Avian influenza, also known as bird flu seems to have hit the shares of poultry producers like Venky’s (India) and feed producer Godrej Agrovet which are reportedly down by 7 per cent and 2 per cent, respectively, in the last three trading sessions.
Venky’s shares dropped more than 4 per cent on Thursday the lowest level in two months after an outbreak of avian influenza or bird flu was reported in four states. The shares were trading at Rs 1,515.95, down 2.85%, after hitting a low of Rs 1495.10 earlier in the day. Similarly, on Friday also the shares were down 2.13 per cent at Rs 1591 on the Bombay Stock Exchange at about 1.45 pm.
However, shares of Godrej Agrovet was up today 1.26 per cent at Rs 536.50 on the BSE.
Meanwhile, ICICI Securities in its report said, with several states facing concerns of bird flu, we believe animal feed and poultry segments of Godrej Agrovet are likely to be impacted in near term.
However, going ahead organised players such as Godrej Agrovet is expected to gain market share from unorganised players as consumers are willing to pay premium for hygienic and packaged products, it reportedly said.
Bird Flu in India:
A bird flu alert has been sounded in states, including Kerala, Madhya Pradesh, Himachal Pradesh, Rajasthan, Haryana and Gujarat, which are already fighting their biggest battle against the novel coronavirus pandemic.
According to the industry experts, this scare has not only impacted small shopkeepers, but is also expected to hit the supply chain of bigger businesses like Venky’s and Godrej Agrovet in the short term. Experts are of the view that the poultry businesses across the country is expected to see their businesses being hit in next 2-3 quarters. Also, prices of poultry products that of chicken and eggs may see a decline, impacting demand for poultry feed. Profitability of entire value chain is likely to be impacted in Q4FY21.
What we learned from the 2006 and 2008 epidemics:
India suffered bird flu pandemics in 2006 and in 2008, which saw a decline in the consumption and prices of poultry products. However, the impact on profitability of poultry companies was less than a year, as consumption and prices both recovered after the disease was controlled.
Organised players to witness value migration:
As the consumers are willing to pay for hygienic and packaged products, the organised players are expected to gain market share in the short to medium term.
Unorganised sector facing losses:
The state wise poultry industry heads are expressing concerns of heavy losses the industry suffered between February and May last year when Covid-19 pandemic struck. The business had only started picking up since the last quarter of 2020.
“Between mid-February and May-end, Gujarat Broiler industry suffered a loss of Rs 350 crore because viral messages created fear among consumers who refused to buy poultry,” Anwesh Patel, president of The Gujarat Broiler Farmers Coordination Committee (GBFCC) reportedly said.