Lowering ceiling price of chicken may not have desired effect, says economist

The government announced on Monday that the ceiling price of standard chicken would be reduced by 20 sen to RM8.90 per kg from Feb 5 to June 5.

PETALING JAYA: The government’s move to lower the ceiling price of standard chicken may not have its intended effect, an economist has argued.

Malaysia is undergoing a shortage of its most popular protein source due to various factors, and Prime Minister Ismail Sabri Yaakob announced on Monday that the ceiling price of standard chicken would be reduced by 20 sen to RM8.90 per kg from Feb 5 to June 5.

The government is also allowing approved permit (AP) holders to import whole chicken, having previously limited this to only chicken parts. Also, hypermarkets will now be given chicken import APs.

Center for Market Education (CME) CEO Carmelo Ferlito told FMT he believed the measures would not rebalance supply and demand in the industry.

Carmelo Ferlito.

“There will be demand, but at that price, foreign producers may not be willing to sell to us,” he said.

“This will keep discouraging more supply and therefore plant the seed for more inflationary pressures once the ceiling is removed.”

He said the government should have increased the number of licences without reducing the ceiling price. “Now it risks getting the opposite effect of what it wants.”

Ferlito has been helping international manufacturers of poultry equipment to establish projects with farm equipment and hatcheries across Asia for the past 13 years.

Apart from a rise in the cost of production – such as chicken feed – during the pandemic, the weakening of the ringgit and the hike in shipping fees have also cut into producers’ profit margins.

Producers have also faced a shortage of foreign workers and supply chain disruptions during the pandemic, both of which have resulted in hikes in the retail price of chickens.

Such issues have caused similar shortages across the globe, with the United States seeing a surge in chicken prices of more than 25% and customers in Australia and Taiwan having to queue for eggs.

A poultry farmer who declined to be named pointed out that the global increase in logistics costs has prevented cheap imports.

He added that the high price of palm oil, which is used in chicken feed, had also resulted in an increase in chicken prices.

“Many poultry farmers across the nation are inactive because they are losing money due to the ceiling prices which have been set while their costs are high,” he said. “So the government’s move won’t necessarily increase supply.”

“The most important thing the government must realise is there is global inflation. Just let the market determine the price.

“If the government wants to set a ceiling price, it has to be reasonable. It can’t be to the point that poultry farmers lose money and go out of business.

“Poultry farmers are not stupid. We won’t price ourselves out.

“It’s easier to sell fruits. Why rear chickens and lose money?” - FMT