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Insightful Analysis of Poultry Industry in Punjab [Updated]

  • ️Wed Feb 05 2025

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Situational Analysis: Poultry Industry of Punjab During COVID-19 – Threats, Challenges, and the Path Ahead

Punjab Board of Investment and Trade
Projects & Policy Research Department
Government of Punjab

Disclaimer: The views and suggestions expressed in this report are result of opinions and information shared by the industry official platforms and its businessmen and do not necessarily reflect the policy of Government of Punjab or PBIT

1- Sector Introduction and Significance

Pakistan’s economy heavily relies on agriculture, which makes up about one-fifth of the country’s GDP and supports 42% of its workforce. Livestock plays a major role, contributing 58% to agricultural GDP. Around 40 to 45 million people in rural areas depend on livestock farming for their livelihood.

The poultry industry is a key part of this sector, with over Rs. 700 billion currently invested. It has been growing rapidly at a rate of 8 to 10 percent annually. Pakistan is now the 11th largest poultry producer globally, with 1,163 million broilers produced each year. The industry provides jobs to over 1.5 million people, both directly and indirectly.

Poultry also helps control the prices of mutton and beef. It contributes 34% (1,518 thousand tons) to the total meat production in Pakistan, which is 4,478 thousand tons. In 2018-19, poultry meat production grew by 9.1%, and egg production increased by 5.6%, reaching 19 billion eggs.

Modern poultry farming methods, like controlled shed systems, have significantly improved both the quantity and quality of production. Today, there are over 6,500 controlled environment poultry sheds, showing that the industry is advancing and adopting new technology.

2- Important Facts

  • Currently, the turnover of Pakistan’s poultry industry is around 1,168 billion rupees (before COVID-19). It is one of the most organized sectors within agriculture, growing at a rate of 10-12% annually.
  • Around 190 billion rupees’ worth of agricultural produce and byproducts are used in poultry feed, contributing to the broader agricultural value chain. There are over 15,000 poultry farms across the country, with capacities ranging from 5,000 to 500,000 broilers.
  • Marketing for broilers and eggs mainly takes place in the unorganized sector, and poultry products account for 40-45% of total meat consumption in the country. Only 5-6% of slaughterhouses and processing fall under the organized sector.
  • Pakistan produces 17.5 billion table eggs and 1.44 billion kilograms of chicken meat annually.

3- Background

The University of Veterinary and Animal Sciences (UVAS) held an online session on April 7, 2020, with key stakeholders from the livestock and poultry sector. This included representatives from academia, the Punjab Livestock Department, farmers, farmer associations, processing companies, exporters, and a FAO expert. The session focused on discussing measures to sustain the food supply chain. Meeting details and recommendations were shared with relevant government offices, including the Prime Minister’s Secretariat.

Similarly, on April 6, 2020, the Pakistan Poultry Association submitted requests and suggestions to the Prime Minister and the Governor of the State Bank of Pakistan, highlighting the industry’s current challenges and offering recommendations to support the poultry sector during the crisis.

4- Existing Incentives being offered to the Industry

The Federal government has introduced several concessions to lower the costs of poultry production. In the 2017-18 budget, sales tax on imported poultry machinery was reduced from 17% to 7%, custom duty from 11% to 3%, and the 5% regulatory duty on importing grandparent and parent chicken stock was removed. Additionally, custom duty on importing hatching eggs was reduced from 11% to 3%. These measures aim to reduce production costs for value-added poultry products and promote the industry. The government is also considering waiving the 100% cash margin on letters of credit for importing raw materials to make Pakistani products more competitive in export markets.

5- Situation Analysis

The COVID-19 pandemic is severely affecting the poultry industry, disrupting the entire food supply chain due to containment measures. Businessmen from the poultry community have reported challenges such as decreased demand, transportation disruptions, and workforce shortages in processing plants. Farmers are being pressured to sell their produce at lower prices, while exporters are struggling to fulfill international orders, leading to a critical emergency in the food supply chain.

The-broiler-production-supply-chain.ppm

The primary issue is that production costs, especially for feed, have risen significantly, with a 40-rupee increase per kilogram over the past year, while chicken sale prices have remained almost the same for five years, fluctuating between 130 to 140 rupees per kg. The profit margin for farmers has now decreased drastically due to a steep drop in demand after the COVID-19 lockdown, particularly from large gatherings like weddings and religious events. In some markets, like Toliinton Market in Lahore, chickens are being sold at just 70 rupees per kg.

While companies with complete control over the supply chain and frozen stock facilities are managing better, the ongoing costs of maintaining frozen stocks and farm operations are unsustainable. Farms face rising expenses for wages, feed, utility bills, and other operational costs, with some small farmers already shutting down due to mounting losses. A farm with 15,000 chicks, for example, incurs a daily holding cost of about 200,000 rupees, making it difficult to survive beyond a certain point.

As a result, many farmers have been forced to close their farms, and hatcheries are dumping new chicks due to a lack of buyers. Only a small percentage of farmers (10% to 20%) are currently investing in new flocks in preparation for Eid-ul-Fitr.

This supply-side crisis threatens the industry’s ability to meet post-pandemic demand, potentially leading to a sharp rise in prices and creating another crisis for the government to manage.

6- Situation Analysis of Poultry industry in China during COVID

COVID-19, though not directly affecting poultry, has had a major impact on China’s poultry industry. After the outbreak began in December in Hubei Province, lockdowns were enforced across many villages to control the virus. As restrictions have begun to ease, China has worked to maintain the supply of agricultural products, which are vital for a stable economy and people’s livelihoods. However, the challenges faced by the agricultural sector during the pandemic have received little attention.

Segments-of-China-Food-Chain
Fig-1: Segments of China’s Food Chain

Two major problems emerged:

  1. Livestock farmers faced severe pressure due to supply chain and market disruptions. With animals requiring daily feeding and short production cycles (such as six weeks for chickens), the situation was critical.
  2. The arrival of the spring ploughing season added further strain on crop farmers, who urgently needed to resume work, but the outbreak and control measures made this difficult. Missing key services during this critical season could result in a year of lost income for smallholder farms.

The Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) conducted interviews with small, medium, and micro-enterprises in the agricultural sector in February. The survey revealed that as of February 10, only 24.6% of agricultural businesses had resumed production, with logistics disruptions cited as the primary challenge, especially in the livestock sector. About 60% of agricultural enterprises reported raw material shortages, with livestock farmers facing the most severe issues due to feed shortages, leading to the risk of animals starving.

The Chinese government implemented measures, such as opening a green channel for feed transport, to help stabilize agricultural production. As other countries implement similar lockdowns, the survey results suggest that agricultural enterprises worldwide may face similar challenges, requiring government intervention to prevent shortages or price spikes.

7- Understanding Major Cost Centre:

Chicken meat and eggs are some of the most accessible, abundant, and affordable sources of protein for the masses. In challenging economic times, like those faced by Pakistan, a cheap and reliable supply of meat and eggs becomes even more crucial. Below is a table outlining the major cost centers involved in the production of chicken by farmers:

Cost Center Estimated Cost (PKR)
One Day Old Chicks (30,000 @ 35 PKR each) 10,500,000
Feed (2000 Bags @ 3000 each) 6,000,000
Diesel Generator + Brooding 200,000
Electricity/Utility Bills 200,000
Labour + Security Salary 250,000
Misc, Maintenance & Husk etc 200,000
Rent 200,000
Total Cost 8,600,000
Break Even Price for the Farmer 138 PKR/Kg

The table clearly highlights that feed is the largest cost center, accounting for approximately 69.7% of the total production cost. The overall cost of production fluctuates based on changes in feed prices, which are a major factor in the poultry industry. The table reflects the estimated average Ex-factory price for broilers, but it’s important to note that approximately two layers of intermediaries (middlemen) are added before the product reaches the customer. Therefore, understanding these major cost centers is crucial for making informed policy decisions.

8- Way Forward

8.1- Recommendations based on Stakeholder‘s Feedback – A Way Forward

  • Subsidized Cargo Flights/Freighter Services:

    • Export items like hatching eggs and processed products need to be transported to Saudi Arabia and other Middle Eastern markets. Due to flight operation closures, there is a request for Pakistan International Airlines (PIA) to offer freighter services from Lahore or Islamabad at affordable rates. Delays could allow competitors to seize the market, potentially causing millions of USD in revenue losses and reduced foreign exchange earnings. Approximately 200 to 300 tons per week could be exported using this service.

  • Agricultural Tariff for Poultry Industry:

    • Since poultry is a sub-sector of agriculture, it is requested that the same reduced electricity tariff applied to agriculture (like tubewells) be extended to the poultry industry.

  • Deferral of Utility Bills:

    • Immediate deferral of utility bills for at least three months is requested. Poultry farmers, already low on revenue, cannot afford additional costs, and electricity is critical to maintain the controlled environment for the flock. If bills aren’t paid, disconnection could force farmers to use costly diesel generators, putting them in financial jeopardy.

  • Loan Payment Deferral:

    • The industry requests that loans, including both principal and mark-up, be deferred for two years to ease financial strain.

  • Exemptions on Import Duty, Sales, and Income Tax:

    • To avoid food crises and ensure food security, the industry requests an exemption on import duties, sales, and income tax for raw materials and machinery used in food production for a specified number of years.

  • Poultry Industry Support Package:

    • The government is urged to provide a support package of 100 billion PKR through banks, similar to that offered to the agricultural sector. This would help poultry farmers buy feed, pay utility bills, pay employees, and purchase flocks from hatcheries.

  • Easy Loans for Working Capital:

    • The government may prioritize the poultry sector and encourage banks to offer easy loans at special discounted rates, helping farmers cover operational costs and retain employees.

  • Reduction of Feed Costs:

    • The industry requests the government to reduce import duties and ensure that feed suppliers lower their prices to help farmers manage costs.

8.2- Long Term Recommendations

  • National Media Campaign: Launch a comprehensive media campaign to educate the public that consuming milk, meat (chicken, beef, mutton), and eggs is safe and helps boost the immune system against COVID-19.

  • Post-COVID-19 Logistics Support: Law enforcement agencies should assist with the logistics of food materials on national and local routes to ensure smooth transport.

  • Uninterrupted Supply Chain: Ensure continuous supply of milk, meat, and eggs from rural to urban areas, with SOPs to prevent disease spread.

  • Equal Incentives for All Stakeholders: Provide equal incentives to the poultry, meat, and dairy industries to maintain equilibrium and support all stakeholders.

  • Inclusion in Food Program: The government should include processed chicken and eggs in the Prime Minister’s food program to support food security and the industry.

  • Price Stability: Empower provincial price control committees, under the Pakistan Competition Commission, to maintain uniform prices for feed, chicks, meat, and medicine year-round, ensuring price stability and fair profits.

  • Inter-Provincial Coordination: Strengthen coordination between provinces for the development of the livestock sector.

  • National Committee for Value Addition: Establish a national committee to work with the private sector to promote value addition and diversification in the livestock industry.

  • Animal Disease Control: Increase measures to control trans-boundary animal diseases (FMD, PPR, zoonotic diseases) that impact trade and the economy, with provincial involvement.

  • Investment in Livestock Sector: The Board of Investments should attract investment into the livestock sector by promoting new incentives and exploring export opportunities, focusing on the global halal food trade.

  • International Promotion: Engage embassies to promote processed poultry and value-added livestock products globally.

  • Special Livestock Industrial Zone: Develop a special industrial zone dedicated to processed meat and value-added livestock products to boost the sector.

Content Source: PBIT Punjab

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