July 1, 2022

 

Malaysia's chicken export ban to Singapore unlikely to benefit regional suppliers

 

Analysts said Malaysia's short-term chicken export ban to Singapore will unlikely benefit regional suppliers because fresh chicken from Malaysia remains in high demand in Singapore, compared to Thailand's frozen poultry, The Edge Markets reported.

 

Due to a shortage on the domestic market and rising prices, Malaysia has decided to stop exporting chickens as of June 1. The government-imposed price cap on standard chickens and rising feed costs have forced poultry farmers to reduce feed costs or even close their operations.

 

Over a third of Singapore's monthly chicken imports, or 3.6 million whole chickens, have been stopped by the ban. The city state brought in nearly 73,000 tonnes of chicken from Malaysia in 2021.

 

Soong Wei Siang, an analyst from RHB, said poultry players in Thailand and Indonesia won't immediately benefit from the ban in terms of market share.

 

He said the majority of the fresh chicken Singapore imports from Malaysia comes from farms in Johor. It will be challenging to import live chickens from Thailand or Indonesia due to distance.

 

He also said that from a cost standpoint, he doesn't believe that the price of frozen chicken that is shipped from Thailand or Indonesia will be as competitive as fresh chicken from Malaysia, which are slaughtered in Singapore. No other nation will be able to do that, in his opinion.

 

The proximity of Malaysia to Singapore, according to MIDF Research, is a benefit, but the ban will have an effect on local poultry breeders as their international clients source chickens elsewhere.

 

MIDF Research said given Malaysia's proximity to the city state and the fact that live chicken is slaughtered and refrigerated in Singapore, we think Malaysian poultry breeders have a slight advantage. Therefore, they predict that once the embargo is lifted, demand for Malaysia's chicken exports may increase.

 

Dr Yeah Kim Leng, an economist at Sunway University, said the ban on chicken exports will likely have a negative effect on local poultry suppliers who are focused on exports.

 

Yeah said the ban prevents local poultry producers from selling their goods abroad at a higher price, so the restrictions result in income loss. Reduced production capacity and efficiency would also be a major effect of the ban.

 

He said if the ban is kept in place, it will seriously harm the industry's long-term prospects and, more importantly, lead to a reduction in production capacity. Poultry producers who focus on exports may not be able to make it and may have to close permanently.

 

He also said the way to combat inflation and shortage is to encourage more-efficient production rather than restricting their operations through a ban or not providing them with support in the face of rising input prices.

 

Yeah cautions that the ban would harm local businesses' reputations, as companies will find it more challenging to hammer out long-term contracts the longer the ban is in place. Contracts for the supply of food are typically long-term because the consuming nations want a dependable and secure supply.

 

He said bans should only be implemented as a last resort and only be in effect for a short time.

 

Last week, Malaysia relaxed the restrictions and permitted the export of live kampung and black chicken to Singapore.

 

-      The Edge Markets