ALOR STAR: Chicken breeders and egg producers are calling for the government to continue providing subsidies to stabilise the supply and price of the essential items.
They pointed out removing the subsidies now would have a detrimental impact on the chicken supply chain, as many breeders will have to slash their production to mitigate high operating costs.
Kedah Chicken Breeders Association secretary P. Ravintharan also cautioned the government on the grave risk of relying on imports, citing the crisis of locally produced white rice shortage as an example.
"If the government decides to rescind the subsidies now, it will adversely affect the country's poultry food security in the long run.
"Inevitably, we will be facing another round of a supply shortage crisis of chicken and egg if the exporting countries decide to halt or slash their supplies.
"We must learn the lessons from the current shortage of local white rice supply when the price shoots up following the exporting countries' move to limit their export," he said when contacted.
Ravintharan was commenting on Agriculture and Food Security Minister Datuk Seri Mohammad Sabu's statement on Wednesday that the government would announce the outcome of its review on chicken and egg subsidies, as well as its price control soon.
Mohamad was reported as saying that the review was based on the fact that the supplies have stabilised and the prices have been lower than the set ceiling prices.
The government had initially planned to float prices of chicken and egg from July 1 but decided that it would continue giving subsidies and imposing ceiling prices on them.
The retail ceiling price for standard processed chicken remains at RM9.40 per kg, while grade A eggs are 45 sen each, grade B (43 sen) and grade C (41 sen).
Also read: Govt to announce review on poultry subsidies, price control soon
Had the government proceeded with the plan to revoke the subsidies in July, industry players predicted that the retail price for processed chicken would have hit over RM11 per kilogramme.
For the government, it is a matter of a RM200 million monthly subsidy bill.
Early this year, Mohamad was reported as saying that Putrajaya had spent RM1.8 million on the chicken and egg subsidies. The scheme was rolled out by the previous administration in February 2022 to mitigate the impact of spiralling prices of imported livestock feeds.
Chicken feed costs make about 70 per cent of the total fixed overhead costs for breeders.
Mohamad had also said the accumulated subsidies figure would have surpassed over RM2 billion by last June.
Risk of supply shortage
Commenting further, Ravintharan stressed that removing the subsidies now would have an immediate impact on the domestic chicken and egg production.
He explained that the fixed overhead costs for small and medium sized breeders have been steadily increasing since the Covid-19 pandemic outbreak three years ago.
"Prior to the pandemic, the 50kg chicken feed packaging was sold at RM85 but the price has jumped to RM135 per packet since the pandemic.
"There has been a mere reduction of one or two ringgit lately, but it is still 50 and 60 per cent higher as compared to the pre-pandemic era. Furthermore, the small and medium scale breeders are bound by contracts with the integrator companies.
"Overall, our fixed overhead costs of livestock feeds, workers salary, electricity bills and so on have increased by some 20 per cent this year as compared to last year," he said.
He added that although the small and medium-sized breeders are only getting 10 sen from the total 80 sen subsidies for each kilogramme of chicken that is provided by the government– 70 sen goes to the integrator companies– it still helps to ease their burden.
Hence, he cautioned that removing the subsidies now would result in a significant jump in their operating costs.
"Should the integrator stop getting subsidies from the government, there is a possibility that they would reduce the current six production cycles annually to just four or five cycles.
"The breeders will also be forced to reduce the quality of feed to their livestock to reduce operating costs," he said.
Ravintharan pointed out any move to rely on imported chicken and egg would further discourage local breeders who are already running on losses, since they are forced to sell chicken at below production costs, due to supply surplus following the influx of imported birds.
"The risks on our food security are clear. We have already seen some 10 per cent of breeders give up and exit the business since the pandemic.
"If this situation persists and the government decides to withdraw the subsidies now, more breeders will be forced to wind up their business.
"All these factors will lead towards the reduction of domestic chicken production, forcing the retail price to jump once again due to shortage of supply. Even worse, the price hike may increase by one fold or even two folds," he said.
In order to achieve sustainable food security for chicken and egg, Ravintharan said the government should consider providing targeted subsidies to the industry players, in particular the small and medium-sized enterprises.
"The government should consider rolling out targeted subsidies such as the inputs and equipment to help the breeders to stay afloat," he said.
Bismi Empire Sdn Bhd (Ayam Bismi) managing director Mazlina Kamarudin concurred.
She said the government should consider dishing out targeted subsidies to the breeders.
"The cost of livestock feed and chicks are still at an all time high. It would be reasonable for the government to consider intervention measures by focusing on subsidies for retail market production.
"The government's strategy on imposing a ceiling price of off-loading the price will have a direct impact on breeders. It should not be done in haste.
"We will be on the losing side if the government decides to withdraw the subsidies now especially with the influx of imported chicken," Mazlina said, adding that local breeders would appreciate a clearer direction by the government on food security, concerning the livestock sector.