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Egg, considered to be the most affordable and nutritious protein source in the common man’s kitchen, can hit your pocket hard in the coming days. According to market experts and poultry industry experts, the retail price of an egg may reach Rs 20 to Rs 25 in the coming time. At first glance this claim seems shocking, but the reason behind it is directly related to the country’s energy policy and ethanol blending in petrol. Maize, which till now was the mainstay of poultry feed for the poultry industry, has now become the preferred raw material for big distilleries involved in making petrol green. This imbalance of demand and supply has created a stir in the poultry sector.
Ambitious target of ethanol blending and huge demand for corn
The Indian government has set an ambitious target of mixing 20 percent ethanol (E20) in petrol with the aim of cutting the crude oil import bill and reducing carbon emissions. Earlier ethanol production mainly depended on sugarcane juice and molasses. However, to control domestic sugar prices and limited availability of sugarcane, the government heavily promoted grain-based ethanol production.
Under this policy, after restrictions were imposed on rice (FCI Rice), distillery companies turned their entire attention towards Maize/Corn. Biofuel plants require large quantities of corn and are offering attractive and high prices to farmers and traders in the open market. As a result, maize arriving in agricultural produce markets across the country is being diverted directly to ethanol producing distilleries, creating an acute shortage of maize for traditional buyers.
Maize accounts for 60% of poultry feed: Historic jump in cost
The entire economy of the poultry industry depends on the cost of feed for chickens. Corn alone accounts for about 60 to 65 percent of chickens’ daily diet, providing them with the energy and carbohydrates they need. The remaining portion consists of soybean meal (for protein), minerals and vitamins.
As long as maize was selling in the range of Rs 1800 to Rs 2000 per quintal, the cost of production of eggs and chicken for poultry farmers was under control. But due to huge demand from distillery companies, maize prices in wholesale markets have crossed the record level of Rs 2600 to Rs 2800 per quintal. A steep 40 to 50 percent increase in feed costs has devastated the entire budget of egg producers.
Why can an egg go for Rs 25: Mathematics of production cost
According to representatives of the Poultry Federation, at present the average cost of producing an egg has increased to Rs 5.50 to Rs 6.50. When maize prices increase further or due to its shortage, farmers will have to resort to expensive alternatives, this cost may increase to Rs 10 to Rs 12 per egg.
From egg production to the consumer’s plate, many middlemen, cold storage, transportation and retailer margins are involved. If 30 to 40 percent of poultry farms in the country are closed due to shortage of maize, then there will be a huge shortage of eggs (Supply Crunch) in the market. According to the basic rule of economics, when the demand for protein is at its peak and the supply is reduced to half, the prices of eggs in the retail market can skyrocket to Rs 20 to Rs 25 per piece.
Small poultry farmers in danger of being locked out
The biggest hit of this crisis is falling on small and medium scale poultry farmers of the country. While big corporate poultry integrators have huge capital and advanced stock storage facilities, rural farmers raising 5,000 to 20,000 chickens buy feed on a daily basis.
Due to skyrocketing prices of maize and fluctuations in the wholesale price of eggs, small farmers are facing a net loss of Rs 1 to 2 per egg. Due to continuous losses, many farmers in major poultry hubs like Andhra Pradesh, Telangana, Tamil Nadu, Maharashtra, Punjab and Haryana have started locking their farms or reducing the number of chickens by up to 50 percent.
Double challenge before the government: Green energy vs protein security
This situation has created a major policy dilemma for the policy makers. On one hand, the country has to maintain a high pace of ethanol production to reduce its dependence on fossil fuels, while on the other hand, it also has to guarantee cheap protein and nutritional security for the country’s 140 crore population.
Egg is the most accessible and nutritious food for the common and poor section of India. From mid-day meals in schools to youth going to gyms, the daily consumption of eggs runs into crores. If the indiscriminate use of maize for biofuel continues, the poultry industry as well as the dairy industry (animal feed) and the starch industry will be in serious trouble, leading to a sharp increase in overall food inflation.
What could be the solution and the way forward?
Poultry associations have demanded immediate intervention from the central government. The industry suggests that the government should allow duty-free import of maize so that the shortage in the domestic market can be immediately bridged. Additionally, it should be mandated for distilleries to use other non-edible biomass or 2G ethanol technologies (agricultural residues and straw) in place of corn.
There is a need to provide high yielding hybrid seeds and incentive packages to farmers to increase the productivity of maize, so that the needs of both the ethanol plants and the poultry sector can be met without any conflict. If the supply chain of maize is not balanced in time, then in the coming days the common consumer may have to shell out many times more for eggs for breakfast.
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