Cover: Subsidies are not a panacea for the poultry industry

ALREADY angry at the government’s initial extension of a price control program until February 4 at a time when the industry is grappling with a 30% rise in feed costs, market players poultry say there are more questions than answers about a recently announced subsidy program that is to cover a new extension period.

Poultry players say it is better in the longer term for market forces to determine prices as economists urge Malaysia to explore viable local alternatives to imported feed, which has jumped 30% since October 2021.

A week ago, Putrajaya announced that a subsidy of 60 sen per kg of broiler chicken and 5 sen per egg for producers will be provided during the period of Keluarga Malaysia’s maximum price control program (SHMKM). is extended from February 4 to June 4. .

The four-month grant is expected to cost the government RM528.5 million.

Poultry industry veteran Datuk Jeffrey Ng Choon Ngee says the subsidy mechanism has not yet been communicated to the industry, adding to the confusion.

“There is also some confusion over farm gate prices for broilers. According to the Ministry of Agriculture and Food Industries, this will be at RM5.90 per kg. However, the price set by the Ministry of Internal Trade and Consumer Affairs is RM5.60 per kg, so there is some confusion here,” he told The Edge, adding that the subsidy is insufficient. , especially for small poultry farms.

“While these grants will help to some extent, they are insufficient as many poultry farmers, especially smaller ones, have had to fork out significant working capital to stay afloat during pandemic shutdowns as the demand was low and no subsidized loans were granted to them. Rising raw material prices, coupled with the imposition of price controls, have raised the question of the survival of small and medium-sized poultry farms.

“This is not a case of these farms not running their businesses well. The rise in [prices of] raw materials is a global problem affecting poultry farmers around the world, and crude palm oil, which is also a component of animal feed, is currently at an all-time high.

“It will certainly help the industry if price controls are removed – more so than subsidies,” says Ng.

Since October 2020, feed prices have risen sharply due to the global rise in cornmeal and soybean meal prices, which account for around 75% of costs. It has also led to a shortage of chicken supply as it has become economically impossible for poultry players – especially small and medium ones – to continue producing. This situation was then aggravated by the imposition of the SHMKM, which prevented them from raising prices.

Group CFO of Leong Hup International Bhd, Chew Eng Loke, believes that the subsidies, once in place, will be difficult to remove.

“It will be better for the country to let market forces determine prices, as consumers will turn to alternatives if prices are unreasonably high.

“[My] personal opinion is to let market forces determine chicken and egg prices. Assuming each person eats 50 kg per year x RM 0.60 per kg = RM 30 per year; allowing every taxpayer to claim, for example, a RM50 cost of living deduction should be much easier to implement administratively than grants,” he told The Edge.

Issuance of import PA

The government has also issued more Approved Permits (APs) for importing frozen whole chicken, in an effort to address the chicken supply shortage while stabilizing market prices.

It was reported that 32 companies had previously received permission to import frozen chicken, but the identity of these companies was not disclosed by the Ministry of Agriculture and Food Industries. However, it has also been reported that four hypermarkets (Lotus, Lulu, Mydin and NSK) are now allowed to import frozen whole chicken.

When contacted, the managing director of Mydin Holdings Bhd, Datuk Wira Ameer Ali Mydin, confirmed that Mydin was one of the hypermarkets benefiting from the import PA for whole chicken.

“We received permission to import whole chicken, but not chicken pieces. We are authorized to import from three countries: Brazil, China and Thailand. We are very grateful to the government for approving our import PA application, and now it is up to us to negotiate the right prices to import the chicken,” he says.

“However, to stabilize chicken availability, I think it will take another two months.”

A poultry industry veteran who requested anonymity is of the opinion that issuing the import PA will not solve the current shortage.

“Rising feed costs are a global phenomenon, so it won’t be cheap to import. Issuing PA is a short-term solution to the problem, but it’s counterproductive because it doesn’t incentivize local producers and doesn’t encourage local production,” he says.

Additional imports are expected to further increase the country’s burgeoning food import bill which, according to data from the Department of Statistics Malaysia, rose by 10% to RM51.4 billion in 2021 from RM46.76 billion. RM in 2016.

In 2020, the food import bill reached a record high of RM55.5 billion. The self-sufficiency ratio (SSR), which is the scale of production for domestic consumption of poultry meat at that time, was 98.2%, and its import dependency ratio (IDR) was 4.2%, while the SSR for eggs was 113.5%. and the IDR was 0.004%.

Poultry meat production fell by 3% to 1.6 million tonnes in 2020 from 1.65 million tonnes in 2019, while egg production increased by 22% to 825,876 tonnes in 2020 compared to 675,959 tonnes in 2019. Poultry meat consumption per capita in 2020 was 47.4 kg; in 2019, it was 49.2 kg.

Long term solutions

The executive director of the Socio-Economic Research Center of the Associated Chinese Chamber of Commerce and Industry in Malaysia, Lee Heng Guie, believes that an “overhaul of the agro-industry” is needed to solve this problem.

“The poultry industry in 2020 had an SSR of over 100% [consisting of both chicken and egg], so we need to see it as a strategic industry for our national food security, and there needs to be a holistic policy in place for that. In Thailand, for example, food-related industries are protected by the government because they are strategic – not just for domestic consumption, but also contribute to foreign exchange earnings,” he told The Edge.

Khazanah Research Institute Deputy Director of Research, Dr. Sarena Che Omar, points out that although Malaysia is more than 100% self-sufficient in chicken and egg production, it is not self-sufficient in chicken production. ‘Food for animals.

“That doesn’t mean we should start planting corn and soybeans, [as] we simply do not have the competitive advantage of being able to grow these crops at equivalent prices (or lower prices) compared to these major exporting countries.

“But what we can do is ask ourselves what alternative sources of animal feed Malaysia can produce and has a competitive advantage. And there is an answer – palm kernel cake, a by-product of the palm kernel oil, and insect farming (such as black soldier flies) hold huge potential for Malaysia,” she says.

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