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Thursday December 9th, 2021
Agriculture

Sri Lanka egg prices up as feed costs soar amid money printing, import controls

ECONOMYNEXT – Sri Lanka’s egg prices have started to go up with farmers hit by soaring feed costs as forex shortages and import controls compounded the fallout from a Coronavirus pandemic, an industry official said.

Chicken farmers are calling for the government to remove the quota controls on maize imports and end the forex crisis.

Packaged branded egg prices in supermarkets have been around 25 to 31 rupees but in retail shops sold ‘loose’ they have been around 14-16 rupees.

Farmers who had difficulty in selling eggs and finding feed during the pandemic has stopped growing new layer chicken.

All Island Poultry Association (AIPA) said egg prices will go up to around 20 to 21 rupees.

“When the country opened after the lockdown, the sudden surge of the demand pushed the market prices of eggs due to a lower supply,” Ajith Gunasekara, President of the poultry association told EconomyNext.

“There is a big demand now and there will be a supply shortage for about two or three months.

“We can’t stop the hens from laying eggs and we can’t stop feeding them too. There’s a problem, it’s not only in Sri Lanka. Christmas will have high egg prices.”

Most farmers have only started to grow layer chicken he said. It takes about five to six months to lay eggs.

Feed Crisis, Forex Crisis

For many years Sri Lanka’s rulers have been squeezing poultry farmers with high maize prices maintained with import duties and licenses with the stocks controlled by politically powerful rent-seeking collectors, sometimes referred to as ‘maize mafia’.

With the US Federal Reserve printing money amid an economic recovery global commodity prices have gone up.

Money printing by Sri Lanka’s central bank has created forex shortages and depreciated the rupee adding to the US policy errors.

Banks are now rationing dollars.

Poultry feed is made of soya meal, maize and sometimes wheat when the government allowed its import for the farmers.

Almost 70 percent of the production cost of poultry farmers is feed. Large feed producers have raised prices in Sri Lanka as input costs went up.

Farmers are also unable to make feed as they are no longer able to import ingredients as money printing created forex shortages.

“Due to global and local market situations and our country’s forex crisis, and the supply chain issues there is a big shortage of feed ingredients,” Gunasekara said.

“The issue is we can’t produce LCs and PC to transfer funds to import the ingredients with the demand of dollars.”

“Small and medium scale farmers can’t afford the cost of production so they can’t survive. In this situation, they have not put their day-old chicks to rear.

“Most small and medium farmers have also closed their farms and they are not going to invest because of the high cost of production and risks in the market.”

other issues the feed producers are facing is supply delays and shipment clearance.

“There is also a world shortage. Most of the feed ingredients are produced in China,” Gunasekara.

He says with the ongoing electricity cuts in China there will be another shortage therefore they will increase the feed ingredient prices too.

“So definitely in the next two or three months feed prices too will go up.”

The average feed price according to Gunasekara is a maximum of 75 rupees per kilogram. In the coming months, he predicts it to go up to 110 rupees per kilogram.

However, the association says they have encouraged the farmers to put the chicks to grow otherwise there will be a shortage in the next March-April festive season.

Chicken meat, the association says they are able to manage.

The association has made a request to the government to allow them to import feed ingredients and release dollars for the purpose.

They also ask the government to remove the import barriers such as taxes and quotas for feed ingredients.

The government has stopped the importation of maize in a protectionist move to protect the local maize growers.

Local maize cultivators produce almost 50 percent of the maize requirement for feed production, Gunasekara said.

As an alternative, the poultry farmers were allowed to import wheat. This year the government had given the approval to bring 200 metric tons of wheat.

“But again, we are asking for maize importation because local farmers are not cultivating maize this season,” Gunasekara said.

“We have to import maize but there is a dollar crisis, so without dollar how can we import? These are the uncertainties of the industries.”

“Main crisis is feed and feed ingredients. We have to import it. If the government can give us the facility to import feed ingredients without any quotas or barriers, then it will be freely available in the market.”

Money Printing

Analysts have called for Sri Lanka’s central bank to be abolished and re-build a currency board so that it cannot print money and depreciate the rupee and put people in difficulties.

At the moment state workers get full salaries with printed money and they buy goods, leaving little for the private sector workers whose salaries have been cut.

When central banks print money the first receivers of money benefit and late receivers end up with high prices.

“But as prices of goods begin to rise in response to the higher quantity of money, those who
haven’t yet received the new money find the prices of the goods they buy have gone up, while their own selling prices or incomes have not risen,” US economist Murray Rothbard explains.

“In short, the early receivers of the new money in this market chain of events gain at the expense of those who receive the money toward the end of the chain, and still worse losers are the people (e.g., those on fixed incomes such as annuities, interest, or pensions) who never receive the new money at all.

“Monetary inflation, then, acts as a hidden “tax” by which the early receivers expropriate (i.e., gain at the expense of) the late receivers.” (Colombo/Oct24/2021)

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