Malaysia to end price caps for chicken by July, will give cash aid to poor instead

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KUALA LUMPUR - Malaysia will end price controls for chicken and eggs by July and leave their prices to be determined by market forces, a move that is expected to boost supply and likely lead to its export ban on poultry being lifted.

Domestic Trade and Consumer Affairs Minister Alexander Nanta Linggi told The Straits Times on Thursday (June 2) that this measure was in line with Prime Minister Ismail Sabri Yaakob's announcement that chicken subsidies would be redirected from farmers to the public, especially lower-income households representing the country's bottom 40 per cent of earners.

Malaysia had banned exports of chicken from June 1 due to a supply crunch that saw many retailers selling poultry at up to double the statutory ceiling price of RM8.90 (S$2.80) per kg. The Malaysian Cabinet decided on Wednesday to extend this price cap to the end of the month from its current June 5 expiry.

"By July, the price of chicken and eggs will be lifted and left to market forces, but at the same time, the government will give direct cash assistance to the low-income households to help them cope with the increase in prices of food, especially chicken meat," Datuk Seri Nanta said.

"In addition, hopefully, the open import (abolishment of approved permits) for chicken will also flood the market, thereby reducing the pressure for increasing prices and balancing supply and demand."

For now, it is not known if the export ban - which affects a third of Singapore's imported chicken supply - will also end in July. Agriculture and Food Industries Minister Ronald Kiandee said last week that the ban would only be lifted once domestic supply had stabilised.

Mr Nanta said that whether the export ban would be lifted would depend on the domestic supply situation at the time.

"If the government is assured that the supply for domestic consumption is sufficient, then the ban may no longer be necessary," he added.

Economists say a free float price with no import cap also implies doing away with export restrictions.

"Allowing market forces to dictate pricing means that an export ban makes no sense. If there is high demand, whether local or foreign, suppliers will increase their capacity or new players will join the fray," Socio-Economic Research Centre executive director Lee Heng Guie told ST.

Datuk Seri Ismail had said on Wednesday that a free float would see chicken prices breach RM12 per kg.

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Meanwhile, the existing subsidy offered to chicken producers at 60 sen per kg has largely gone unclaimed, as suppliers insisted it was insufficient to compensate for their losses from selling chicken at the current RM8.90 ceiling. The government had set aside RM720 million to cover the subsidies.

"Therefore, on July 1, we will no longer subsidise farmers but (pay) directly to those in need," the Prime Minister said, adding that the relevant ministries would announce the mechanism for doing so in due time.

Mr Nanta added in a statement on Thursday that "the Finance Ministry will study proposals to channel aid to the targeted low-income groups, including the rate and mechanism to address the rise in cost of goods when the price ceilings for chicken and eggs end on June 30".

An Agriculture and Food Industries Ministry official also told ST that it will take time to finalise the mechanism as "our ministry is working out several matters with the Treasury".

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