Import and the Dollar are Destroying Food Production. Poultry is a Prime Example

Estimations indicate a decline in poultry production by a rate of 60% for eggs and 72% for chicken in the Syrian market, that is, during the previous surge in dollar exchange rate that the country witnessed since the beginning of the year. It is an estimated figure that comes from the statements of the manager of the General Association for Poultry since February, and the rate has actually increased significantly with the insane surge in prices.

The significant decline in the production of the poultry sector appears in the exceptional increase in the prices of chicken and eggs, which rose at a higher rate than the increase of the dollar exchange rate. That indicates a shortage of supply and local production.

Why Did Production Decline?

The increase in the dollar exchange rate, during the period between March 2020 to June, led to a wide halt in the poultry production process.

The dollar is included in the costs of poultry farming at a rate of approximately 80% of the price per kg through imported feed. The prices of poultry feeds in March have locally reached 500 thousand Syrian pounds per ton, and it started to rise since April to reach 1,2 million Syrian pounds with an increase by a rate of 140% during less than 5 months. This increase that is related to the dollar, was enough to force out a larger number of producers with the inability to bear costs of this amount, specifically that there is no other supporting factor for producers, as all forms of loans were halted in the previous period.   

Most importantly, the general condition leads to sharp and huge losses in this sector with the instability of costs and prices, and the consecutiveness of losses (with higher costs than the level of revenues) leads to the non-continuation of small investment in poultry farms.

The production structure in this sector is very fragile, and is witnessing rapid fluctuations, as chicken and eggs are being produced by a large number of small poultry farms distributed in the Syrian countryside. It works with a low capital with a short production cycle of 40 days, and produces food items that get spoiled in short time and is difficult to store. That is, it is experiencing great and rapid losses in the case of increase in prices and decline in demand, and it becomes difficult for the owner of the poultry farm to reproduce the same amounts in the next cycle.

The Increase in Dollar then the Increase in Chicken Prices.

The increase in dollar prices by a rate of approximately 90% during the period between March and the beginning of April, was not accompanied by a similar increase in the prices of chicken. As producers were still working at a wider rate, but they were losing for successive cycles with the increase of dollar prices and feed in every new breeding season, and their revenues became uncapable of covering the costs of reproduction.

With the cessation of many poultry farms, the decline during the months of June and July appeared when the dollar continued to rise by a rate of 21%, but in return, the prices of chicken rose by a rate of 148% due to shortage of supply. The price of chicken moved from being 1450 Syrian pounds per kg to reach 3600 Syrian pounds at the end of July. Whereas the prices of eggs increased by a rate of 68% from 2200 per egg carton to reach 3700 Syrian pounds.

Feeds are a Cycle that Doubles the Cost

The root of the problem, and its solution, lies in the monopoly of feeds import, and the increase of their prices with the fluctuation of the dollar and monopolistic prices.

Poultry feeds that contain yellow corn and soybean are both imported in a narrow trading cycle; however, the government says: it funds their imports in dollar, i.e. it is supposed to be priced according to the official dollar exchange rate, but that is not what actually happens.

These components get mixed and covered locally in poultry feed factories. It consists of a mixture of which corn makes up 60%, soybean 35% and the rest are minerals and nutrients. Between these two cycles, poultry farmers pay a price for feed equivalent to 2.8 times the price based on the cost of the materials arriving at the ports. 

In statements on feeds: in April, customs price per ton of imported soybeans was $375 and $125 per ton of corn arriving at the port. According to this price, the main costs per ton of combined feed is approximately $210 per ton, while its final sale price in the Syrian market was 850 thousand Syrian pounds, which is equivalent to approximately $600 per ton in the market price in April! The difference between the two prices of approximately $390 is distributed primary between importers, and the owners of the mixing factories and other several cycles. And all of them are making their profits on the expense of poultry consumption, which has been constrained thereby and declined to exceptional limits.

Importers constitute the most profitable cycle, because there are only few of them, and because the powerful among them get financing for imports from the Central Bank to achieve double profits, while they price according to market price.

Even if their imports are not financed, they get an average profit rate of 66% in the feed mixture. The margin added by factories is also high, and it cannot be estimated precisely because the costs are not limited to corn and soybean, rather it constitutes the majority of these costs. Whereas, the price in the local market exceeds the cost of import by 70% and its profit rate is indeed less than that of the importers.

From Importing Feed to Importing Chicken!

Chairman of the Chambers of Agriculture has talked in some of his statements about the possibilities of importing frozen chicken as a compensation for the declining poultry production. Such a tendency, the chairman said, might push the import to be a required and acceptable issue, which is something that should be avoided.

Poultry production is subject to the dollar by a rate of 80% of its costs, and in a very important cycle it is poultry food. In the Syrian circumstances, this issue turns into dietary risk that threatens production and food for millions, as chicken was the last animal protein component that had been, until the beginning of the year, within the capabilities of Syrian consumers.

The Syrian food policy system that has mortgaged poultry food for import, and allowed exceptional monopolistic profit rates, while the cost can be reduced to at least the half, is the same system that may prompt to end poultry farming and to the complete dependence on importing frozen chicken. Whereas, local smuggler cycles were striving to compete with the local production market by smuggling frozen chicken from Turkey.

The problem with importing frozen chicken does not lie in which type of chicken to be imported, nor in the fact that it is frozen, nor in the quality of the food provided. It rather lies in the disappearance of a market whose average value in 2018 exceeded 150 billion Syrian pounds, which was equivalent back then to 300 million dollars. Also, when these sums are distributed among large cycles of producers and workers in the sector, sales centers and feed factories, the values become distributed among large cycles of income. What should be corrected is the redistribution of this income so that to be taken back from importers and big monopoly cycles, and saving the income of poultry farmers and the consumers’ capability to consume.

Otherwise, moving to importing frozen chicken would raise a high monopolistic income for a very narrow cycle of importers of this material, and would, therefore, be a crime pushing hundreds of thousands to sink into the abyss.

Such an abyss is being led to by the policies that has caused the complete disappearance of the State, and turned this system into a business management for the powerful, changing the laws according to their interests. Those people see today, that it is possible to move from the profit of the monopolized feed market to the profit of the monopolized imported chicken market! like a whale swallowing another whale, while we are taken hostages to the dollar with even higher rates.