Crisis-hit Sri Lanka’s govt expects not to rely on money printing in 2023
ECONOMYNEXT – Sri Lanka’s egg price controls have hit two generations of layer chicken, triggering a collapse in both layer and parent bird populations, an industry official said as the country grapples with the worst currency crisis in the history of its central bank.
Sri Lanka’s daily egg output is estimated to have dropped to about 4 million a day from the normal 7 million after farmers killed layer chicken for meat in the wake of price controls imposed by the Consumer Affairs Authority.
In the Christmas season when a demand for cake and also tourism picks up another 15 to 20 million eggs are demanded, which leads to a rise in price in all years.
Eggs packed in trays sold for around 65 rupees or more in super markets in December, while many small groceries stopped selling eggs at lower prices without packaging fearing raids by the CAA.
The boiler chicken industry, which was free from price controls has recovered as soaring prices of around 1500 to 1700 rupee a kilo incentivized farmers to grow more chicken while layer chicken were sold for meat, in the past quarter. Prices are now down to 1100 (live birds) to 1400 (frozen).
A court order has suspended the price control order until February. Price controls trigger shortages and also black markets if supply is not killed in the first place.
Long Investment Cycle
Unlike broilers which are killed at around 40 days it take around 5.5 months for a new batch of layer chicken to mature, says Ajith Gunaskera, President of the All Island Poultry Farmers’ Association.
To grow a batch of layer chicken to maturity, he says it now takes about 3.5 million rupees, compared to around 700,000 rupees a couple of years before a currency collapse and a global commodity price spike in the wake of Fed money printing.
“Interest rates are now 30 percent so small farmers cannot make the investment,” Gunasekera said.
Coupled with a hike in value added tax, a cascading social security levy that has cast doubt on the ability of the current administration to do simple reforms, as well as the currency collapse has pushed up feed costs.
A 50 kilo bag of layers feed has gone up from around 5,000 rupees before the crisis to around 13,000 rupees now, Gunaskera said.
To bring down the cost of feed it has been proposed that excess paddy be allowed to be used for chicken feed but the Consumer Affairs Authority also banned it by a gazette notice.
The CAA has created shortages and black markets of several foods during the Coronavirus crisis including tinned fish and has emerged as a key threat to food security. The agency disrupted the egg industry and triggered shortages as access to protein has been reduced in the currency crisis.
But farmers who now order layer chicks also cannot get them.
“Hatcheries are saying that it will take until March to give the layer chicks,” Gunasekera said.
“There are not enough layer parent stock.”
Sri Lanka needs around 80,000 parent birds to produce the required layer chicks but now there are only around 42,000, a the main hatcheries, according to Gunasekera.
Though Sri Lanka has grant parent farms for broilers, layer parents have to be imported.
As orders for chicks dried up due to price controls, hatcheries stopped importing new parent stocks, and the effect of price controls have reverberating across two generations.
Imported parent stock chicks take about 5.5 months to lay eggs.
“As a solution it has been proposed that Sri Lanka import hatching eggs (fertilized eggs of parent birds),” Gunasekera said.
“But that also has risks of diseases. If approved it will have to be done under strict controls in a few monitored farms.”
The price controls came shortly after a bakery owners association – which raises prices by press conference – called for them.
Over the past few days egg producers have got together to sell eggs at around 50 to 55 rupees.
However with market demand strong due to the shortfall other traders are going to the farmgate and offering higher prices, Gunasekera said.
The price controls and the disruption of the poultry layer sector come as President Ranil Wickremesinghe tries to implement a social market economy.
The social market economy is a term used to describe the post World War II West Germany where price controls were ended and strong controls were placed on the central bank, laying a strong base for producers and consumers to create an ‘economic miracle’.