December 10, 2004

 

 

Falling Feed Prices to Lower Costs for Malaysia's Poultry Industry

 

The multi-billion-ringgit poultry industry in Malaysia can anticipate significantly lower costs next year. Feed prices, a major cost component, have eased and are expected to fall further.  

 

The prices of soymeal and corn had soared in the early part of the year, leading to high feed prices throughout 2004. Soymeal and corn are key ingredients in animal feed.

 

Companies engaged in poultry and layer egg farms will be paying less for feed next year, after they deplete the current stocks.  

 

This has been a trying year for these companies. They have encountered problems like bird flu and high feed prices, driving many of them into the red. The reversal of the upward trend in soymeal and corn prices from their peak in June means that feed costs will be falling in the months ahead. However feedmill companies may take a couple of months to finish their own stocks before they reduce their prices. 

 

"This is very good news for us because we had to go through not only the bird flu outbreak, but also soaring prices of soymeal and corn in the middle of the year,'' according to an executive of a large poultry company.  

 

The large poultry companies listed on Bursa Malaysia include KFC Holdings Bhd, Leong Hup Holdings Bhd, Sinmah Resources Bhd and CAB Cakaran Corp Bhd.  

 

They have seen soymeal prices on the Chicago Board of Trade reach a high of US$249 a ton in early May while the price of corn peaked at US$3.39 a bushel in March.  

 

Since then, these prices have fallen considerably. Based on their closing prices on Wednesday, soymeal had declined by 36% to US$158 and corn had fallen by 40% to US$2.04 per bushel.  

 

"There will be considerable savings," said a poultry company executive. The cost savings for a large company could be around RM25 million to RM30 million a year, he added. That would be enough to erase losses and provide for ample profits.  

 

The lower cost of feed, however, would be offset to some extent by the higher cost of shipping charges. Most of the soymeal and corn are believed to be imported from North or South America.  

 

Freight charges are at record levels, but one industry executive said the net effect of higher freight charges and lower feed prices would still be positive for the industry. 

 

Another factor holding profits back is a restriction on exports due to the bird flu scare. Farmers in Malacca and Johore are allowed to export to Singapore although industry officials said other markets such as Japan still remained closed. 

 

The extent financial conditions will improve depends on the type of business the poultry companies are involved in. This can range from feed production and breeding of day-old-chicks to the rearing of broilers and processing of chicken. The lower costs will support the development of this industry.