KUCHING: The government’s decision to allow market forces to determine the prices of chickens and eggs has been welcomed by economists, who believe that it will help to stabilise the poultry industry in Malaysia.
Centre for Market Education (CME) economist Dr. Carmelo Ferlito told New Sarawak Tribune that this move will restore the dominance of market forces and enable the poultry industry to adapt to changes in demand.
“Before the implementation of the lockdown, the poultry industry in Malaysia was in a balanced state.
“Falling demand and reduced supply during the lockdown, regrettably resulted in a significant shift in market conditions.
“The restructuring of the supply side is much more radical and time-consuming. Paying a temporary high price is necessary to readjust production and ultimately stabilise prices,” Ferlito stated.
He also said that “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 sell, if they see profit opportunities to do so.”
Regarding the issue of locally produced chicken feed, Ferlito argued that if it was economically feasible, big integrators would have already ventured into it. If price ceilings were removed and the incentive to produce increases, local feed may not even be necessary.
“Indonesia attempted to produce poultry feed locally, but the resulting prices were twice as high as those in the international market.”
Meanwhile, Universiti Malaysia Sarawak (UNIMAS) economist Dr Jerome Kueh said opting for floating prices for chicken and eggs was sensible to maintain the long-term stability of the market.
He further stated that implementing a price ceiling on chicken and eggs was only a temporary measure to address price hikes that may cause suffering, especially for the B40 groups, since chicken and eggs are staple foods.
However, Kueh cautioned that a price ceiling may lead to market imbalance due to circumstances where demand exceeds supply at the price ceiling level.
“Producers may have less incentive to supply as lower price levels reduce their profit margin and make it difficult to cover the cost of supplying.” he added.
Kueh pointed out that floating prices for chicken and eggs would allow market forces to respond to price changes.
“This means that market forces will determine the optimal supply based on the price level at the time,” he explained.
He hoped that the level of responsiveness of different segments of society, particularly the B40 group, would be taken into account when the new policy takes effect.
Agriculture and Food Security Minister Datuk Seri Mohamad Sabu has announced the government’s decision to allow the prices of chicken and eggs to fluctuate after June, in a bid to combat food shortages.
Last December, during a dialogue with the Sibu Poultry and Livestock Association and Sibu Butchers Association, Sibu MP Oscar Ling expressed the view that the prices of chicken eggs should be dictated by supply and demand, rather than being subject to a price cap. Local poultry farmers were confident that egg prices would decrease naturally as production increases in a free market.
The current retail ceiling price for standard chicken in Peninsular Malaysia is RM9.40 per kg, and for eggs, it is 45 sen for Grade A, 43 sen for Grade B, and 41 sen for Grade C, although the maximum prices for these items vary in Langkawi, Sabah, Sarawak, and Labuan based on zones and districts.
