THE current global oil crisis has indeed affected costs in the livestock industry, says Datuk Jeffrey Ng Choon Ngee, advisor to the Federation of Livestock Farmers’ Associations of Malaysia, but compared with the impact caused by the Russian invasion of Ukraine in 2022, the difference is “like heaven and earth.” As such, industry players are still generally capable of absorbing the economic pressure, depending on their individual circumstances.
He reveals that during a meeting between the federation and the government on March 30, they had already explained that rising international shipping costs and global crude oil prices has pushed up the prices of imported corn and soybeans, two key raw materials for the livestock industry by about 10%. However, Malaysia’s corn and soybean imports mainly come from North and South America and do not pass through the Strait of Hormuz, so the economic pressure is still not as severe as during the Russia-Ukraine war in 2022.
Speaking to Sin Chew Daily, Ng points out that Ukraine accounts for about 12% of the global corn supply, while Russia also contributes several percentage points. At the beginning of the war, industry players worldwide were worried about corn supply shortages, and the impact spread throughout the entire supply chain. At the time, corn and soybean prices surged by nearly 100%.
“Corn prices jumped from around RM900 per tonne to RM1,800 per tonne. Later, prices fell back to around RM1,000, and after the oil crisis, they are now around RM1,100 to RM1,200,still nowhere near RM1,800.”
He says the government has generally provided subsidies or tax relief to livestock operators, including for eggs, raw materials, and animal feed. However, raw materials shipped into Port Klang and transported by lorries from the port to farms do not receive diesel subsidies, even though the distances involved are relatively short, and this still affects operating costs.
“If farms use generators, or tractors to transport eggs and feed within the farms, those also do not qualify for diesel subsidies.”
Overall, costs have certainly risen for operators, he says, but the extent is difficult to quantify because each farm differs in scale and operations. Some smaller farms, for instance, do not use generators at all and therefore consume almost no diesel.
“We need to have a benchmark. If we compare with the lowest-cost period, then costs have definitely increased. But if we compare with the peak period, prices have actually come down now.”
He stresses that because raw material prices have already risen by nearly 10%, and overall costs had already increased by 7% to 8% even before the outbreak of the US-Iran conflict, the market should still be able to cope as long as the government keeps prices within an affordable range.
On whether future supply shortages may occur, Ng says it is difficult to generalise because each operator has a different business model and cost structure.
“I visited Indonesia before, and operators there said diesel prices had become so high that they had no choice but to suspend operations. At least Malaysia still has subsidies for now. But some farms without stable electricity supplies rely heavily on generators. If diesel rises to RM6 or RM7 per litre, they will definitely face pressure although these are more isolated cases,” he notes.
He adds that another major issue is the overall economic environment and consumer purchasing power. If consumer spending remains weak and purchasing power is low, producers may still be forced to sell at low prices even if production increases.
“Can everything depend on government subsidies? The government also cannot continue bearing all subsidies forever, otherwise public finances will collapse. It cannot be that the public enjoys all the benefits while the government shoulders all the costs. So I believe the most important thing is for the government and industry players to maintain long-term communication.”
