ECONOMYNEXT - Sri Lanka's Ceylon Grain Elevators Plc, a feed milling and poultry group, warned that demand for meat was weakening amid a currency fall and an infestation of the Fall Armyworm was pushing up domestic prices of maize, which has import controls.
The group reported profits of 218 million rupees for the December quarter, up 13.8 percent from a year earlier.
"The Group has been able to improve profitability despite the adverse effect of upward revision in fuel prices, the continuous depreciation of LKR against USD, inclement weather conditions and the glut in the market for chicken that hindered the last quarter performance, with prudent management and cost control," Chief Executive Officer Cheng Chih Kwong, Primus told shareholders.
In the past, so-called 'gluts' in chicken meat have come after steep currency depreciations, which makes it difficult for the less affluent to continue to buy meat and they move down to cheaper foods.
Starting from the live bird market, the demand fall then spreads to the day-old-chick sector, leading culling.
Three Acre Farms, a publicly traded unit of Ceylon Grain Elevators said the day-old-chick market was undisturbed in the December quarter.
"The Group revenue has increased due to the improved demand for Broiler Day Old Chicks (DOCs) during the year," TAFL said.
"Stable demand for Layer DOCs in the last quarter of the year after recovering from the volatile table egg market further strengthened the performance of the Group."
Analysts had warned that the Central Bank's habit of printing money to cut rates as soon as the economy recovers from the previous balance of payments crisis, would lead to monetary instability. (Sri Lanka is recovering, Central Bank threat looms: Bellwether).
Sri Lanka's rupee fell from 153 to 180 by the end of 2018 as the central bank pumped liquidity into money markets and undermined the credibility of a peg, which has multiple convertibility undertakings.
Poultry farmers and feedmillers not only have to deal with natural disasters but also state import licensing on grain, which are imposed to protect farmers.
In the current Maha season, an infestation of Fall Armyworm had hit maize farms.
"The recent spread of invasive 'Sena' caterpillar (Fall Armyworm) in many Maize farmlands of the country has caused a shortfall in the domestic Maize production for the upcoming Maha season will affect the prices adversely," Primus said.
"This may in turn affect the overall poultry industry performance."
Authorities have said they may relax maize imports following more study of the crop damage. Up to 40 percent of the cultivated area had been hit to various degrees by January, Agriculture Minister P Harrison told parliament. (Colombo/Jan31/2019 - SB)