan through ADBP for the construction, of poultry sheds.

8. Established directorates of Poultry Production in Karachi and Punjab to provide extension services to the poultry farmers.

9. Establishment of Federal Poultry Board to coordinate government and industry activities in the poultry business.

The subsequent development of Pakistans Poultry Industry can be divided into six phases

Phase 1: The Introductory Period 1965-1970.

During this period the early poultry ventures, involving risks were supported by Government policies that exempted poultry production form national tax levies and permitted producers to import genetically improved breeding stocks and equipment such as incubators. A number of catalytic forces shaped the early development of the poultry industry.

These forces included potential profits in the industry, availability of technologies and supportive government policies resulting form the perception of a protein deficiency in Pakistani diet. The government of Pakistan also established the Directorate of Poultry Production at Karachi, which provided extension services to the growing numbers of poultry farmers. The early development of the industry was also characterized by emerging problems including rising feed costs, disease outbreaks and consumer preferences for Desi birds.

Phase 2: Institutional Development 1971-1975.

As poultry production became a significant enterprise in the agricultural economy of Pakistan, the government strengthened institutions serving the new industry. The Federal Poultry Board was established to coordinate government and industry activities, in the layer and broiler business. Research services were offered through the Poultry Research Institute with the assistance of UNDP/FAO funds. The Directorate of Poultry Development was established in Punjab similar to that in Karachi. Poultry Producers struggled with the adverse effects of government programs e.g. the ban on export of poultry products and the consequences of some major planning flaws such the establishment of poultry estates clustered together without adequate sanitation and health control. This phase is characterized by both the greatest success of the poultry industry and its greatest failure. A dramatic increase in poultry production resulted due to diverted investments form the nationalization of industries in other sectors. At the same time the clustering of production units led to large disease outbreaks and the lack of marketing facilities due to ban on export of poultry products limited industry growth.

Phase 3: The Production Boom 1976-1980.

The government of Sindh followed a policy to attract investment in poultry farming by offering estate land under ten year leases. At the same time, the nationalization of other industries contributing the entry of capital into poultry industry, particularly in the Punjab, resulted in the poultry production boom. Commercial egg production increased from 624 million eggs in 1976 to 1223 million eggs in 1980. Broiler production increased form 7.2 million birds to 17.4 million birds during the same period. The increase volume of production was forced through limited marketing channels. Serious financial setbacks to poultry farming in Pakistan culminated from discontinuation of poultry exports; disease problems; high relative prices of poultry feed; deteriorating feed quality; and

limited supply of feed ingredients. Poultry farmers faced with financial problems and seeking remedial measures formed the Pakistan Poultry Association in 1979 on the advice of the Federal Poultry Board.

Phase 4: Depression and Adjustment 1981-1990.

Disease problems posed a serious threat to the sound development and consolidation of the industry. The large Karachi poultry estates began to close in 1984 and a number of poultry farms closed in other areas of Sindh. Production showed a decreased growth or even depression during early 1980 particularly of increases in the Punjab, Balochistan and NWFP. However, in the later part of 1980s starting form 1985 industry seemed to be readjusted with much rise in poultry number particularly in broilers. Faced with disease problems, lower productivity and numerous environmental and climatic difficulties, some of more successful farmers decided to produce under more modernized conditions and to establish their poultry farms in cooler, less polluted area of the country. Breeding farms in Karachi and Punjab thus relocated to Abbotabad, to the base of the Murree Hills and to the Valley of Quetta. The farmers also built houses with controlled environments for breeders, broilers and commercial layers.

Phase 5: 1991 to 2000

In this period was a disaster due to diseases, in 1990 the farmers suffered a great loss due to Hydro pericardium syndrome specially the farmers of Broiler and Broiler Breeder Birds. In 1991-92 an other disease Gumboro attacked the chicks of broiler, layer and parent flock that resulted in great mortality. With the passage of time efforts to reduce the incidence of these diseases and prophylaxes regarding vaccination and bio-security were done, this also resulted in establishment of new medicine companies and the importation of vaccines form abroad started. At national level institutes like Poultry Research Institute, Veterinary Research Institute and Agriculture University Faisalabad also done efforts to reduce these diseases.

In 1995 a new disease Avian Influenza appeared in Murree and Abbotabad and mortality in parent flock rose up to 80% due to this disease and set a challenge to the scientists at national level. Conferences at the diagnosis of this disease were conducted in which scientists discussed their point of views, after great loss measures were adopted that resulted in controlling the disease. In 1996 parent flock increased in number due to absence of planning that resulted in depression in the market and the price of chicks decreased several times its cost of production. This depression in Poultry market continued in 1997 as result of ban on serving of lunch in marriage parties that reduced the demand of poultry products in the market up to 40%. Slowly in 1998 it started improving and by increase in price of chick the companies got a great profit. 1999 again a syndrome like influenza broke that cause great loss in some areas while some areas were safe. Phase 6: Automation Stage 2003-2009.

During 2005 and 2009 the poultry industry witnessed a major transitional change from the old style open house commercial farming to the controlled house farming. Most of this change occurred in the broiler industry.

Automation in the grand parent and most of the breeder farming was already there, but when the farming community felt the production benefits in the controlled house farming of the breeder farmers, the progressive commercial farmers started switching over to the controlled and semi controlled house farming.

Till 2006 a considerable number of commercial broiler farmers had switched over to the controlled houses and they started getting a huge comparative and competitive advantage over the orthodox house farmers.

This comparative advantage in production and profits attracted the rest of the farmers who could afford to install these farming equipments (A controlled shed of 30,000 broilers used to cost Rs. 6 Million in 2006) and suddenly after 2006 started the mushroom growth of controlled houses.

After 2007 many investors who were not poultry farmers basically, entered in the arena tempted by the huge profits. Within last two to three years an immense number of controlled house farms have been completed and are operational.

Poultry sector is one of the most organized branches of the agro-based sectors of Pakistan. Poultry at present contributes 40 percent of the total meat consumption and generates employment and income for about 1500,000 people. Poultry is the cheapest available meat protein source for our masses and as such, is an effective check upon the spiraling animal protein prices also. Unfortunately Poultry Sector of Pakistan has suffered heavy losses due to scare of Avian Influenza (Bird Flu) since 2006 onwards.

Current situation (Automation Boom)

At the end of 2009 a total of a total of 1800 controlled house units of 30,000 broiler birds are reported to be operational in Punjab only.

Following is the area wise distribution of these sheds Lahore & adjacent towns Okara Sahiwal ,Pattoki Faisalabad Multan & adjacent south belt Gujranwala & adjacent cities Rawalpindi & adjacent cities Others 600 200 200 260 150 150 250

POULTRY PRODUCTION STATUS (Economic Survey of Pakistan 2008-2009).

Unit Types. Commercial Poultry Layers Millions Broilers Breeding Stock Day old Chicks Eggs Meat 000 Tons

2006-07

2007-08

2008-09

24.82 370.70 7.25 387.20 6682 456.95

26.56 407.77 7.61 425.92 7136 501.30

28.42 448.55 7.99 468.51 7620 550.00

Total Poultry Day old chicks. Millions Nos Poultry Birds. Eggs. Poultry Meat. 000 Tons 418 477 10197 554 456 518 10711 601 499 562 11258 651

Poultry Sector is one of the vibrant segments of agriculture industry of Pakistan. This sector generates employment (direct/indirect) and income for about 1.5 million people. Its contribution in agriculture growth is 4.81% and in Livestock growth 9.84%. Poultry meat contribution is19% in the total meat production of the country. The current investment in Poultry Industry is about Rs. 200.00 billion. Poultry sector has shown a robust growth at the rate of 8-10 percent annually which reflects its inherent potential.

PROVINCE WISE POULTRY STATISTICS

BROILER Grand Parent & Parent

2006-2007

2007-2008

2008-2009

A.

Broiler Grant Parent. Punjab

200,000 100%

175,000 100%

135000 100%

B.

Broiler Parent Stock. Punjab Sindh N.W.F.P Baluchistan

8.0 M 68 % 2% 30% -

7.5 M 75% 2% 23% -

5.5 M 79% 3% 18% -

C.

Commercial Broiler Punjab Sindh N.W.F.P Balochistan

800 M 75% 20% 4% 1%

720 M 75% 20% 4% 1%

550 M 75% 20% 4% 1%

LAYER

2006-2007

2007-2008

2008-2009

D.

Layer Grant Parent. Punjab.

4000 100%

E.

Layer Breeder.

New 428000 Molted 250,000

225,000 ** 275,000 75% 20% -

290000 170000 75% 20% 5%

Punjab Sindh. Frontier

75% 20% -

F.

Commercial. Layer Punjab Sind. N.W.F.P Balochistan

35.5 M. 70% 25% 4% 1%

34.0 M 70% 25% 4% 1%

30.0M 70% 25% 4% 1%

FEED . G. Feed Punjab. Sindh. N.W.F..P . Baluchistan. 5.5 M.T 82% 18% 5.0 M.T. 82% 18% 3.8 M.T 82% 18%

* **

Reduction of Broiler is due to early culling of PS. Effect of reduced P.S. will be seen next year on commercial layer. Source : Dr. Mustafa Kamal Big Bird Poultry

Factors affecting Profits of poultry farmers

Major factor are the rates of the poultry meat and eggs which ultimately depend on the number of poultry grand parents and breeders in the country. Essentially what this means is that as the demand of the poultry products is almost the same so its the total poultry production in the country that plays a major role in deciding the fate of the farmers.

The management of the individual farmers. Since its a livestock business and it very vulnerable to diseases resulting in mortality in worst cases and poor production in average to mild cases of mismanagement and poor bio-security.

The poultry acumen of the farmers. Depends on the on-hand experience, education, oversight of the industry and the level of information available about the breeders etc. When to rear a flock and when to hold back is the most deciding factor in commercial broiler farming.

The nature of the finances involved in the project. It is observed that those farmers who have invested their own money in the business make more money than those who get it financed from the feed distributor etc. The reason behind this phenomenon is the level of effort being put in by the farmers.

Afghanistan trade plays a pivotal role in determining the total demand of the poultry products in the country. So if the border seals off it has a very negative impact on the profits of the farmers.

The cost of the rearing the birds by the commercial and breeders is also a major factor in determining the profit margin of the farmers. It depends on the following sub factors; The prices of the grains especially maize and the soybean meal in the country which in turn naturally depend on the production, availability and other market forces affecting on their prices. These prices of grains affect the rates of poultry feeds which is about the 70% of the overall rearing cost. The prices of electricity and now a days mostly diesel prices due to load shedding. This plays a major role especially in case of controlled houses.

The pandemics like bird flue (H5N1) can suddenly wash away almost certain profits of the farmers in days.

All other general business environment factors are as much applicable on poultry sector as on other businesses.

Opportunities

& Threats

Opportunities

1. Shortage of layer breeders in the country resulting in lower population of layer birds in the country and its going to be a good year or two for the layer farmers. 2. Hyder G.P and Noor G.P had wiped off in last two years and this year the chick prices are still expected to remain high due to balanced breeder population and overall increase in the rearing cost of breeders. So this year is not going to be too much risky for the good broiler farmers. 3. Layer Breeders farmers have huge potential of making money, some new Grand Parent company is also expected to step in sensing the gap. 4. Broiler breeder farmers are also expected to earn modest to high profits because no matter whose hands operate the controlled houses, the will remain operational and thigh demand for day old chicks will be there. 5. Two or three big poultry concerns are stepping in processed meat market to compete K& Ns and they are also trying to get licenses to export the meat to gulf and other countries.

Threats

1. High cost of rearing is the major threat to the poultry industry at this moment especially that of poultry feeds which is responsible for the 70% expense of the farmer. The other allied costs which are threatened to be increased are; The price of diesel is increasing and most of time the sheds are running on diesel due to power crises. The corn prices are expected to increase due to low acreage of cultivation as many of the corn farmers have preferred to cultivate wheat in Rabi and are planning to cultivate Cotton and other crops in Kharif. This will put tremendous pressure on the supply of corn to the feed millers and the prices will go up. As stated earlier there is no overproduction of breeders in the country so there are least chances of the day old chicks falling. 2. Due to the shortage of corn, feed millers will be forced to buy even the poor quality corn with fungus on it. This is expected to negatively impact the performance of the flocks and so on their profits. 3. Threat of bird flu is always hanging over this industry which can wash away all the projected profits and turn the industry to disaster. 4. If the war on terror intensifies in the border areas with Afghanistan which is a huge probability it can cease the borders and so our trade of eggs and meat with this country.

Predictions of Poultry Pundits about 2010

Layer farmers are expected to make good to excellent profits this year due to shortage of layer breeders in the country.

Broiler open-house farmers are in a great threat of making losses in most of the flocks except a few flocks.

Controlled house farmers will outperform the traditional ones through their productions and cheaper inputs like chicks, feed and medicines. But as whole it will be a lot riskier year where great management and all the positive factors stated above will be needed to be profitable.

The mushroom growth of the controlled houses will be stabilized with the expectation that the new entrants who are merely investors and not good farmers will suffer huge losses due to bad management, wrong decisions and high cost of rearing.

The losses of controlled house farmers with poor management will result in ceasing the production and renting out the sheds. On an average a controlled shed of 30,000 birds will be rented out in Rs.1 Million per anum. Because the good farmers with less finances and the altogether new entrants will try their luck by operating these sheds.

The good farmers with ample track record of good management are expected to make moderate profits even in these tough circumstances.

The layer breeder farmers will grab huge profits and the broiler breeder farmers will earn modest to good profits this year.

HBL Poultry Product: Current Gaps & Suggestion for Improvement

Sr. #
1

GAP

Suggestion.
Only verbal confirmation of the farmers that they have 3 years experience should not be considered enough and a proper evidence in shape of Feed Mill account statement or other receipts of last years should be taken. And the experience of last 5 years should be made mandatory It should be; Broiler 15,000 birds Layers 10,000 birds Breeders 10,000 birds It should be enhanced to Rs. 1 million Only the cash flows showing the business to be feasible is not enough . He should provide the details of his at least last years flock details with the receipts from the middlemen to whom he had sold out his flocks. It will help the AFO to analyze the farmers management capabilities. For example if the most of the farmers made good money during last flocks and he did not. It shows that there is some thing wrong with his management. The farmers who need finances for the sheds that they have got on rent should be asked to show a cash inflow of at least Rs. 0.8 Million per anum from other than poultry sources. Minimum debt equity ratio should be enhanced to 65%35% from 70%-30%. If the loan is given for more than one year a general Profit & loss statement of all flocks should be taken at the end of each year.

Eligibility Criteria: Experience

2 Minimum farm capacity 3 4 Minimum Loan Requirement

Cash Flows

5 Eligibility 6 7 Monitoring & Review

Minimum Debt Equity Ratio

*There could be an altogether new product for the controlled house Poultry Farms and so for the Tunnel Farming with these farming nature specific contents different from the normal Poultry and Agriculture farming.