BANANAS are one of the local agricultural products that could go up in price if the global energy crisis continues due to the Strait of Hormuz blockade, says the Agriculture and Food Security Ministry, as it projects up to 100% spike in the cost of urea, an essential component in fertiliser needed for crops in Malaysia.
However, the Ministry has implemented long-term initiatives as a step towards addressing the challenges, he tells Sinar Harian.
According to Mohamad, the three long-term mitigation action plans outlined focus on energy efficiency, reducing logistics costs, and transitioning to renewable energy sources as contained in the National Food Security Policy 2030.
“The three plans are the integration of agricultural waste into a sustainable energy system, the adoption of an Integrated Agriculture System involving a regenerative agriculture model and a circular economy, and the formulation of a National Food Security Act,” he says.
Adds Mohamad, his ministry has also identified new mitigation action proposals and is examining the feasibility of these proposals such as the creation of buffer stocks for other commodities and agricultural inputs such as fertiliser, and the exploration of local domestic fertiliser production using Lynas plant industrial waste.
Explains Mohamad, this is necessary as data as of May 3 showed that the price of urea fertiliser had recorded a drastic jump of 72% due to the crisis in the Middle East.
“Fertiliser is the largest component that contributes up to 50% of production costs, especially for vegetable and fruit crops which is 40%-50 %, as well as rice crops which is 13%.
“If the crisis continues, the cost of fertiliser components for crops such as bananas is projected to increase by up to 100%.
“In addition, the capacity and productivity of the agricultural sector will also be affected due to the increase in fertiliser costs, delays in fertiliser supply, and reduced fertiliser use as a measure to optimise production costs at the farm level,” he says.
Mohamad stresses the current impact on the agri-food sector needs to be viewed holistically based on the input cost structure, which includes fertiliser, animal feed, and diesel fuel, all of which are heavily dependent on the global market.
“In this context, the increase in the cost of imported inputs and energy has an impact across all subsectors, but with different intensities according to their respective production structures,” he notes.
Mohamad elaborates that apart from agricultural inputs, other components affected by the conflict are fuel or logistics costs.
Describing fuel consumption as the lifeblood of the country’s agro-food supply chain, he says that it is mainly diesel that recorded 70% to 80 % of the operating costs for fishing boats, 20% to 50% for agricultural machinery or machines and 10% to 40% for pesticide and fertiliser processing.
“The global energy crisis, especially the conflict that triggered the surge in Brent crude oil prices, has had a direct impact on the significant increase in the operating costs of the agri-food sector.
“In fact, the closure of the Strait of Hormuz has also directly affected the increase in the cost and delivery time of raw materials such as agricultural inputs,” he says.
Responding to a question about the agricultural subsectors most affected by the current energy supply uncertainty, Mohamad says that while the increase in the cost of imported inputs and energy has an impact across all subsectors, it has different intensities according to their respective production structures.
"For the crop subsector, especially vegetables, the main impact is through the cost of fertiliser, pesticides and diesel used in farm activities as well as the transportation of produce.
"Meanwhile, the livestock subsector is more significantly affected because a large part of production costs depend on imported animal feed such as corn and soy, making it very sensitive to global price fluctuations," he shares.
When asked whether the increase in energy prices is a threat to the country’s food security in the long term, Mohamad says although it cannot be ruled out, it depends on several things.
In general, he says, the increase in fuel prices has affected the food system globally.
“The threat and risk of dependence on fuel and petroleum by-products such as urea fertiliser and petrochemicals will certainly affect the country’s food security in the long term.
“The offer of agricultural input and fuel prices at rates above normal levels has directly increased the cost of production in the agricultural sector,” he says.
Inevitably, this situation will result in the transfer of costs along the supply chain, starting from the farm level to the consumer level, which can result in an increase in the cost of living and food inflation, concedes Mohamad.
Regardless, mitigation action plans are on the table.
