Chicken prices have been a hot topic in the local media recently, firstly with a ban on the export of chicken and the removal, and subsequent reintroduction, of a price ceiling set at RM9.40 per kg in Peninsular Malaysia.
But why did chicken prices rise to begin with? You might be surprised to know the pandemic and Russian-Ukraine war are among the factors.
Here’s a general rundown on events that led to all the clucking around chicken prices in Malaysia.
1. The pandemic
The pandemic over the past two and a half years forced many Malaysians to stay at home. The poultry industry was also affected due to a lack of workers, while transport and logistics became harder to manage.
As such, chicken was in short supply in the market, as poultry companies could not provide enough meat to meet demand.
This trend was true for much of the world, as sudden supply shortages for certain products – such as toilet paper – drove many to panic-buy. This stockpiling exacerbated the situation by threatening the already short supply.
International transportation played a role here, too. As the whole world shut down, fewer imports of chicken from overseas meant local producers could not keep up with demand.
Prices of global container freight also sharply increased by almost 6.5 times, from US$1,592 in December 2020 to US$10,361 last September. More on this below.
2. War in Ukraine
As Russia is the world’s biggest exporter of crude oil and second-biggest exporter of natural gas, the European Union banned imports when Moscow chose to utilise both to fuel the conflict in Ukraine.
Both Russia and Ukraine account for nearly a third of the world’s wheat production, while Ukraine provides about 16% of the world’s corn production. Naturally, production and transportation have been severely strained due to the ongoing war.
The conflict, therefore, caused the prices of these commodities to increase due to a global supply shortage. It has had an indirect effect on other global commodities, too, such as coal, palm oil, soybean and barley. For how this affects the prices of chicken, read on…
3. Increased transport prices
Malaysia imports almost all of its livestock feed from overseas, which makes transporting them crucial to local chicken producers. But crude oil prices increased sharply by 44% from US$77 per barrel in December to US$112 per barrel last month; while natural gas prices increased even more, by 54% from US$3.70 in December to US$5.70 in July.
This has increased the cost of transportation by at least 50% for most international transport and logistics companies.
While global container freight prices have decreased from the beginning of the year, it still remains very expensive at US$7,635 as of May, compared with US$1,592 in December 2019 just before the pandemic.
Higher crude oil and natural gas prices increase the cost of container freight, which in turn impact the price of livestock feed for chickens.
4. Prices of chicken feed rise
Most of the chicken feed used by Malaysian chicken producers comes from corn, wheat, barley, and soybean. As mentioned above, a disruption in supply has led to increased prices of these commodities: corn prices rose by 28% from US$591 in December to US$756 last month, while wheat prices went up by as much as 41% from US$771 in December to US$1,088 in May.
Prices of soybean and barley have also been increasing, owing to the Russia-Ukraine conflict and higher transportation costs. Soybean prices increased by 27%, while barley prices rose by 32% from December to May.
As the prices of these raw materials for chicken feed have increased, chicken producers, similarly, have to raise prices to keep afloat.
So what happens next? As the Russia-Ukraine conflict continues, it is very likely that transportation and chicken-feed prices will remain high. The Malaysian government says it will review the ceiling on chicken prices after Aug 31 but, in the meantime, consumers could consider switching to other protein alternatives such as fish or tofu.
