Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Strong Growth Predicted for Livestock Sectors in India

with 5 comments

The article below touts quite emphatically that growth of industry is a given. While it is very easy to forecast the growth of an industry, but its not as trivial to spot winners in an industry. I can safely put money on Venky’s, Simran and Srinivasa Hatcheries. First and the last are related to each other, Venky’s was an excellent pick for 2009, already up 14 times since the nadir of ’09.

I am bullish on other stocks too but do not want to touch existing positions until they mature.

Beef and poultry production will increase by 29 per cent and 41 per cent, respectively, to 2013/14 and there is strong demand for dairy products, according to a new report.

With the monsoon forecast to be only slightly below average, we expect crop production in 2010/11 to increase significantly owing to higher yields, according to a new report, India Agribusiness Report Q4 2010, from Companies and Markets. 

Over the five-year forecast period, production across all agricultural sub-sectors will be positive, spurred by increased demand, foreign direct investment. Dairy and livestock will also benefit from improved technology adoption, which could set a strong example and produce a model for other sub-sectors to follow. 

Sugar production growth to 2013/14 will be 105 per cent. Growth will be dictated by increasing domestic per capita consumption. However, this growth is also a function of base effects. 

Beef and poultry production will both increase – by 29 per cent and 41 per cent, respectively – to 2013/14 due to increased demand from higher incomes and prevalence of western style restaurants. 

Because of marketing schemes targeted at the general population and generally greater demand for high-value dairy products such as yoghurt and cottage cheese, the report forecasts butter and milk production to grow by 38 per cent and 26 per cent, respectively, to 2013/14. 

2010 real GDP growth will be 7.8 per cent and is predicted to average eight per cent from now until 2014. 

Consumer price inflation will reach 16.6 per cent year-on-year in May 2010, up from 5.7 per cent in May 2009. 

With the monsoon registering only slightly below average up to 7 July, the sectors deeply affected by the previous year’s drought (rice, sugar, grains) should increase production considerably year-on-year in 2009/10. However, we note that these are generally due to base effects and when harvest yields are compared internationally, India’s agricultural production still has room to improve. 

Indian agriculture will benefit greatly from increased multinational investment and technological improvements in various sectors. In dairy, large firms Reliance, DCM, Bharti and ITC have all entered the market, while in coffee, Segafredo Zanetti, News Café and Starbucks are finally gaining a foothold in a market experiencing moderate but consistent growth. The dairy and livestock sectors should get a significant boost in the form of information holding micro-chips and other technological advances. 

Strong economic growth will lead to increased incomes among India’s vast population. This, combined with a youthful population and increasing urbanisation, means Indian demand for sugar and meat products. Producers should certainly benefit from this, but the government will also be keeping a keen eye on production levels in order to ensure what they consider manageable prices in order to control food price inflation

Source : thepoultrysite.com

Written by amitdipsite

August 7, 2010 at 3:58 am

Posted in Uncategorized

5 Responses

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  1. Hi Amit,

    I have been tracking Venkys too and believe in the long term story of this company. With the consumption story of India intact and climbing more it makes Venkys poised to make the most of this. The potential for the poultry industry to grow remains huge with the per capita consumption of egg and chicken increasing. It is a company with excellent pricing power and structural volume growth potential.
    However the troubling part to me to is the feed costs going up. The feed costs in the form of maize and Soya is on the rise. Historically its price has grown from Rs 5600 in 2005 to currently around Rs14000 per tonne. This is staggering as the prices of feed amount will have a direct effect on eggs and broilers.
    I am really bullish on the new food chain. Venkys Exps is a move in the right direction. It could be India's answer to KFC and Mcdonalds. The food industry in India is expected to see a CAGR of 5% in the next 3 years and Venkys Exprs in poised to grow more than this. It could benefit from the Great Indian Consumption story greatly..
    Need your opinion on how much u believe in Venkys and the industry?

    Mokhtar

    December 14, 2012 at 6:49 am

  2. Hi Amit,

    I have been tracking Venkys too and believe in the long term story of this company. With the consumption story of India intact and climbing more it makes Venkys poised to make the most of this. The potential for the poultry industry to grow remains huge with the per capita consumption of egg and chicken increasing. It is a company with excellent pricing power and structural volume growth potential.
    However the troubling part to me to is the feed costs going up. The feed costs in the form of maize and Soya is on the rise. Historically its price has grown from Rs 5600 in 2005 to currently around Rs14000 per tonne. This is staggering as the prices of feed amount will have a direct effect on eggs and broilers.
    I am really bullish on the new food chain. Venkys Exps is a move in the right direction. It could be India's answer to KFC and Mcdonalds. The food industry in India is expected to see a CAGR of 5% in the next 3 years and Venkys Exprs in poised to grow more than this. It could benefit from the Great Indian Consumption story greatly..
    Need your opinion on how much u believe in Venkys and the industry?

    Mokhtar

    January 14, 2013 at 3:41 am

  3. Definitely Mokhtar,

    They have a strong chance to do well. Plenty of firms in the same business though. They have feed business as well as a part of group. Opportunity is present but focus and passion is missing and business is also hard. Can test patience for years like Heritage Foods before rewarding.

    Regards

    Amit Arora

    January 14, 2013 at 9:18 am

  4. Restaurant business looks seductive but its very hard give real estate constraint. McDonalds India took 15 years to break even. QSR has better chance of succeeding than likes of Speciality Restaurants Ltd. But that will serve as a mirage for earnings for many years.

    Amit Arora

    January 15, 2013 at 5:52 am

  5. Thanks for your reply. Yes patience would be needed. Agree with you about their focus(with Blackburn rovers in shambles)

    REal estate contraint wont be as much as Mcdonalds and KFC as such because of Venkys being a local player. Secondly Venkys Exprs is a QSR with not much seating capacity(so smaller space required – a good strategy); take away and eat at your comfort types. Whereas mcd and kfc provide ample space for seating. Also the products are all in-house by Venkys whereas mcd and kfc buy the chicken from locals, in case of kfc they buy it from Venkys only. Breakeven would be faster than we think.

    Mokhtar

    January 16, 2013 at 6:27 am


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