Livestock man tells why price controls are problematic

Livestock farmers are not happy with the move to fix prices on essential items as the movement control order enters its third phase today. (Facebook pic)

PETALING JAYA: A livestock farmer has questioned the wisdom of Putrajaya’s move to control the price of some essential items, saying it may have overlooked issues affecting supply.

Jeffrey Ng, who is also the adviser to the Federation of Livestock Farmers’ Associations of Malaysia, told FMT it would be difficult to set prices for perishables because of the many variables affecting production costs.

“Take chickens, for example. In the past week, we have had very hot weather and the chickens tend to eat less. So they grow at a slower rate and the feed costs are lower. How would you calculate the price?”

Since it would be difficult to decide on the right price, he said, the authorities risked fixing a price that would be too high for the consumer or too low for the producer.

The government has said it would impose price controls on essential items today and lift them when the movement control order (MCO) ends.

Ng said one major concern for chicken farmers was that the MCO restrictions were affecting logistics and slaughterhouse operations.

“If the slaughterhouses are allowed to operate with only 50% of the normal work force, they cannot slaughter the normal number of birds per day,” he said.

He called for leeway for sectors that needed their entire supply chains to be operative.

He complained that one of his farm’s trucks was once told to turn back from sending hundreds of chickens for processing as there were more than two people in it.

“Two people cannot do the heavy loading and unloading,” he said. “One cage with chickens is 32 kg, and one truck carries hundreds of cages at a time.”

He also complained about the international trade and industry ministry’s requirement that businesses reapply for permission to operate under the third phase of the MCO, saying the red tape was causing delays to operations.

Economist Carmelo Ferlito of the Institute for Democracy and Economic Affairs said price controls should be avoided because rising prices sent a signal to producers that demand was high, prompting them to increase production.

Even without price controls, he said, producers were already crippled by the MCO restrictions.

“If there are price controls, there’ll be no incentive for producers to step up production, and you’ll then have a supply problem,” he said, adding that the market would naturally adjust itself without government intervention.

Another benefit of letting the market dictate prices, he said, was that people would think twice before hoarding when prices go up. - FMT