Feed Prices Rise as Chicken is Cheap, Permindo Says Farmers Lose up to Rp5,000 per Kg

JAKARTA - The Indonesian Independent People's Poultry Association (Permindo) complained about the increase in feed prices that continue to burden people's chicken farmers. In the midst of rising production costs, the live bird (live bird/LB) price is actually below the cost of production (HPP).

Permindo noted that current feed prices are in the range of Rp8,600-Rp9,500 per kg or up around Rp1,000 per kg compared to the previous period. Meanwhile, the price of live birds in various national production centers is only in the range of Rp17,000-Rp18,000 per kg, while the breeder HPP has reached around Rp22,000 per kg.

Chairman of Permindo, Kusnan said that with this condition, farmers are estimated to lose around Rp4,000-Rp5,000 per kg of chicken sold. With an average harvest weight of 2 kg per head, farmers' losses can reach Rp8,000-Rp10,000 per head.

Furthermore, Kusnan assessed that the condition was a cost-price squeeze phenomenon, namely when production costs continued to increase while selling prices actually decreased so that the business margin of farmers was increasingly eroded.

"People's farmers are not facing a chicken price crisis alone, but are facing a business margin crisis due to the falling selling price along with the uncontrolled increase in feed costs," Kusnan said in an official statement, Wednesday, June 24.

According to Kusnan, the high price of feed cannot be separated from changes in the management of the import of feed raw materials which are increasingly concentrated through one door with the Cash Before Delivery (CBD) payment system. This scheme significantly increases the working capital needs of the feed industry.

Kusnan said that the main raw materials such as soybean meal (SBM), feed wheat, and various other feed components now require much greater liquidity support than before.

Furthermore, Kusnan said that in this condition, medium and small-scale feed factories that do not have capital strength like large companies face increasing cash flow pressures. As a result, many feed factories have to accelerate billing to farmers to maintain the availability of funds for the purchase of the next raw materials.

"Liquidity pressure, which was originally at the feed industry level, then shifted to the level of farmers," he said.

This condition, continued Kusnan, forced farmers to sell chickens faster even though the market price was low to meet the obligations of paying for feed, day old chicks (DOC), medicines, labor, and cage operating costs.

According to Kusnan, the phenomenon of panic selling or forced sales in various production centers also weakens the bargaining position of farmers. This situation is used by middlemen who have the ability to buy in large quantities so that the live chicken price is increasingly depressed and moves far below the HPP.

"The prolonged low chicken prices today are not solely due to oversupply, but rather the accumulation of domino effects from the governance of the import of feed raw materials, industry liquidity pressure, panic selling of farmers, and the inequality of market structures that ultimately put pressure on prices far below the cost of production of farmers," he said.

Therefore, Permindo asked the government through the National Food Agency (Bapanas), the Ministry of Agriculture, the Ministry of SOEs, and the food SOEs to immediately take corrective steps that touch the root of the problem.

Among them, evaluating the governance of the import of feed raw materials, providing supply chain financing facilities for the feed industry, especially medium and small factories, forming a national raw material buffer stock, strengthening the program for the absorption of live chickens and carcasses when prices are below HPP, and building a transparent national data system.

In addition, Permindo also encourages food SOEs to take a more active role as a market balancer and provider of stabilization instruments, not just as trading actors who follow market mechanisms.

"If the root of the liquidity problem in this supply chain is not immediately resolved, then the price of chicken has the potential to continue to fall below the cost of production for farmers. What farmers need is not a temporary aid, but rather improvements to a healthy, fair, transparent, and sustainable business ecosystem," concluded Kusnan.