Chicken prices will not spike following removal of subsidies - MIDF Research

KUALA LUMPUR: MIDF Research anticipates that the market price of chicken will not increase substantially after the removal of subsidies and price controls, considering that chicken is a staple protein for Malaysians.

The research house said in a note today that chicken prices would also be closely monitored by the government as they are under the government’s watchlist.

"Nevertheless, the maintenance of subsidies for chicken eggs will continue to support egg producers and ensure that the market price of chicken eggs remains controllable,” it said.

MIDF Research noted that the removal of price controls and subsidies for chicken, effective from Nov 1, 2023, would be a positive development for chicken producers, giving them the flexibility to adjust prices based on market supply and demand dynamics as well as the ability to pass on increased production costs to consumers.

It said this would benefit chicken producers under its coverage, such as Leong Hup International Bhd.

"Overall, we believe that the demand for poultry products will remain resilient since chicken products are the most affordable source of protein for Malaysians.

"Additionally, we are optimistic that chicken producers will benefit from the normalisation of commodity prices such as corn, soybean meal, crude palm oil, and wheat,” it added.

Meanwhile, subsidies for grade A, B, and C eggs would continue, and the government did not mention the removal of price controls for chicken eggs.

"Therefore, we believe that the government intends to maintain price controls, which will not impact or benefit egg producers like QL Resources Bhd under our coverage.

"We find this manageable for QL Resources since the company only sells chicken eggs in East Malaysia, where price ceilings are higher and vary across cities,” it said.

Additionally, the economies of scale of the egg producer, along with government subsidies, would continue to sustain the margin, MIDF Research said. - Bernama