Published: Thursday, Jul 28, 2016
Published : 28 Jul 2016, 01:00:44
Bangladesh's poultry sector: Are the chickens coming home to roost?
Syed Mafiz Kamal and Muhammad Shafiullah
Earlier this year, the local poultry farmers staged a protest in front of a central market in Gaibandha district in northern Bangladesh. They, along with feed traders and dealers, formed a human chain demanding reduction of accessory prices in the poultry industry. According to them, "if the government did not take a pragmatic action in this regard, all the poultry farms of the district would be closed down forever, causing many people to lose their jobs and the country would face deficiency of protein."
Whether the closure of few poultry farms or shops in Gaibandha will create a country-wide protein deficiency is a conversation beyond the scope of this article. However, this demonstration is telling of a larger story: the poultry sector in Bangladesh requires serious attention. It needs an effective policy formulation so that the sector is made more cost-competitive in keeping with its comparative advantage, whereby the country can enjoy the socio-economic benefits of job-creation and higher income-generation.
The poultry sector in Bangladesh has been growing rapidly. Aggregate demand for poultry has been on the rise, which is consistent with the expansion of the middle class and their purchasing power, and the consequent transformation of people's consumption habits. Meat from poultry constitutes an integral part of a nutritious diet. In addition to being a protein source, it is also an important employment generation sector, and is integral to the country's long-term food security. In Bangladesh, poultry farming around the homestead is a vital livelihood option for rural poor families, which can play an important role in poverty reduction. Unlike other livestock options such as cattle and sheep, raising and consuming poultry has fewer adverse impacts on public health, and on the environment for that matter.
The importance of poultry lies in its contribution to the Bangladesh economy. The sector alone contributes some 1.0 per cent of Bangladesh's GDP. Because it is a labour-intensive sector which does not require lengthy training, almost anyone can participate in poultry farming because it can be done either on a large scale or in one's backyard. A 2008 study by FAO (Fig.1) estimated that 67 per cent of eggs in Bangladesh came from the 'backyard system.' The report also states that more than 80 per cent rural households in Bangladesh keep poultry. The very poor prefer to keep no animal (such as cattle) other than poultry because of its favourable characteristics: low cost of maintenance and lack of land ownership. Despite the informal nature of the poultry sector, it is now among the top employment-generating sectors in the country.
Because of few religious impediments in the faster consumption-growth areas (developing countries), according to OECD-FAO Agricultural Outlook Report, poultry will be half of the additional meat consumption by 2024. Bangladesh is a nutrient and protein-deficient country. In spite of successful strides in public health measures, the country remains persistently malnourished. In Bangladesh, 25 per cent of the population are undernourished and 36 per cent of children are stunted. According to World Health Organisation (WHO), Bangladesh is on the lower-end of the global protein consumption. In light of such striking deficiencies, chicken meat and other poultry products such as eggs ought to be considered vital to the nation's nutritional mix.
Yet, Bangladesh is one of the lowest poultry meat consuming countries. Local industry observers claim an annual consumption of just 3.2 kg per person. However, OECD-FAO Agricultural Outlook states that the per capita consumption is even lower at only 1.2 kg per person per year (which is lower than regional countries like India and Pakistan). Bangladesh's low consumption is due to its vast segment of the population who are poor and middle-class, who consume meat occasionally, and have a low per capita income compared to her neighbours. Among the high consumers of meat, the United States (47.6 kg per capita) and Malaysia (41.4 kg per capita) are at the top end of the chart (Fig.2).
The current per capita egg consumption in Bangladesh is also low. It is only 32 eggs per person per year, and is almost half that in India. According to one estimate, by eminent livestock researcher Mohammad Mohi Uddin, from 2013, 56 per cent of demand for eggs is unmet in Bangladesh. With increasing incomes, the demand for meat, especially the cheaper option poultry meat, and eggs is set to rise. However, given the low rate of consumption projection, the demand has to be further boosted.
The demand for poultry products in Bangladesh is fuelled by key drivers which are both economic and food security-related. They include: population growth, urbanisation, income rise, changing dietary patterns, nutritional awareness and food quality awareness. The supply constraints are low productivity, uneven and inadequate feed supply (feed expenditure accounts for 40 per cent of the poultry production cost), epidemic of bird diseases and limitations in marketing and logistics structures, including those related to broader poor health of the country's infrastructure.
Farmers face losses because of lack of coordination between demand and supply. According to Mohammad Mohi Uddin's analysis from 2013, feed supply experiences some 62 per cent deficiency in Bangladesh, compared to just 15 per cent in China. This remains a major obstacle. Another noteworthy obstacle is the resurfacing of widespread bird flu, which hit in 2007 and affected the country until 2012, resulting in the closure of 60,000 poultry farms and killing of millions of birds. When diseases hit the sector, poultry producers experienced up to 100 per cent loss in investment.
Despite such setbacks, the poultry sector, according to industry observers, is expected to grow at the rate of some 16 per cent annually for the next five years, provided the investment, production and consumption are prudently managed. According to Bangladesh Poultry Industries Coordination Committee (BPICC) convener, last year, the poultry sector capital stock exceeded US$3 billion and is expected to double by 2030.
The success of the industry is directly correlated with the prices of competing protein products such as beef and Hilsa fish. In other words, chicken is highly 'cross-price elastic.' In addition, the poultry sector got a boost with the rise of beef price since last year after India cracked down on cow export to Bangladesh. Similarly, during Hilsa season poultry sales experience certain stagnation. As discussed, the industry is also affected by the prices of feed. Any increase in global prices of feed constituents such as corn and soybean raises poultry production cost which is why import of these inputs are exempt from customs duties. Thanks to the duty-free facility, Bangladesh imported US$380 million worth of feed in FY2015, a 17 per cent increase from the previous year.
Bangladesh's poultry sector exhibits noteworthy potential despite many challenges (as previously noted). Substantial effort must be put in to streamline the market -- including encouraging demand and improving the supply-chain. On the demand side, increasing the consumption of poultry through wellness campaigns and other incentives will go a long way in meeting the country's nutritional needs. On the supply side, raising chicken is often faced with difficulties due to poor infrastructure and logistics, such as intermittent supply of electricity. Industry leaders complain that power is a constraining factor (just like most other industry sectors in Bangladesh). The cost of diesel is more than the electricity bills they pay. In addition, inadequate and inhospitable transport services lead to high mortality of chicken before reaching the consumers' plates. The increasing trend of investment in the sector is a welcome development. Proper research needs to be done to improve poultry breeds, combat disease outbreaks, and provide better veterinary services in general.
Improving hygiene and sanitation in slaughterhouses and encouraging consumption of professionally packed, such as halal certified, meat in Bangladesh are necessary for augmenting demand as well as ironing out inefficiencies. In this respect, there is a severe lack of cold storage facilities to store poultry products in order to avoid losses in difficult times such as political unrest or in times of market shortage. Prioritisation of incentives to the poultry sector in the recently-passed FY2016-17 budget is expected to be a shot in the arm for the sector and a sign of timely and prudent policies by the government. This will indeed be conducive to the industry's goal of doubling capital stock in the sector.
To conclude, growth of the sector is essential for meeting the nutritional requirements of the population and ensuring food security of the nation. Sustainable growth in the poultry industry could also generate much needed jobs and income for the country's unemployed youths. That makes a strong and immediate case for the right policy support to this critical labour-intensive industry.
(This article is co-authored by Syed Mafiz Kamal and Dr. Muhammad Shafiullah for FE-PRI EAU. Mr. Kamal, a Senior Research Associate, and Dr Shafiullah, a Senior Economist, at PRI, can be reached at firstname.lastname@example.org and email@example.com, respectively.)