SUPPLIES OF CHICKEN FOR THE FESTIVAL SEASON IS SUFFICIENT BUT ALL PARTIES SUFFER FROM THE EFFECT OF HIGH COST OF PRODUCTION

The Federation of Livestock Farmers’ Associations of Malaysia (FLFAM) would like to express its appreciation to the Government of Malaysia through the Ministry of Domestic Trade and Consumer Affairs for reverting to the year round retail ceiling price of RM6.00 per kilogram for standard chicken during the coming festival season. Chicken has been a price controlled item since 1998 and the present ceiling price of RM6.00 per kilogram has been in force since October 2004.

The poultry producers has not been able to agree to the ceiling price being lowered to RM5.60 per kilogram for the festival season as the industry has been suffering an escalation of cost of production since the beginning of 2006. The increase in cost of production is a global phenomena caused by the diversion of corn and vegetable oils for the production of bio-fuels – ethanol and bio-diesel respectively. With the sustained high price of crude oil the likelihood for the high price of these commodities to remain or go higher is very likely.

The FLFAM would like to assure consumers that there will be sufficient chicken supply for the current festival season at the present ceiling price. The consumers have to realize that at the present cost of production all parties involved in the production and supply of chicken to the consumers are suffering from little or no margin of profit. The situation should be seen in the context of the following facts: –

• The calculated cost of production to raise broilers is now RM4.16 per kilogram when farmers are required to sell chicken at RM4.00 per kilogram. This means that farmers are operating in a slightly negative cash flow situation;
• The wholesalers and retailers are still operating on a margin of RM0.50 per kilogram for each level of trade. This margin has not been adjusted since 1998 when the year round ceiling price was first enforced.

The farmers made a commitment to accept the RM4.00 ceiling price for the festival season because we believe that the Government will understand our situation and will adjust the ex-farm ceiling price at the right time for it to be done.

The wholesalers and retailers did not have problems with trading margins before as the ex-farm price has been transacted at below the ceiling for many months in 2006 and 2007 and they are free to sell chickens at the year round ceiling price of RM6.00 per kilogram. It is only when the ex-farm ceiling price is transacted at RM4.00 per kilogram that they feel the margin squeeze that they are suffering now.

Since wholesalers and retailers have not always suffered from thin profit margins all the time the FLFAM can only suggest that they comply with the present ceiling price levels for the festival season and propose to the government that their trading margins be adjusted to reflect more fairly to the current cost of doing business. We are sure the Government will understand their situation.

The industry is thankful to the Government for their understanding of our situation and we hope it will allow us to continue to play our role as a supplier of protein food at reasonable prices to the consumers by making sure of its continued viability and sustainability.