Analysts call for govt support on domestic poultry feed industry

This will allow the poultry farmers to move further away from the reliance of imported feed

by AZALEA AZUAR

THE government’s decision to float chicken and egg prices after June would help stabilise the price and enhance supply, analysts said.

However, they insisted that the government should support the domestic chicken feed industry to further move away the poultry farmers’ reliance on imported feed.

Putra Business School Assoc Prof and business development manager Dr Ahmed Razman Abdul Latiff said removing the subsidies to poultry farmers would initially adversely affect food prices.

However, he assures that the prices will balance demand and supply once suppliers start to increase their supplies and customers return to their usual spending model as the price could gradually decline.

“Supporting domestic produce of corn feed could reduce the price further but it will take time to have a significant effect as other factors need to be considered as well such as prices, logistics, nutrients of local feed and etc.

“At the same time, other alternative feed such as palm oil kernels need to be considered as well so that we don’t depend on one source of feed only,” he told The Malaysian Reserve (TMR).

Ahmed Razman suggests that the government should continue to promote local chicken feed production and use technology to reduce chicken farming and egg production costs.

Remove Price Ceilings

to Stabilise Supply Meanwhile, Centre for Market Education CEO Dr Carmelo Ferlito said it is necessary to eliminate price ceilings to ensure ample chicken and egg supply at the right prices.

He said the move is the right one as there is no other method to mend the supply shortage issues.

“Only after this has been done then more free international trade can be introduced not via the government but by removing import permits and allowing local traders to buy and resell, if they see profit opportunities to do so,” he told TMR.

Ferlito noted the Malaysian poultry industry is the only livestock industry with enough production to meet domestic demand.

He said the largest local producers are even large enough to build farms in neighbouring countries such as Indonesia, the Philippines and Vietnam.

The problem, he said, is the over reliance on imported chicken feed which has shot up in prices due to global instability.

Previously, the Agriculture and Food Industries Ministry and the Domestic Trade and Consumer Affairs Ministry have advised the country to cultivate corn and palm kernel cakes to reduce the costs.

Ferlito believes that feed is vital, as it constitutes 70% of poultry farm costs and wondered why the industry was not widely supported.

“Now, my take is that, if local production of feed was economically meaningful, the big integrators would have already ventured into it.

“If it did not happen, it means that it does not make sense,” he said. Last year, several government agencies banded together to launch an effort to reduce the country’s dependence on imported poultry feed with the introduction of a local version in Muar and, subsequently, for wider distribution starting in Perak.

The kampung chicken feed, developed by FGV Integrated Farming Sdn Bhd (FGVIF) and branded as Alma, has started to be distributed to poultry farmers in Perak using the existing distribution network.

Agencies involved are FGV Holdings Bhd who forged cooperation with strategic partners Federal Land Development Authority (Felda), Felda Capital Cooperative (KPF) and Padiberas Nasional Bhd (Bernas).

Last year, several govt agencies banded together to launch an effort to reduce the country’s dependence on imported poultry feed – pic Bloomberg

Overcoming Food Shortages

The production subsidy was originally introduced by the government on Feb 5 last year and intended to last for four months as a stopgap measure to manage the rising price of poultry products.

The programme had an initial budget allocation of RM528.52 million, before being continued all the way to December last year.

The government recorded the overall total expenditure in supporting and maintaining the price of whole poultry and egg in 2022 at RM1.23 billion.

On Feb 21, media reported that Agriculture and Food Security Minister Datuk Seri Mohamad Sabu insisted on releasing poultry price control after June to alleviate food shortages.

This will also enable the Domestic Trade and Cost of Living Ministry to keep a lookout and analyse changes in the pricing of commodities in comparison to the present ceiling price.

One of the causes of supply chain issues of chicken eggs are the shortage of workers during the Ramadhan month and the Hari Raya Aidilfitri festive season.

Therefore, the Agriculture and Food Security Ministry will be cooperating with the Home Affairs Ministry and the Human Resources Ministry to push the number of workers in not only the agricultural sector but also other sectors.

Mohamad also plans to have a meeting with egg suppliers on doubling the production as the consumption of eggs during these periods will also increase.

The ongoing Russia and Ukraine war which erupted last year has also caused supply chain issues on feed, which have led to chicken and egg prices soaring.

Both countries remain the most important producers and exporters for arable crops, mainly cereals and oilseeds.

Malaysia also relies heavily on corn grain imports from South America, specifically Brazil and Argentina for the chicken feed needs.

According to QL Resources Bhd’s 2022 annual report, the group expects the ongoing war, drought in South America and strong US dollar to ringgit exchange rate are likely to increase the commodity prices.

“Demand recovery is expected as the lifted restrictions encouraged consumption.

“Trading volume is projected to stabilise and along with it, the margin,” it said in the report.

Likewise, QL Resources expects chicken and egg production to remain steady as consumers turn to these sources of protein.

“With the government subsidies providing reprieve in the first half of the financial year 2023 (1H23) and if market dynamics are allowed to determine price equilibrium in the 2H23, we expect a cautiously positive performance for integrated livestock farming for 2023,” QL Resources said.

The current retail price ceiling in Peninsular Malaysia for eggs are Grade A (45 sen per egg), Grade B (43 sen per egg) and Grade C (41 sen per egg)

The Cost of Poultry

The current retail price ceiling in Peninsular Malaysia for a standard chicken is RM9.40 per kg while the prices for eggs are Grade A (45 sen per egg), Grade B (43 sen per egg) and Grade C (41 sen per egg).

A report from the Department of Statistics Malaysia (DoSM) on Dec 30, 2022, showed that the chicken broiler production costs include direct cost (98.6%) and indirect cost (1.4%) while its largest components include poultry feed (65.1%) and buying day-old chicks (16%).

“The composition of production cost for chicken eggs was 96.9% of direct cost and 3.1% of indirect cost in which 76.2% of the cost was the cost of poultry feed and 15.8% was the utility and salaries wages costs.

“The purchasing cost of day-old chick comprised 2.2% from the overall production cost of egg,” the report stated.

On the other hand, the average cost of poultry feed for Starter type was RM132.04 per 50 kg for chicken broiler while poultry feed costs RM129.71 per 50 kg and RM126.96 per 50 kg, respectively, for Grower and Finisher types.

It also costs an average of RM2.21 to buy a day-old chick (broiler) and RM3.32 for a day-old chick (layer) in Malaysia but is subject to change based on the current market.

“On average, the production cost of broiler chicken in Malaysia was RM6.53 per kg.

“Meanwhile, the profit margin of chicken at the wholesale level was recorded at RM1.30 per kg, while the profit margin of chicken at the retail level was at RM1.25 per kg,” the report noted.

It was also reported the average production cost of a chicken egg was recorded at RM0.48 while the profit margin per egg is RM0.04 for wholesale and RM0.02 for retail.