Govt should consider providing support services and complementary infrastructure to boost private investment in the industry
by S BIRRUNTHA
GOVERNMENT incentives are important to strengthen the country’s livestock industry as it plays a major role in sustainable food systems, according to analysts.
Sunway University Business School professor and economist Dr Yeah Kim Leng said on top of providing better incentives, the government could also consider giving support services and complementary infrastructure to accelerate private investments in the livestock industry.
He added that these include breeding research and development (R&D), feedstock import substitution and modern integrated production systems that harness digital technology advances in livestock farming.
According to Yeah, the livestock industry’s value-added output in 2021 amounted to RM19.1 billion in current prices or RM16.5 billion in constant 2015 prices.
He noted that its share of the country’s GDP in both current and constant prices hover around 1.1% to 1.2% between 2016 and 2021.
“Over the same period, the industry grew annually at 3.6% in constant price and 7.1% in current prices between 2016 and 2021.
“The industry’s growth is relatively stable and moderate, but its price inflation averaging 3.5% is above the national average.
“Given the government’s focus on food security and the high meat imports, the prospects for achieving higher growth than the 3.6% per annum is good,” he told The Malaysian Reserve (TMR).
Nevertheless, Yeah opined that the development and upside growth potential of the livestock industry in Malaysia continue to be moderated by several key challenges over the past years including low capital investment; rising labour cost and manpower shortages; high feed and input cost inflation; and more breeding and extension services for small farms, especially for the cattle industry segment.
Centre for Market Education CEO Dr Carmelo Ferlito also concurred that the government should consider providing better incentives to further strengthen the livestock industry in Malaysia.
He added that the main thing the government should do for poultry specifically is to liberalise prices, as current price controls are making inflation worse and keeping production at bay.
“More generally, the government should lift labour regulations. For non-poultry livestock, the main intervention should be facilitating the encounter with foreign technology for upgrading the non-poultry livestock sectors,” he told TMR.
Commenting further, Ferlito said the livestock industry in Malaysia is very heterogeneous, but it can be said that the strongest part of the industry is the poultry industry.
He noted that the industry is the only one self-sufficient in terms of production for domestic consumption.
He said currently, the main challenges in the industry are mostly the consequences of the lockdowns due to the Covid-19 pandemic, as well as rising raw material costs, labour restrictions and price controls.
“More or less, the livestock industry accounts for 10% of the agriculture contribution to GDP and poultry is around 60% of that 10%.
“The future will be in the direction of further consolidation so that economies of scale can favour industry growth in the direction of technical progress,” he said.
According to the Department of Statistics Malaysia, the production of chicken or duck eggs recorded an increase of 5.6% in 2021 to 839.7 thousand tonnes compared to 795.5 thousand tonnes in the previous year.
On the other hand, livestock production for beef, mutton and pork declined by double digits with 11.1%, 10.6% and 10.5%, respectively.
Landings of marine fish in 2021 were 1,328 thousand tonnes, which decreased by 4% compared to 1,383 thousand tonnes in 2020.
The Poultry Industry
According to the Federation of Livestock Farmers Associations of Malaysia (FLFAM), poultry and pig farming represent by far the major proportion of the livestock industry in terms of output value.
Malaysia is a net exporter of chicken meat and eggs and is 91.62% self-sufficient in pork requirements.
The 2020 ex-farm production value of chicken and duck eggs was estimated to be RM5.5 billion and poultry meat output is estimated to be in the region of RM115.68 billion, while the pig industry contributed about RM4.03 billion during that year.
These subsectors are operated largely in a commercially-oriented manner and are managed as public or private limited companies.
FLFAM also noted that apart from the above, there are also niche farming activities to produce duck meat and eggs, and “kampung” (village) chickens to fill small but profitable market demands.
In terms of broiler production, FLFAM said in 2019, there were four grandparent stock farms that supply 100% of the parent stock chicks needed by the parent stock (PS) farms.
“There are 22 PS farm companies in the Malaysian Peninsular. These farms produce more than 828.21 million broiler day-ol-chicks (DOCs) in 2019. Cobbs and Ross are the predominant breeds used together, accounting for 77% utilisation.
“There are approximately 2,606 broiler grower farms producing 787 million birds in the same year.
“About 69.72 million live birds and 12.34 thousand tonnes of chicken meat and further processed products were exported, mostly to Singapore,” it noted.
FLFAM said due to severe market competition, farm companies are gradually getting smaller in numbers but are getting bigger in production capacity.
It added that there have also been a few mergers and acquisitions among the PS farms as part of the ongoing restructuring of the broiler production system.
“Most of the new farms are built as environmentally-controlled closed poultry houses with various degrees of automation.
“About 30% of broilers are channelled through modern processing plants and are sold in supermarkets and fast-food outlets, while the remainders are still sold as live or dressed birds in wet markets.
“Tentative steps are being taken by the government to stop the chicken slaughter in live bird markets for hygiene and environmental reasons,” FLFAM highlighted.
In terms of table egg production, FLFAM said there were five layer PS farm companies in the Peninsular as of 2019.
“These farms produce more than 34.6-million-layer DOC pullets.
“Lohmann Brown, Hisex-Brown Dekalb and Novogen are the predominant breeds. All the table eggs produced are brown-shelled,” it added.
According to the association, there are approximately 204 layer farms producing 9.62 billion eggs in the same year.
“About eight companies produce more than one million table eggs per day each. About 2.12 billion table eggs were exported to the Singapore market as fresh in-shell eggs.
“All the eggs are marketed through wholesalers as fresh in-shell eggs.
“There are presently three relatively small egg processing plants in operation to produce different forms of liquid eggs to the specific requirements of the bakery and confectionary industries.
“There is growth in the produc- tion of ‘designer eggs’ to meet the demand for ‘healthier’ eggs deemed to be lower in choles- terol and higher in Omega-3 fatty acids,” it said.
Additionally, FLFAM also noted that efforts are being made to export in-shell eggs and interest to export is dependent on the offer prices of the importers, which vary according to the regional market sentiments.
In 2019, exports were made to Hong Kong (168.18 million), Timor Leste (10.08 million), Macau (15.41 million), Maldives (0.65 million) and Sabah and Sarawak (27.48 million).
In terms of duck production, the production of broilers and mule ducks is carried out by small and medium commercial operators. FLFAM said there are eight duck breeder farm companies operating about 14 farms currently.
Broiler ducks (Peking ducks) are raised mainly around abandoned tin mining pools and are targeted towards a lucrative Singapore market that accepts them as live birds.
The mule ducks are produced by specialised farmers and fulfil a small niche restaurant market within the country and in Singapore.
Leading Players of the Livestock Industry
QL Resources Bhd is an integrated agro-based business group, producing nourishing products from agro resources, with a market capitalisation of RM14.48 billion.
According to the company’s website, QL Resources is a leading operator in integrated livestock farming, with businesses spanning the entire value.
“Our operations can be categorised into four subcategories in three footprint countries of Malaysia and geographical neighbours of Indonesia and Vietnam.
“These subcategories are animal feed raw material trade, commercial feed milling, layer farming and broiler integration, which produce eggs, broiler chickens and DOCs.
“Our processes are halal compliant and products are certified halal by the Department of Islamic Development Malaysia,” the company noted.
For its latest financial quarter, which is the second quarter ended Sept 30, 2022 (2Q23), QL Resources registered a net profit of RM93.9 million from RM45.94 million in 2Q22, while revenue for 2Q23 grew 31.26% to RM1.64 billion from RM1.25 billion previously.
Meanwhile, Leong Hup International Bhd is another large fully-integrated producer of poultry, eggs and livestock feed in SouthEast Asia (SE Asia), with a market capitalisation of RM1.9 billion.
“Our livestock business is vertically integrated and, in combination with our feed mill business, covers the entire poultry value chain.
“Our integrated, farm-to-plate business model operations began in Malaysia, where our headquarters remain.
“Today, we have expanded and operated in four other fast-growing countries in SE Asia, namely Indonesia, Singapore, Vietnam and the Philippines,” the company noted on its corporate website.
Currently, Leong Hup produces and distributes broiler chickens for consumption in the respective domestic markets of Malaysia, Indonesia, Vietnam and the Philippines.
The company also exports broiler chickens from Malaysia to Singapore.
“In Malaysia, our table egg production is operated by our subsidiary, Teo Seng Capital Bhd.
“We are among the market leaders for prime quality DOCs, including PS DOC, broiler DOC and layer DOC,” it said.
For 3Q22, Leong Hup posted a net profit of RM67.31 million against a net loss of RM53.42 million the previous year, while quarterly revenue rose 30.53% to RM2.36 billion from RM1.81 billion previously.
Other large-cap companies in the livestock industry include CAB Cakaran Corp Bhd with a market capitalisation of RM340.42 million, Alpha Ocean Resources Bhd (RM328 million), Teo Seng (RM229.51 million), LTKM Bhd (RM198.93 million) and Lay Hong Bhd (RM192.48 million).
Supply of Eggs Recovering
Recently, Agriculture and Food Security Minister Mohamad Sabu noted that the shortfall in egg supply in the country’s market is improving, following the temporary measures taken by the government to allow import of eggs.
He said this was proven when data from the Veterinary Services Department showed a shortage of eggs last December of only one million compared to the critical shortage situation before that, which was 157 million in November and 118 million in October.
“After getting a briefing on the latest situation in egg supply, the Agriculture and Food Security Ministry’s top management and I met several major egg producers to find the best solution so that the supply can be restored.
“The data I obtained showed a critical shortage of eggs in October and November 2022. Alhamdulillah (Thank God), now the supply of chicken and eggs is beginning to recover and will be stable again soon,” he said in a statement on Jan 17.
Last December, the government allowed the entry of chicken eggs from India by air as a trial phase to ensure that the imported chicken eggs meet the set standards.
On the government’s proposal to stop the export of eggs, Mohamad said the move could not be done because the sharp increase of the price of imported chicken feed and prolonged price controls had put pressure on local egg producers.
- This article first appeared in The Malaysian Reserve weekly print edition