Strategic thinking needed to prevent chicken farm closures, says Ong Kian Ming

Strategic thinking needed to prevent chicken farm closures, says Ong Kian Ming
-A +A

Media statement by Dr Ong Kian Ming, the Member of Parliament for Bangi and DAP's spokesperson for international trade and industry on July 29, 2022.

Malaysia’s export ban on chickens has done long-term economic damage to Malaysian farmers as other countries have looked elsewhere for their supply of chickens. When the Malaysian government announced the temporary ban on the export of chickens at the end of May (including live poultry, whole carcasses, chilled and frozen meat, chicken parts and chicken-based products), I had already warned that this short-term measure will harm our chicken products in the long term.

I wrote that ironically, the decision to ban the export of chickens, which may look like a workable short-term solution, will end up hurting local chicken producers and even chicken imports for the following reasons:

  1. This will decrease the level of cross-subsidies available to local chicken farmers since they can earn more from their export sales to countries in like Singapore;
  2. Local chicken farmers may have to pay compensation because of possible breaches of contractual obligations to their overseas customers; and
  3. Many of the countries which import from Malaysia will be forced to look for other supply sources in the region, and they will be able to offer better prices compared to Malaysian retailers, who are looking to diversify their own import sources!

Even though this ban was eased in the middle of June, the damage to the industry had already been done. This impact was felt most strongly in Singapore, which imported one-third of its chicken supplies from Malaysia, including almost all of its live chickens.

Private food importers in Singapore immediately announced alternative supply sources of chicken from Thailand. On June 1, the Singapore Food Agency (SFA) announced a list of new farms and establishments that could export their chicken products to Singapore, including from Australia, Brazil and Thailand. On June 30, the SFA announced the approval of three establishments in Indonesia to export chicken meat and chicken meat products to Singapore.

More recently, the Indonesian ambassador to Singapore announced the possible setting up of chicken farms in Batam to export live chickens to Singapore.

The Ministry of Agriculture and Food Industries (MAFI) must understand that the path to food security in the country is not only to provide enough supplies for the domestic market, but also be able to produce enough supplies to export to foreign markets. Countries like Thailand and Vietnam can produce more than enough rice for their domestic market because they are also rice-exporting countries. Instead of harming local chicken farmers with short-term policies, such as the export ban, and by putting in price controls that are not reflective of the underlying cost of production, MAFI should be putting in place plans to help our chicken farmers expand their domestic production and access to foreign markets.

When our chicken farmers can earn more from the export market, they would be in a better position to manage prices of chicken and eggs in the domestic market.

Some policy recommendations for MAFI to pursue include:

  1. Working with the industry, including members of the Federation of Livestock Farmers' Associations of Malaysia (FLFAM), to provide soft loans via Agrobank for long-term investments and expansion in this sector;
  2. Working with Malaysia External Trade Development Corporation (MATRADE), an agency under the Ministry of International Trade and Industry, to expand market access for our chicken producers to other countries which import chicken and chicken products, including for the halal market in the Middle East;
  3. Utilising its agencies on how to assist the industry to increase its productivity, and reduce the reliance on foreign workers, including via investments in automation and Industry 4.0 best practices;
  4. Working with state governments and land-owning government-linked companies to identify areas for new chicken farms, including via strategic joint-venture partnerships;
  5. Understanding the underlying cost structure of chicken farmers, and making it easier for these players to claim for the announced subsidies for chickens and chicken eggs; and
  6. Assuring our export markets, especially Singapore, that such export bans will not be implemented again, and that contractual sanctity will be respected. According to the FLFAM, 21 chicken farms which produce more than two million eggs have closed over the past three years because of the Covid-19 pandemic, a shortage of labour and an increase in the cost of operations.

Strategic thinking, coordination and planning are needed on the part of MAFI and the Malaysian government to prevent further closures from happening, especially since cost pressures on chicken farmers will continue to be present.

Dr Ong Kian Ming
July 29, 2022