The extraordinary inflation cycle of the last 18 months has irreversibly changed pricing in many sectors. Even if market prices are now beginning to calm down as a result of demand suppression and loss of purchasing power, domestic demand will likely never look the same again.
Take the example of the poultry industry, where general inflationary pressures combined with a weak policy matrix have hurt consumer demand over the past two years. Now that demand is particularly sluggish (after a record number of times when prices doubled in less than a year), prices have been on a downward trend for at least the last four months. Since June 2023, national average prices have fallen approximately 32 percent in both wholesale and retail markets; This may be the longest period of continuous price decline in recent history. So will the good old days return?
The recent decline in prices is most likely the result of a shift in the demand curve rather than an increase in production (or a return to past peak levels). While the downward trend in prices is across the entire value chain, the following rule of thumb can help explain what’s going on. The past ‘peak’ in the poultry industry is now the new ‘bottom’.
This means that if the highest price of ‘live’ chicken in Lahore is in the range close to Rs 325 per kg in 2021, that is where the lower limit lies two years later (in 2023). Despite the recent downward trend lasting more than four months, average prices for the 2023 calendar year are still 80 percent higher than in 2021. The situation is no different for Daily Chicks, where prices no longer fall below Rs 60 per chick. A few years ago this would have been the highest prices ever reached.
Yet falling consumer demand refuses to shift gears. Channel checks show that the decline in consumption over the last 18-20 months has been so severe that hundreds of farms across the country have been completely shut down. Although the current declines in input prices (feed and chicks) will likely make room for a short-term calm in prices, the quantity demanded is still too weak to attract most producers.
Welcome to the brave new world where protein consumption is falling. Where poultry prices are now on par with beef, and farm egg prices are on par with live chickens. The market may soon find new meaning, but the euphoria of the past decade may not be seen for a long time.
news source (www.brecorder.com)