Collusion between poultry feed firms led to egg, chicken price hike: CCP inquiry

Published May 8, 2021
The Competition Commission of Pakistan (CCP) on Friday disclosed that 19 poultry feed companies were involved in price coordination which led to repeated increase in prices of chicken and eggs. — Dawn/File
The Competition Commission of Pakistan (CCP) on Friday disclosed that 19 poultry feed companies were involved in price coordination which led to repeated increase in prices of chicken and eggs. — Dawn/File

ISLAMABAD: The Competition Commission of Pakistan (CCP) on Friday disclosed that 19 poultry feed companies were involved in price coordination which led to repeated increase in prices of chicken and eggs.

The commission took suo motu notice of the concerns and complaints received through the PM Citizens Portal as well as the CCP’s online complaint management system, alleging that some of the leading mills collusively raised poultry feed prices. The complainants also included poultry farmers as their businesses were hit by the costly feed prices.

The CCP inquiry revealed that between December 2018 and December 2020, the feed mills colluded to raise the poultry feed prices by Rs825 per 50kg bag which made the feed 32pc costlier for the poultry farmers.

WhatsApp group messages show companies increased rates from December 2018 onwards despite bumper maize crop

The CCP inquiry team also took support from the data of Pakistan Bureau of Statistics (PBS) for September 2020 which showed increase in the chicken prices by 18.31pc and eggs by 5.2pc. The rise in these prices coincided with an increase in feed prices by almost Rs100 per bag.

In October 2020, after another price increase by poultry feed mills by Rs125 on layer and Rs175 on broiler feed, chicken prices rose by 26.62pc and eggs by 23.81pc as compared to the previous month.

In November 2020, poultry feed prices rose again by Rs150 per bag. The prices of chicken and eggs rose by 20.76pc and 5.23pc, respectively, in that month.

In December 2020, another price increase in poultry feed by Rs250 per bag caused prices of chicken and eggs to rise by 3.21percent and 14.08pc, respectively.

In February 2021, the CCP raided two major poultry feed producers and impounded crucial evidence pointing towards price change coordination among the feed companies. The impounded record revealed that officials of 19 feed mills were using an active WhatsApp group where one feed producer would announce its intended price increase and the rest expressing and sharing their willingness to follow suit.

Price discussions included the effective date and amount of the rise. These discussions and decisions were implemented on the ground, as evidenced by the official price lists of these companies.

The inquiry has mentioned a conversation thread from Dec 7, 2020, where the top managers of feed mills discussed price increases on the group. In the conversation, an official of a feed mill said: “Everyone would increase, for sure, but what’s about the exact effective date, please”.

In response, official of another feed mill said: “Dear all owners want immediately but seems from tomorrow”. Another feed mill representative replied: “Surely with effect from 07-12-2020”.

Price lists show that on Dec 7 and 8, 2020, mills increased prices by Rs250 per 50 kg bag.

The inquiry also found that mills carried out price changes between December 2018 and December 2020 in a coordinated manner in short intervals at least 11 times. In addition, the data revealed that not only were price revisions made on the exact dates, but the amounts of price change were also similar.

To illustrate this pattern, on Oct 10, 2020, the feed mills participating in the WhatsApp group increased prices by Rs125 per 50 kg bag for layer and Rs175 per 50 kg bag for broiler feeds, on Nov 14 and 16, 2020, by Rs150 per 50 kg bag on all feed rations and on Dec 7 and 8 2020, these mills increased prices by Rs250 per 50 kg bag on all rations.

At the same time, the CCP inquiry noted that the key poultry input costs shows that maize, which is the primary component of feeds constituting 55-60pc in terms of physical usage in feed, approximately 40pc of the cost.

Maize witnessed a bumper crop in 2020 and was abundantly available. In fiscal year 2019-20, maize prices fell by 7pc compared to the previous year and in the first quarter of FY21, were 22pc lower than 2019-20.

On the other hand, soybean meal, another critical raw material, saw higher prices. However, the rise in input prices which has been witnessed cannot be used as a justification to increase feed prices uniformly as each mill has a different cost structure and business model, the CCP noted.

Poultry feed mills are each other’s competitors, and any discussion and coordination on prices is prohibited under Section 4 of the Competition Act, 2010.

After the release of inquiry report, CCP will issue show cause notices to poultry feed companies involved in the prima facie violation of Section 4 of the Competition Act.

Published in Dawn, May 8th, 2021

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