Cement and chicken prices go up

http://www.dailymirror.lk/news/22672-cement-and-chicken-prices-go-up.html

A kilo of chicken will be increased by Rs 30/-. Good for poultry companies BFL, GRAN and TAFL

Chicken prices up by Rs. 30 and the season comes shortly.

Will the next bull run starts with this chico kick?

Monster wrote:A kilo of chicken will be increased by Rs 30/-

So it is not true then that we only have to win (FIX) matches to see the price hikes ?

Bad news for cosumers and good news for stock holders. We were expecting this hike speculation.

I do not think it works like that.When the news is clear and obvious price may not get appreciated.What usually happens in this type of situation is existing share holders book their profits while new enters get trapped.So be careful if you hope to catch chiken now.

Whitebull wrote:I do not think it works like that.When the news is clear and obvious price may not get appreciated.What usually happens in this type of situation is existing share holders book their profits while new enters get trapped.So be careful if you hope to catch chiken now.

Should qualify that observation with short term and medium term strategy.

if chicken price go up ......
we may have a chicken run ....not a bull run

sureshot wrote:if chicken price go up ......we may have a chicken run ....not a bull run

Some Run is better than No Run at all .

So Hens and Cocks can have the show on monday.

Monster wrote:http://www.dailymirror.lk/news/22672-cement-and-chicken-prices-go-up.html

A kilo of chicken will be increased by Rs 30/-. Good for poultry companies BFL, GRAN and TAFL

As well as there should be a positive impact on cement shares such as TKYO.........

next quarter income may decrease as chicken price goes up by lowering the chicken demand.

What are the reasons for this chick price rise?

DKS wrote:What are the reasons for this chick price rise?

What do you mean. Just like they raise prices for other items they raised chicken also. Due to excessive CESS on maize and previous drought chicken farmers were also finding difficult to make profit. Especially the small timers. So this raise was evident at some point.

Also I saw a comment that people will eat less chicken now. Forget chieck lovers vs haters argiments but does a 10% price increase make people not eat it ( those who eat). Fish sometimes goes up by Rs 200 right. Yet people eat.

Again please let us not start chicken lovers haters argument.

Thanks..

With all those difficulties such as excessive CESS on maize, market leader in poultry posted excellent result around 27 eps for the last financial year. I think now it is time to re-calculate their projected earning for coming quarters and financial years with this 10% price hike. Their revenue must definitely go up. if we see their recent quarterly reports we can see clear Q by Q growth in revenue. But cost of sales has also gone up. if they able to cut down the cost as well cant we expect all time best result in 2013?

So i would like to invite you all to do a re-assessment about poultry group specially about poultry leader Bairaha Farm.

Factors to consider,
1. 10% price increase of chicken
2. Increased demand for chicken in the future with high tourist arrival.
3. Seasonal demand
4. Development of Maize projects in north and east with government assistance.

Finally i think poultry group will shine the market again in 2013 and 2014.

Thank you.

Chicken prices going higher decreases the consumption. The main consumer of chicken is the food industry including the hotels, restaurants, caterers including your lunch packet maker. When the price of chicken goes up the size of the chicken in the lunch packet gets smaller. That is when the cost goes up the cost allocated for the item is the same only the portion gets smaller. You can see that even if you check high class restaurants or take away franchises how much they served then and now.
From my personal perspective how much I paid for chicken then and now hasn't grown with the price. It's just that the amount and frequency I buy gets less and I keep using the same chicken portion for more meals.
Also high chicken prices make these bulk buyers go for cheapest option which means they will only be concerned about the cost not the quality. So the one who can provide the cheapest wins not the well established companies who had to save the reputation, although the final consumer gets a piece of bone at the end.
So when the chicken prices go up the consumption does not stay the same. It goes down adjusting to the price. It does not mean consumers pay more. It is consumers pay the same price but buy less.

Further people talk about tourist arrival, travel, leisure, hotels. The same record played over and over again. This does not grow in a massive scale as after the war. Now it's in a saturated state with gradual increments. Major chicken producers who are supplying to the five star hotels and restaurants are not even listed in the Colombo stock exchange.

Further I have a big feeling that this quarters chicken company reports will be really disappointing unless they can bring accounting magic or dispose some asset to show something at least above line.

Thanks.

What is your feeling about next two quarters ending December and March? And next two years(2013, 2014)??

This has been timely and will give chicken companies some breathing space.

The impact of this will be seen in the December Qtr with high sales volume coinciding with the seasonal factor. I dont expect the positive impact to be that enormous anyways. The cost of production has increased at a faster rate. It will just about help the companies to balance things and survive.

Cheers!

After reading posts on this thread, i feel most have missed the biggest factor impacting the poultry sector currently. yes, production costs have increased due to the drought, cess, global rise in maize and soybean prices, electricity and transportation costs, consumer discretionary food expenditure declining due to inflation etc.
The poultry sector is very cyclical. after the end of the war, the poultry industry enjoyed renewed demand. this lead to a shortage. the existing players like Gran, Three Acre Farm and Bairaha dramatically increased their production capacity by increasing their batches, cages and livestock. some independent breeder farms doubled their hatchery capacity. 6 new breeder farms started production. the total broiler production in 2009/2010 which was 6 million kgs per month is now 12 million kgs per month. then all of a sudden, johnny boy imported chicken from india. that just killed the local industry temporaraliy. now their is severe over production in the industry at a time feedstock prices and other overheads are high. also remember that in the poultry industry, there is very little economies of scale. i.e 70 % of total overhead cost is feed. (every bird eats 150 grams of feed per day) thus when you increase capacity,you do not a comparative advantage in scale. now for the poultry cycle to turn, the excess capacity has to be removed with the small scale breeder farms and the new entrants going out of business. only then will the existing players have a good time like in 2010 and 2011.
In the poultry business, it is not easy to decrease capacity overnight (unless you cull the very expensive batches). although the broiler cycle is only 45 days, the raw material i..e the day old chick production takes over a year. this is because the parent stock (each bird about Rs 4000) will start laying eggs only at week 22 and will continue till week 80. so unless you cull them earlier, they will keep laying day old chicks that are used by the broiler processors. A Broiler Day Old Chick which was Rs 130 in 2010 is Rs 50 now ! This is due to the current demand / supply fundamentals.
Longer term, the poultry industry will be very lucrative for the bigger players. this is because Sri-Lanka's per capita consumption of chicken is still about 5 Kgs. Thailand, Malaysia and Singapore is about 35-40 kgs. Perhaps this is due to Sri-Lanka being a majority Buddhist country where the majority do not eat chicken due to religious reasons.
Another factor to keep in mind especially for the foreign poultry players is that the majority profit is kept overseas by over invoicing the feed.

To summarize, For the Poultry Industry in Sri-Lanka, a SWOT Analysis would look like this :

STRENGTHS
1. CHICKEN IS A CONSUMER DISCRETIONARY FOOD ITEM AND CHEAPER THAN BEEF AND FISH
2. EGGS ARE A FAST MOVING CONSUMER STAPLE FOOD ITEM.
3. EGGS ARE CHEAPEST SOURCE OF PROTIEN
4. RISING GDP PER CAPITA WILL POSTIVELY IMPACT CONSUMPTION / DEMAND

OPPORTUNITIES
1. CONSUMPTION OF EGGS & CHICKEN PER CAPITA LOW COMPARED TO S.E. ASIAN COUNTRIES
2. ADDING CAPACITY RELATIVELY EASY & LOW COST (OPPORTUNITY & THREAT)
3. TOURISM BOOM IN FUTURE, RISING GDP PER CAPITA
4. NORTH & EAST CONSUMER MARKETS OPENING UP

WEAKNESSES
1. GOVERNMENT PRICE CONTROL
2. CYCLICAL NATURE OF INDUSTRY DUE TO DEMAND / SUPPLY / PRICE FUNDAMENTALS, EASE IN ADDING CAPACITY, LIVESTOCK CYCLE
3. BARRIERS TO ENTRY LOW
4. NO INSURANCE COVERAGE OF RISKS
5. DIMINISHING ECONOMIES OF SCALE ADVANTAGE DUE TO FEED COST AS % OF COGS STRUCTURE IS HIGH
6. MAJORITY NON CHICKEN EATING CONSUMERS IN COMPARISON TO ASIAN REGION

THREATS
1. RELATIVELY EASY & NON CAPITAL INTENSIVE TO ADD CAPACITY
2. AD HOC GOVERNMENT INTERVENTIONS – INDIAN IMPORTS
3. BIO SECURITY RISK – BIRD FLU
4. RAW MATERIAL PRICES / FEED COMMODITY PRICES / CLIMATE CHANGE IMPACT

Thanks. Thats very informative.

What're the consequences on cost of construction, law abiding citizens trying to build a small asbestos hut taking debts, cost of living, food? People's buying power? Not just increase of cement and chicken this instance. (Chicken you can skip but cement would not be easy unless you build mud huts.) How would they affect years ahead?
As starting chicken farm is a day's job (clear an area, make chicken coup wire netting around) there would be competition and people will buy the cheapest offered.