KUALA LUMPUR: The poultry industry in Malaysia remains a key economic contributor, demonstrating resilience and growth despite global challenges.
Analysts are optimistic about the sector, citing lower feed costs—one of the largest input expenses for poultry producers—and a strengthening ringgit as positive factors for local poultry companies.
Feed, primarily made up of corn and soybean meal, is imported in US dollars and typically accounts for 70 per cent of production costs, according to Tan Cheng Wen, vice president of Tradeview Capital Sdn Bhd.
He expects Malaysia's poultry companies to benefit from improved profit margins as feed and input costs decline.
"However, the concern in the industry is not only the removal of subsidies since last year but also the competition from imported frozen chickens from Thailand. This has exerted a downward selling pressure on our local poultry price," he told Business Times.
Tan said the market has always been competitive, particularly for listed companies operating in West Malaysia.
However, he noted that the decline in feed costs provides an added boost for these companies.
Meanwhile, an industry insider said that improved margins in the poultry sector are likely to increase competition among listed companies, as each seeks to capitalise on favorable market conditions.
He added that companies may try to differentiate themselves through pricing strategies, product quality, or expanded production capacities.
"Lower feed costs are generally a major driver for enhanced profit margins in the poultry sector.
"As feed typically accounts for 60 to 70 per cent of total production costs, a decrease in these expenses will directly improve the profitability of poultry companies.
"This can lead to more favourable financial results, especially for integrated poultry producers who control their own supply chain," he said.
On the outlook, the expert said Malaysia's poultry sector appears positive with lower feed costs, as feed is one of the largest input costs for poultry producers.
However, he noted that the weakening ringgit introduces a degree of risk, particularly for producers who rely on imported feed ingredients.
In October, the ringgit averaged 4.30 against the greenback, slightly weaker than 4.26 in September.
"A weaker ringgit increases the cost of imports, which could offset some of the savings from local feed cost reductions," he added.
Among the key players of the poultry sector are Leong Hup International Bhd, QL Resources Bhd, Lay Hong Bhd, CAB Cakaran Corporation Bhd, and Teo Seng Capital Bhd.
In a recent note, MIDF Amanah Investment Bank said the reduction in feed costs is expected to benefit major players like QL Resources and Leong Hup.
The research firm remains optimistic that commodity prices will stay low in 2025, driven by strong supply from top exporters.
With government support, it said QL Resources and Leong Hup are well-positioned to benefit from this trend, contributing to a positive outlook for the sector.
Furthermore, MIDF said prices for key feed ingredients like corn and soybean meal have been falling since early 2024.
In Oct, soybean prices dropped by 18 per cent year-on-year (YoY) to US$350 per tonne, as supply increased from Argentina, the US, and China.
Soybean accounts for 19 to 32 per cent of feed costs.
Corn, which makes up 55 to 69 per cent of feed costs, became 14 per cent cheaper, averaging US$17,319 per tonne last month, thanks to higher production in major regions like the US, China, the EU, and Ukraine.
MIDF also expects the impact of the ringgit's depreciation to be softened by global commodity price stabilisation, which has already helped stabilise input costs.
The firm predicts the ringgit will strengthen to around 4.03 by the end of the year, further reducing input costs for poultry firms.