Relax import LC rules for feed raw materials to help farmers cut costs 

Most feed producers have been incurring losses as they could not raise feed prices in line with the rate at which raw material prices have increased due to the Russia-Ukraine war. Unable to bear the burden of losses month after month, many have now stopped production.

On the one hand, the cost of raw materials is high, and on the other hand, importing got complicated. As a result, entrepreneurs in this sector are going through a major crisis.

We are not able to open letters of credit (LCs) as required, due to the dollar crunch. LC opening has reduced by 30-40% compared to normal times.

Prices of raw materials fell during the first phase of the coronavirus pandemic. At the time, Maize, which accounts for 50-50% of feed, was priced at $210-215 per tonne and the price has now increased to $310-325. Another major ingredient is soybean meal, the price of which rose to $580-590 per tonne from $435-445. Again, the dollar price is paid at Tk107, which used to be Tk86. Although we have increased feed prices in this situation, it is not enough.

Feed companies have been making losses of Tk1-1.5 per kg of feed for some 6-7 months. But how many companies can afford to drag out these losses for long? The answer is, not many.

We cannot increase the price after a certain point, because the farmers cannot avail it. Even those producing one-day-old chicks are making huge losses. Again the feed business is now being done entirely in credits. Dealers are taking products from the companies in credit and the farmers are doing the same when buying from the dealers. If we are to come out of this culture, the farmers need to have money in hand and they have to make a profit selling products. If the purchasing power of the farmers does not improve, then there is no way out of it. It takes at least 30-35 days to produce a broiler. The necessary money for the expenses incurred during this period should be in the hands of the farmer.

Feed companies have been making losses of Tk1-1.5 per kg of feed for some 6-7 months. But how many companies can afford to drag out these losses for long? The answer is, not many. We cannot increase the price after a certain point, because the farmers cannot avail it.

Here the small farmers are not able to pay the money properly due to not being able to balance the production cost by selling the end products. Many feed companies are running out of money as they are unable to collect money from the field, forcing them to stop production.

Now the number of government-registered feed companies is more than 200 of which 50 are not in production now. To get out of this situation small farmers have to be supported. Small farmers produce an egg for Tk10.5 and sell it for Tk8-9.5. Similarly, they are producing broilers at Tk140-145 per kg, while selling them for Tk115. So how will the farmer survive? And if the farmers don't survive, the feed industry, those who are producing day-old babies will not be able to survive either.

The government needs to create an environment here so that the small farmers get a reasonable price for the produce. Because a farmer will not trade for long incurring losses. In two or three years, the price of fish and beef has increased, but the price of chicken has not increased. Still, broiler chickens are being sold at Tk150 per kg, and eggs at Tk120 per dozen. At least at this point, the farmers need to be able to sell chicken at Tk150-160 per kg.

Now the most important thing is to help the farmers sustain themselves. For this, they need to get loans on easy terms. Banks do not provide loans to this sector as the business is risky. Nonetheless, arrangements should be made to ensure that farmers get the incentive loans that have been provided in agriculture. That is, the farmers should be provided with capital. If there is an opportunity, the money should reach the hands of the small farmers as incentives. Maybe the big industries will survive, but the survival of the small ones is at risk.

Besides, we have written to the commerce ministry through the livestock ministry, asking them to give us priority in opening LCs. As this low-cost source of protein is very important for us, we need to keep its supply chain in place. The first step in this supply chain is the import of raw materials. It must be prioritised.

In normal times 6.57 million tonnes of feed is produced annually. Of this, the feed demand in poultry is 4.45 million tonnes, 1.59 million tonnes in fish, and 0.53 million tonnes in cattle.

The author is the secretary of Feed Industries Association Bangladesh and associate vice president of ACI Godrej Agrovet Private Limited