A Study on Development of Sri Lankan Poultry Industry Importance of Rural Poultry Sector

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1 Res. Bull. Fae. Agr. Gifu Univ. (63) : 87-96, A Study on Development of Sri Lankan Poultry Industry Importance of Rural Poultry Sector A. Iddamalgoda, M.Sugiyama, K.Oguri, K.Arahata*, and H.P. Premasiri** The United Graduate School of Agricultural Science, Gifu University, *Faculty of Agriculture, Gifu University, Gifu, Japan **Gold Coin Feed Mills (Lanka) Ltd. Colombo, Sri Lanka (Received July 16,1998) SUMMARY Gifu, Japan The present study is an attempt to examine the present situatior: of Sri Lankan poultry industry and the existing condition of the rural poultry sector. The achievement of the poultry industry in Sri Lanka in the past two decades has helped the poultry industry to emerge as the fastest growing segment of all the livestock sectors. This impressive performance has been, however, mainly due to the rapid expansion of the private sector while the performance of the rural poultry sector remains rather stagnant. In Sri Lanka, rural poultry could be promoted as a powerful tool for rural development programs. Poultry manure has been using as a fertilizer and the low building cost are advantages in rural areas. At present, a large percentage of commercial poultry birds are of commercial hybrids and a large percentage of meat and eggs come from this rural commercial poultry sector. However, the coexistence of both the sectors is particularly important to improve the domestic poultry industry and to provide stable income to rural women and youth. Egg consumption has increased from 31 eggs in 1981 to 58 eggs in Poultry meat consumption increased from 0.19kg which accounted for 17% of total meat consumption in 1981to1.5 kg which accounted for 50% of total meat consumption in 1995 and it is estimated to increase to 5kg by the year Future prospects for the poultry industry in Sri Lanka has prompted international companies such as KFC, Gold Coin, Cargills Inc. etc. to enter into the domestic industry. Key Words: Commercial Poultry, Rural poultry, Broiler industry, Egg industry, International companies Res. Bull. Fae. Agr. Gifu Univ.(63) : 87-96, 1997 INTRODUCTION The poultry industry consists of two major sectors, namely egg ~nd meat production. Sri Lanka formerly called "Ceylon" has a very special place in the history of poultry domestication with "Galus lafayetti" or "Ceylon Jungle Fowl" being one of the ancestors for the present day poultry breeds. However, its poultry industry has a brief history of only a few decades. Poultry is recognized as one of the important segments in animal agriculture because poultry keeping has been practiced for centuries as a backyard operation among rural families. During the past two decades, native backyard type poultry breeds have been reducing with the availability of hybrid day old chicks in the rural areas due to the rapid growing demand for meat and eggs. In spite of encouraging growth in the poultry sector, the per capita availability of eggs in the country is 58 eggs and l.5kg of poultry meat 1 l as compared to eggs and kg of poultry meat in the developed countries 2 >. Two decades ago there was only one chicken processing company in Sri Lanka, but with the rising This research paper has partially presented at the 6th Asian Pacific Poultry Congress Nagoya, Japan 4-7, 1998

2 88 Research Bulletin of the Faculty of Agriculture, Gifu University, No.63, 1998 demand for poultry products, several large scale processing companies entered the business. Though the Feed and Chick supply is basically done by large joint venture companies, locally owned companies and semi government companies, the production sector is still in the hands of rural or semi urban poultry farmers by way of contract growing in order to fulfil the requirements of each contracted company. The semi government sector such as the National livestock Development Board (NLDB) and Mahaweli Livestock Enterprises Limited are involved to upgrade rural poultry farming via supplying of chicks, feed and arranging processing and marketing. However their share in the market is not significant. Eggs and poultry meat have become important components of the diet since reduced fish production caused very high prices for fish which had been traditionally the main source of animal protein in the diet. At present chicken dishes are a very common item in local menus even though it was considered a luxury item a decade ago. The price, nutritional value, religious acceptability by all communities and lower capital investment needed for small-scale backyard poultry units are the main factors for this development 3 >. purpose of this study is to analyze the present situation and the future prospect for the Sri Lankan poultry industry with respect to production, consumption, relation between current rural poultry sector and commercial poultry industry. MATERIALS AND METHODS To review the development of Sri Lankan poultry industry a survey questionnaire prepared and mailed to the experts of the poultry sector in Sri Lanka and the collected data was analyzed. Information from other studies, data from statistical publications and secondary data have been used. Here poultry meat includes broiler and culled chicken and other kinds of poultry meat such as duck, geese, and quail production is very insignificant in Sri Lanka. Present situation of poultry industry i). Poultry population RESULTS AND DISCUSSION It is in the range of 9.5 million to 11 millions birds according to different statistical data published for the year Though backyard poultry still comprises a large percentage, the exact figure is not known. However the present rural poultry population which currently comprises of commercial hybrids and native types accounts for about 68% of the total poultry population. Urban and semi urban areas predominantly rearing commercial types contributes 32% of the total population. Poultry unit size in rural areas is 15 birds for native type and for commercial type. On the contrary urban and semi urban average is more intensive and is from 500 to 5000 birds during the year Table 1 indicates the change in livestock population for past 4 decades and the poultry population has increased by 145% when compared to other types of livestock. However the pig population has not increased in spite of its productivity among farm animals even though there is no religious restriction for eating pork among majority communities. Though the total population has increased the over all increase is predominantly due to broiler population from the beginning of l 990's. According to the poultry census, in 1990 there was a production of 14.5 million of broiler day old chicks and 3.7 million of layer day old chicks. In 1993 this has increased to 25.2m of broiler DOC and 4.8m of layer DOC. However due to increasing demand for meat in 1994 Broiler DOC production increased to 32.4m but the layer DOC decreased to 3. 7m. This was due to drop in procurement of parent stocks and drop in production of commercial pullets. As a result of that, there was high egg prices in 1994 but the layer DOC production again increased to about 5.8 million in 1995 and broiler DOC to 37.9m to meet the increasing demand. However lower egg consumption will be the main cause for the stagnant growth in layer population when compared to broilers. The

3 IDDAMALGODA et al : A Study On Development of Sri Lankan Poultry Industry - Importance of Rural Poultry Sector 89 Table 1. Trends in Livestock Population in Sri Lanka Unit: 'OOOheads/birds Category 1950/ / / / %Change 1950/52 to 198 Cattle Buffaloes Goats Sheep Pigs Poultry n.a Source : Livestock Statistics Sri Lanka ii). Poultry Meat and Egg Production and Consumption During the past decade, meat production has rapidly increased by 3 fold, but the scale of operation is yet relatively small with only a few large scale processors in Sri Lanka. In rural areas there remains a large gap in demand and supply due to lack of refrigeration facilities at the village level. In 1986 the poultry meat production was just 10,000 MT and by 1994 it increased to 25,000 MT and recent FAQ data gives the figure for 1996 as 56,000 mt. Therefore further growth in production is expected with the introduction of modern large scale processing facilities and the improvement of the rural commercial broiler sector with the help from contract growing facilities. Table 2 shows the growth projection of broiler production from 1993 to year 2000 in relation to growing human population and assumed consumption growth. There is a significant increase in proportion of other poultry meat from 1990 to 1996 as explain in Table 3. The data is available for total chicken production, hence using the broiler day old chicks production is used to calculate the broiler meat contribution to the total meat. It is assumed that average mortality is 10% and average final dressed weight is 1.2 kg in 42 days. In 1990 the percentage of other poultry was 2.6% and the corresponding figures from 1994 to 1996 were 6.2%, 11.6%, 9.1 % and 20.2%. Even though there is a production of duck meat in Sri Lanka this characteristic increase would be due to the layers being contributed Table 2. Growth Projection For Broiler Production HUMAN POPULATION (MILLIONS) 2.REQUIRED AMOUNT OF MEAT (MILLION KG) 3.PERCAPUT/ANNUM (KG/PERSON) 4.REQUIRED NO.OF BROILER D.O.C/WEEK 5.REQUIRED AMOUNT OF FEED METRIC TONSNEAR 6.REQUIRED GROWTH RATE% Assumption: I.Annual growth rate of population % 2.Annual growth rate of per capita consumption of chicken kg 3.live weight ofa broiler 1.6kg and carcass recovery - 75% 4.Feed consumption per broiler - 3.2kg 5.Livability - 96% Data: Survey on Sri Lankan Poultry Industry, Gifu University, 1997 Dept. of Animal Production and Health

4 90 Research Bulletin of the Faculty of Agriculture, Gifu University, No.63, 1998 Table 3. Estimated Other Poultry and Broiler Meat Production in Sri Lanka Total Chicken Meat (mt) Broiler DOC Productioh (Million) Total Broiler Meat* (mt) % of Other Poultry 2.6% 2.0% 0.5% 6.2% 11.6% 9.1% 20.2% Data: Survey on sri Lankan Poultry Industry, Gifu University, Dept. of Animal Production and Health * Estimated by using Broiler DOC Assumption: Av.10% mortality, Av.Dressed weight l.2kg in 6 weeks. to meat production via use of male DOC and culled chicken. Egg production has increased from 9,361 MT in 1961 to 47,300 MT in 1989 and further increased to 48,858 MT in >. However, the growth during the past few years has been rather stagnant. Growth in the egg sector has been rather slower than the broiler sector due to the latter fetching more income to the household in a short duration of time. Egg consumption increased from 31 eggs in 1981 to 58 eggs in 1994 but the increase in the past few years has been rather slow. In contrast, poultry meat consumption has increased from 0.19 kg in 1981 to 1.5 kg in This increase is mainly due to lower price of chicken compared to other meat types, acceptance by all religions and communities and the escalated prices of fish which has been the main protein source in the traditional diet for many years. Further increase in production is expected to keep chicken price low and hence lead to greater demand. By the year 2000 the estimated chicken meat consumption will be 4. 7 kg with an average per capita consumption growth about 0.5 kg every year 1 >. According to Table 4 Sri lankan per capita consumption has increased by 6 folds from 1981 to 1994 but far behind the other countries in the region. COMMERCIAL POULTRY SECTOR The poultry industry in Sri Lanka is dominated by a few private sector companies who accounts for over 80% of the industry output. This sector is involved in layer and broiler breeder farms with hatcheries (DOC production), feed production and poultry processing. At present, the state sector presence in the industry is Table 4. Poultry Meat and Egg Consumption in Sri Lanka and Asia Per Capita Consumption in Sri Lanka Regional Co 1sumption 1992 Year Eggs (Nos) Poultry Meat (kg) Country Poultry Meat (kg) Sri Lanka Thailand Malaysia Pakistan India 0.43 Source: F AO (1995)

5 IDDAMALGODA et al : A Study On Development of Sri Lankan Poultry Industry - Importance of Rural Poultry Sector 91 insignificant and the NLDB produce about 7-8% of the total DOC in the country. Layer DOC production has been stagnant due to lower egg consumption in Sri Lanka, while Broiler DOC production has recorded an impressive annual growth of over 20% during the past few years. Feed production is dominated by 3 main companies namely, Ceylon Grain Elevators, Gold Coin Feed Mills and Bairaha together with Cargill Inc of the USA. Ceylon Grain Elevators company is the major controller in feed and chick production. In 1993 it controlled 80% of the market share in feed supply but with entrance of Gold Coin and Cargill, its share has come down to around 65%. CGE share in Layer DOC is 60% and Broiler DOC is 30%. Gold Coin has 15-20% share in the feed industry and Bairaha together with Cargill target is 10% of share initially and it also has the Layer DOC share of 10% and Broiler DOC share of 30%. With both CGE and Bairaha planning to fully integrate there activities, these two companies will play a major role in the development of the poultry industry in Sri Lanka. CHICKEN PROCESSING INDUSTRY There are other popular hatcheries and poultry processors such as Christombu Farms, Nel farms, NLDB, Maxie House, Pussela farms, Ceylon Cold Stores, John Keels, Bairaha and CGE. Current demand outstrips supply, therefore chicken processing is expected to expand with the changing demand for different poultry products. Furthermore, due to poor distribution, especially in rural areas where refrigeration facilities are inadequate, there remains a large gap in the demand and supply chain. There is large potential to improve rural poultry sector via contract growing if the private sector improves their processing facilities. Thus to improve the chicken consumption and to develop the rural poultry sector, it is vital that large scale processing plants are setup with modem freezing facilities in order to make chicken meat readily available throughout the country. Once the large companies establish contract growing systems for the supply of chicken from the rural and semi-urban commercial farmers, there will be several ways to upgrade the rural living standards. EGG PRODUCTION COST Table 5 Shows the cost of production of an egg among the different flock sizes. It explains that economy of scale is around birds and there is not much difference in the flock size between birds. Feed is the main cost factor which consist of about 70% of the total cost. This can be controlled upto some extent by using locally grown maize and other feed supplement without affecting the quality of feed. However most of the farmers engaged in commercial production prefer to commercial feed which is supplied by the contractor. Improving the scale of operation, optimizing feed conversion ratio and adopting improved technology will assist in controlling the cost. Table 5. Production Cost of An Egg Year Unit: Rupees/Egg Scale of Operation(No. of Birds) Data: Survey on Sri Lanka Poultry Industry, Gifu University, 1997 * 1Rs. = 2Yen

6 ,, ~-~ Research Bulletin of the Faculty of Agriculture, Gifu University, No.63, 1998 MEAT PRICES Poultry industry has grown tremendously in the past decade with the ever increasing demand primarily due to escalating prices of fish. With beef and fish prices increasing, together with changing consumer habits and health consciousness, chicken became a readily substituted item. As seen in Figure 1, chicken was the most expensive meat a decade ago and considered a luxury item, but during this period it has become the cheapest animal protein source. Raw material for feed production is predominantly imported and all feed companies enjoyed the duty free status until the beginning of Therefore poultry meat prices were lowered year by year. However after introducing new Goods and Service Tax for all the industries, feed prices and other supplies were supposed to increase and the future of the development of the poultry industry will depend on the government counter measures to contain the unwanted development. There is a significant price fluctuation for eggs in the months of April and December. High price in April probably due to the Traditional New Year holidays during this month and it is celebrated by all major communities. December peak perhaps due to the Christmas holidays and the New Year holidays in the country. Figure 2 shows the monthly fluctuation of egg prices from January to December in MARKETING OF CHICKEN MEAT AND EGGS IN SRI LANKA Compared to the broiler marketing channel, the egg marketing channel is traditional because of the continuous growth of semi-urban and rural egg sector instead of an integrated system. At present, majority of eggs are sold without grading and packing which is observed in developed nations. The marketing of broiler chicken expanded during the last decade more than the traditional local chicken marketing. General marketing channel for meat and eggs are shown in the Figure 3. At the beginning there were only few breeders and hatcheries in the private sector and the government sector. There was only one processing company and no proper marketing channel as seen in the present broiler industry. This is the result of the increasing entrance of vertically integrated large scale poultry businesses except for the production which is largely in the hands of semi-urban and rural contract farmers. During past decades many processing companies established and they are becoming the influential 300 i mi 1994 bd :::.:::'. 200 "-- I/) Q) Q) 150 a. ::i 0::: Chicken Beef Pork Mutton Fish Fig. l. Prices of Selected Animal Products

7 IDDAMALGODA et al : A Study On Development of Sri Lankan Poultry Industry - Importance ofrural Poultry Sector 93 C> C> w -(/) Q.) Q.) a. ::J 0::: 4 White -It- Brown Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec Fig.2. Yearly Fluctuation of An Egg Price in 1994 group at the down stream of the marketing channel.' They distribute chicks and feed which may be from upstream of the marketing channel (hatcheries and feed producers) to their farmers and collect their produce at market rate and handle marketing of produce including processing, packeting and distribution. However this affected the independent broiler farmers who were supplying the local market without contract. Therefore to encourage this independent rural farmers, cooperatives have established and functioning efficiently in the Egg sector. These egg cooperatives arrange the marketing and supply of inputs to the rural and semi urban farmers who wants to start the layer business. It is observable that "the cost of production and market prices in Sri Lanka are higher than in other countries in South Asia but the quality, the hygiene factor and the way it is organized with small farmers are of high standing". RURAL POULTRY SECTOR Rural poultry sector comprises of rural commercial poultry and backyard farming where the latter consist of native breeds, has become minimal during the past two decades. About 68% of total poultry population is located in rural areas. Over 50% of the country's population depend on agriculture and for the last 15 years, livestock activities are much greater than cereal production. Importance of rural poultry is that it provides employment especially to women and youth, regular income to farmers, provides essential nutrients by way of eggs and poultry meat, supply of poultry manure for farm use, low cost of housing and no heavy labor requirement 5 >. However it is important that the above mention companies and continuous government support needed to maintain the development of the rural poultry sector. IMPORTANCE OF RURAL POULTRY 1. Popularity in poultry rearing is high in rural areas due to low capital and space requirement, easy management, daily or quick return especially in case of broilers and the best economical converter of feed among farm animals. 2. Rural Poultry is suitable for the rural poor and marginal land farmers. It not only gives income but acts as a reliable supply of high quality animal food to the rural population through eggs and meat. 3. It also provides an opportunity of employment for members of the rural families especially women and children. Due to regular income, poultry farming helps the farmers to manage their crops by purchasing

8 94 Research Bulletin of the Faculty of Agriculture, Gifu University, No.63, 1998 Private Semi Govt.Breeding Farm Hatchery Contract Integrated Independent Cooperative Backyard Farms Farmers Farmers Farmers Farmers lntergrator Processing Plant Wholesaler Dealer Slaughter Hous,e Backyard Killing Export Wholesaler Restuarants & Institution Retailers Supermarket Wayside Stall (Eggs & Live birds) CONSUMER Fig.3. Marketing Channel for Chicken Meat and Eggs in Sri Lanka requirements like seed, pesticides and fertilizer. 4. Poultry litter as a manure is being utilized to cultivate crops and save the extra expenditure on fertilizer. A study has revealed that poultry litter accumulated over a period of 9-12 months is a balanced organic manure 6 l. It has been estimated that 40 birds reared on deep litter can tum out one tonne of manure within a year, which can be used for a hectare of paddy or maize and half hectare of intensive vegetable cultivation. Therefore the additional food grains produced by the use of these fertilizer will be much more

9 IDDAMALGODA et al: A Study On Development of Sri Lankan Poultry Industry- Importance of Rural Poultry Sector 95 than the quantity of grains that birds eat in their feed. CONSTRAINTS IN DEVELOPMENT Poor marketing facilities is a main problem with those farmers who is doing their independent farming outside the contract growing system. Many egg farmers have formed cooperative societies for marketing eggs and to have constant input supply. High feed cost affects their net income and a program to mixed their own feed with locally grown feed supplements should be encouraged without affecting its quality. With rapid increasing intensive farming the disease incidence is also getting high. Therefore there must be poultry diagnosis facilities and extension facilities to overcome sudden losses. CONCLUSION The future of the poultry industry is bright and the demand for poultry will increase at the expense of beef and high prices of fish which has been the main protein source in the traditional diet. Government policies toward the private sector is very encouraging and raw materials for feed production is predominantly imported and they enjoy duty free status until recently. Demand for poultry product has been increasing due to urbanization and increasing disposable income and therefore fully integrated companies with good processing facilities will have a prosperous future. Rural poultry rearing has been the most popular livestock farming practice with many households engaged in layer farming with few birds to well managed medium scale farms. Established companies are engaged in contract growing which increases the farmers income and employment opportunities with no risk in marketing. The cost estimates reveals that feed alone accounts for about two third of total costs. Thus availability of quality feed at reasonable price for rural areas would provide an opportunity to produce more poultry products. Proper marketing facilities and price for products would go a long way in expanding the rural poultry industry in Sri Lanka. REFERENCES 1 ) Dept. of Animal production and Health, Govt. of Sri Lanka, Sri Lanka(1996) Broiler and Layer Industry of Sri Lanka. 2) Rahaman, Z.U.: Proceeding XX World Poultry Congress 3: , ) Reddy, C.V. : Poultry International 36-3: 38-44, ) WATI Poultry Statistical Year Book. pp WAIT Publishing Co., Illinois, ) Sasaki, M.: Proceeding XX World Poultry Congress 3: , ) Nadeem, F.M.: Production and Marketing of Broilers: An Economic Analysis. PhD thesis(unpub.) University of Agricultural Sciences, Bangalore, India, 1995.

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