Animal feed industry takes a big hit over edible oil price hike

The surge in soybean oil price has dealt a blow to the country's animal feed industry that heavily depends on soybean meal, a by-product of the extraction of soybean oil from seeds, said the sector insiders.

Currently, the refinery companies are unable to raise prices of edible oils further in the local market because of government intervention.

However, the production cost of animal feed is skyrocketing as oil producers are increasing the price of soybean meal, which is used in animal feeds.

As a result, the production costs of fish, meat, milk and eggs continue to rise in kitchen markets.

At a virtual view-exchange meeting on Saturday, leaders of the Feed Industries Association Bangladesh (FIAB) raised these concerns on how the poultry, fisheries and livestock sectors are being crushed due to the rising production cost of feeds.

According to the industry leaders, feed production requires 50-55% maize and 30-35% soybean meal. Soybean meal price has soared by 88% in the last two years since the beginning of the Covid-19 pandemic, of which a 30% hike was observed in the last two months. Meanwhile, maize prices rose by 18%.

Md Ahsanuzzaman, general secretary of FIAB, said the price of soybean meal was Tk54 per kg in August last year, which turned Tk60 earlier this year.

Later, the DO (delivery order) price was fixed at Tk70 on 16 March despite the 10% value-added tax (VAT) exemption by the government on edible oil imports, he said, adding that the price increase of soybean meal in the domestic market is much higher than in the international market.

When the government put pressure on the edible oil-producing and refining companies to control the price of soybean oil, the companies then reduced the price slightly but raised soybean meal price abnormally, Ahsanuzzaman claimed.

According to the leaders, the domestic poultry, fisheries and dairy sectors have been taken hostage by 3-4 soybean seed crushing companies.

Therefore, the government needs to pay heed to this issue. Because the production costs increase of eggs, milk, fish, and meat will eventually affect the ordinary consumers, they said.

As a result of the Coronavirus pandemic and the recent Russia-Ukraine war, prices of various livestock feed ingredients have seen an 88-123% rise in the last two years. To adjust with the pressure, feed millers are counting losses and some were even forced to reduce production, said the sector insiders.

FIAB President Ihtesham B Shahjahan said millers thought the price of raw material would come down to a moderate level but that did not happen and the price is still soaring by the day.

Currently, the total production cost including raw material has gone up so much that losses of Tk3-4 in per kg broiler feed, Tk2.5-3.5 in layer feed, Tk3.5-4 in cattle feed and Tk4-5 in fish feed are being counted by the millers, he said.

Ihtesham said large feed mills have reduced their production by 15-20% while several small mills and many broiler farms have been already shuttered.

The rise in feed prices has led to a crisis in poultry, fisheries and dairy farms due to a lack of coordination between the production cost and market price, with many shutting down businesses, he added.

Secretary Md. Ahsanuzzaman said about 80% of the cost of feed production is owed to the purchase of raw material.

In March 2020, the price of maize was Tk24.17 per kg, which rose to Tk36 this month. The price of soybean meal is now Tk70 which was Tk37.25 once, he said.

The price of full-fat soybeans now stands at Tk66.90 up from Tk38.50 and the price of rice polish is now Tk36.33 which was selling at Tk21.25 previously, Ahsanuzzaman continued.

Similarly, L-Lysine price increased from Tk133.33 to Tk200, Synthetic DL-methionine (DLM) from Tk200 to Tk300, poultry meal from Tk54 to Tk80, and fish meal from Tk100 to Tk146, he added.

To resolve the crisis, industry leaders demanded the withdrawal of advance tax (AT), advance income tax (AIT), source tax, VAT and duty on import of all kinds of raw materials and equipment used in poultry, fish and animal feed production in the forthcoming national budget.