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Malaysia Agribusiness Report Q2 2010
Business Monitor International, Feb 2010, Pages: 67
Malaysia Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Malaysia's agribusiness service.
As 2010 got underway, food prices were never far from the headlines in Malaysia. Prices for many commodities never really fell back after the customary pre-Ramadan rise in the middle of the year. With Chinese New Year in mid-February, worries over spikes in prices and hoarding returned. Meat prices were a particular source of concern. Both chicken and pork prices rose rapidly in 2009. In 2010 pork was added to the list of products to be subject to government price controls over the festive period. As ever, blame for the price rises was put on unscrupulous practices by either pig farmers or pork vendors. Sugar prices also rose in the New Year, though this was a direct result of government policy. Sugar in Malaysia is heavily subsidised with retail prices set below the cost of production. On January 1 the government lifted the official sugar retail price by MYR0.20/kg. This took the price to MYR1.65 in peninsula Malaysia and MYR1.75 in east Malaysia. Despite the rise, the government will still have a large subsidy bill in 2010 to keep the price of sugar at these levels. In 2009 the government budgeted MYR720mn to keep sugar prices down. The policy is not only hugely expensive, it also leads to supply shortages at times of high demand and contributes to increasing problems of obesity and diabetes. We would like to see the government get rid of the subsidy altogether and allow sugar prices to be set by the market, though appreciate that for reasons of political necessity this will have to be a gradual process. Rice pricing was also on the agenda as the government began to implement its policy of phasing out subsidised low-grade rice and compensating the poor with vouchers. The policy aimed to remove subsidised ST-15 rice from sale immediately and begin the new programme in December. Problems with the distribution of free rice vouchers, however, meant this did not happen. The government was taken by surprise by the amount of people who qualified for the vouchers. Documentation also proved a problem with many tribal people in Malaysian Borneo lacking ID cards. We therefore believe that subsidised ST- 15 will remain on the shelves into the second half of 2010.
The best way for Malaysia to keep food prices stable would be to improve efficiency in production. There were some promising developments on this front in 2009. In November, the government began a project to improve the genetic stock of rice grown in the country. BIOMalaysia 2009, as the project is called, is a link up between the Malaysian Biotechnology Corporation, part of the science ministry, the Malaysian Agricultural Research & Development Institute (MARDI) and Canadian biotech company DNA LandMarks. The agreement was initially signed in May 2009. DNA LandMarks is to set up a new research centre at MARDI to work on breeding new, higher yielding varieties of rice.
Also in November, the Science, Technology and Innovation Ministry announced it was encouraging corn farmers to switch to new improved seeds. The new seeds, which will be imported from China and Taiwan, are claimed to give higher yields than traditional seed varieties as well as being more resistant to pests and taking a shorter time to harvest. The ministry will kick off the project by distributing free seeds. These are both important developments. Average crop yields in Malaysia are distinctly unimpressive given that it is one of the most developed countries in the region. With land increasingly at a premium, particularly in Peninsular Malaysia, yield improvement is the most promising path to boosting output.
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