With the increasing cost of chicken feed, some sellers are buying chicken from breeders at RM9.40 per kg. With the price ceiling set at RM8.90 however, most chicken sellers are in danger of closing shop.
A chicken seller at Pasar Seri Setia, Robaiyah Amir, said that she had to sell chicken higher than the pre-determined ceiling price at RM11.50 per kg, but could not earn extra profit due to high operational costs.
Ideally, price ceilings are short-term measures enacted to keep prices low, so ordinary consumers can afford to purchase chicken for daily consumption.
However, when the market price is below the equilibrium price level for longer than usual, chicken breeders will find themselves challenged to meet the quantity of chickens demanded by consumers.
Current difficulties in recruiting foreign workers further complicate the labour shortage issue faced by chicken breeders.
A lower number of workers could lead to lower production levels and, by extension, a chicken supply shortage.
Therefore, the price ceiling extension until the end of June would disincentivise chicken breeders from continuing production.
It is especially true when the intersection between the Marginal Cost (MC) and the Average Variable Cost (AVC) is below the price ceiling/Marginal Revenue (MR).
When chicken breeders can't cover AVC (the cost of packaging, price of raw chicken and ice per unit of chicken), they have no choice but to shut down operations.
This has happened in the Philippines. The price monitoring report published by the Philippines Department of Agriculture in March last year showed that price ceilings on pork and chicken starting from February the same year were ineffective.
Now, with the chicken export ban in place, there is an increasing concern that Malaysia will lose the Singapore export market for good.
When Malaysia banned the export of live pigs and raw pork due to the Nipah virus outbreak in 1999, Singapore imported live pigs from Pulau Bulan in Indonesia for 18 years.
After Malaysia lifted the pork export ban in 2015, it took two years for Singapore to accept the import of live pigs from Sarawak.
If we impose a chicken export ban for years, Singapore will choose other countries as alternatives for chicken supply.
If the price control and export ban on chicken persist, Malaysia will experience more side effects from these short-term measures, in the long run.
To avoid Malaysia losing out on its comparative advantage in chicken exports, EMIR Research recommends:
l Exploring alternatives to producing chicken feed ingredients locally by applying less fibrous de-shelled palm kernel cake (PKC) and black soldier fly larvae.
l For PKC to be the alternative carbohydrate source in the feed mix instead of applying grain corn. When black soldier fly larvae are processed into powder, they can be a source of protein in chicken feed.
l For the Agriculture and Food Industries Ministry to conduct research and development with the Malaysian Agricultural Research and Development Institute, local universities, and chicken breeders to enable the country to move away from imported chicken feed ingredients soon.
l Tax incentives and grants for chicken breeders to upgrade their existing farming sites with closed-house structures and proper ventilation systems, which eliminate the excess heat and humidity from the sheds, generating comfort and welfare among chickens.
The sheds consists of four air filters and six large fans that control air flow, temperature and odour, as well as netting to prevent flies from entering them.
If the temperature is kept at the optimal level of between 24 and 28 degrees Celsius, chickens could reach an ideal weight of 2.4kg within 32 to 35 days.
l Relaxing restrictions on hiring foreign workers and provide financial support for chicken breeders to incorporate modern technologies into their farms, attracting more locals to be involved in chicken production.
l Conducting monitoring and enforcement even after price control and export ban removal.
The Domestic Trade and Consumer Affairs Ministry and the Federal Agricultural Marketing Authority are the government agencies responsible for ensuring the farm, wholesale and retail prices are set at reasonable and acceptable levels.
This is the time for us to think of other unconventional measures to address the skyrocketing chicken price issue apart from short-term price control.
The writers are part of the research team of EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research