MIDF Research has reiterated its bullish stance on Malaysia’s consumer sector, in light of the government’s decision to revoke price ceilings on chicken and eggs from July 1, 2023. The new policy provides poultry industry players with increased price flexibility, enabling them to adapt to fluctuating input costs. The price determination will now be shaped by market forces and reflect supply and demand conditions, the research firm said in a note issued today.
The optimism for the consumer sector is anchored in a defensive approach, deriving strength from consistent demand for staple goods, firm domestic consumption, steady labour markets, robust retail activity, and heightened tourism. Additionally, food and beverage producers are anticipated to maintain healthy profit margins as declining raw material prices and past price increases offset other cost pressures.
Poultry industry players are expected to benefit from normalized commodity prices for livestock feed, mitigating high input costs. Global futures contract prices for key livestock feeds, such as soybean meal and corn, have seen reductions of 1.8% and 29.4% respectively year-on-year in May 2023, reducing cost pressures on the poultry industry and potentially counterbalancing increased labour and electricity expenses.
The post-July 2023 landscape, sans price controls, is predicted to enable poultry farmers to more fluidly pass on elevated input costs to consumers, enhancing profit margins. Furthermore, lifting the export restrictions on live and dressed chicken, along with chicken parts, might propel poultry players to augment chicken production domestically and seek overseas opportunities, diversifying their revenue sources.
However, MIDF Research cautioned about a possible surge in egg prices in the short term, given the tight egg supply domestically. The global avian flu outbreak has dwindled egg supplies internationally, potentially leading to higher prices for imported eggs in Malaysia.
In April 2023, average prices in Malaysia were recorded as RM10.45 per kilogram for chicken and 47, 45, and 44 sen per egg for Grade A, Grade B, and Grade C eggs, respectively. As a result, the research house anticipates the floating prices for chicken to remain relatively stable post-removal of price controls, while egg prices might experience a hike due to limited supply domestically and globally.
News Source: MalayMail