The Sri Lankan Poultry Feed Industry under Economic Crisis: Structural Vulnerabilities and Strategic Responses

Abstract

The feed industry is a key component of the animal-based food system, with approximately 91% of compound animal feeds produced in Sri Lanka being used for poultry. There has been a steady increase in poultry feed prices and a significant drop in feed production during the recent macroeconomic crisis (2022–2024). This study investigates the structural dynamics, operational shocks, and firm-level crisis management strategies adopted by feed manufacturers Utilizing a stratified purposive sample of 30 registered commercial manufacturers and a snowball sample of 60 self-mixed producers across major production hubs, the study operationalizes Small Business Crisis Management Theory via an empirical Resilience Continuum matrix. The findings reveal a highly polarized industry response strictly dictated by operational scale and vertical integration. Macroeconomic shocks—principally a 300% spike in domestic maize costs, foreign exchange illiquidity, and an institutional 15% Value Added Tax (VAT) —led to a 25–50% contraction in commercial output, forcing mills to operate significantly below capacity. While 63.34% of commercial mills and 68.33% of self-mixed operations proved highly Vulnerable (experiencing severe margin compression and asset liquidation), a minor tier of large-scale, vertically integrated integrators (3.33%) exhibited High Resilience by internalizing supply chains and altering feed formulation matrices. Ordinary Least Squares (OLS) models confirm that maize and soybean price variances explain over 90% of retail feed price volatility (R2 0.86, p < 0.01). This structural contraction poses a severe risk to independent smallholder livelihoods and national protein security. The study recommends institutionalizing a predictable raw input import framework, scaling contract farming out-grower schemes, and removing fiscal distortions on essential compound feeds.