KUALA LUMPUR: The potential removal of 10 sen egg subsidy will increase the selling price by just two to three sen, but save the government RM1.2 billion annually, according to TA Securities.
The research firm said if the government proceeds with the decision in the upcoming 2025 Budget, it could save RM100 million monthly, or RM1.2 billion annually.
It said the move aligns with the government's strategy to redirect savings from targeted subsidies to critical sectors like healthcare, education, and public transportation.
Currently, the subsidy is set at 10sen per egg for Grade A, B, and C eggs, with ceiling prices capped at 42sen, 40sen, and 38sen, respectively.
Price controls were only introduced during the 2022 egg shortage, when production costs surged by 30 per cent, causing producers to cut back on supply.
To address the shortage, the government provided incentives to help stabilise the market supply and demand.
The government had initially planned to float egg prices in July 2023 but postponed the move due to concerns about potential price hikes and their impact on consumers.
"We believe egg prices would similarly remain stable, with only a modest increase of two to three sen, ensuring affordability for consumers."
"Poultry producers, who are already profitable under the current price cap, are expected to manage the impact thanks to lower feed costs and a stronger ringgit," TA Securities said in its research note today.
According to the firm, the current lower feed costs and a stronger ringgit will benefit poultry companies in the short-term by expanding their margins.
"With the expected removal of egg subsidies, poultry producers are likely to gain greater flexibility in adjusting selling prices in response to market demand and supply conditions."
"Thus, we expect the impact on poultry players to be minimal if the egg subsidy and ceiling price are lifted," it added.