I AM a retired veterinarian who once worked as a senior government official in a neighbouring country. I took part in the planning and implementation of a major cattle feedlot for that country, where a Malaysian businessman is a co-owner, and the enterprise is still thriving.
The failure of the National Feedlot Corporation (NFC) despite strong support from the past government is embarrassing. The NFC was supposed to develop a sustainable beef industry in the country for national food security but it failed.
Recent news reports have quoted new Agriculture and Agro-based Industry Minister Salahuddin Ayub saying that the venture would be revived and Veterinary Services Department (DVS) director-general Datuk Dr Quaza Nizamuddin Hassan Nizam has mentioned that it could be viable under a different business model involving 61 contract farms.
I presume this new entity to replace the NFC would function as an integrator to import feeder cattle and distribute them to contract feedlot farms for growing and selling back to the integrator.
In my opinion, this new model is not much different from the previous one except that the inherent risks in raising feeder cattle are now transferred from the integrator to the contract feedlot farmers. It seems the integrator carries a relatively lower risk in importing feeder cattle for distribution.
I do not see how this additional layer of feedlot operators can improve production efficiency, reduce costs and lower overall business risks, however.
The key factor for success that is so glaring but has not been considered yet is feed and feeding. In cattle feedlot farming, the main aspect is to raise feeder cattle in confinement and feed them mainly with commercially compounded feeds or concentrated feeds for higher productivity.
In Malaysia, apart from palm kernel cake and fruit-bunch fibres, there is scarce industrial biomass available that are suitable for commercial livestock feed manufacturing. Hence, feeding of livestock will rely heavily on imported grains. It is for this reason that the envisaged new model needs to include feed manufacturers.
There is only a small number of feedstuff importers who also comprise the major feed manufacturers in this country. Due to the volume of imports they command, they have “exclusive rights” and act as agents for exporting countries. As such, these importers will have the advantage in securing regular supplies of feedstuffs at competitive prices. Thereby, small and medium-size feed manufacturers and large-scale livestock farmers need to purchase feedstuffs from these agents at a premium.
Livestock feed is the major production cost in feedlot farming. Those who control imports of feedstuffs and also manufacture them will have absolute advantage in producing good quality feeds at comparatively lower costs using least-cost formulation.
Good quality feeds are important to achieve fast growth rate and desirable feed-to-bodyweight-gain ratio. These, in turn, will translate into higher productivity and profitability. In this regard, major feed manufacturers have the best chances to succeed. Hence, the Government should involve them in some way to undertake mass-scale feedlot cattle farming.
The director-general of the DVS has rallied for patriotism among plantation corporations, smallholders and relevant agricultural-linked agencies to venture into cattle farming. This seems desperate but it is understandable. However, these companies and agencies are not charitable organisations. They need to make profits to sustain operations and realise goals.
On top of that, cattle farming in Malaysia is still perceived as highly risky due to bad experience in the past and the closure of big cattle farms, including Majuternak, Darabeef and NFC.
I foresee the country continuing to rely on small-scale household cattle rearing, which is pathetically slow in making progress – if at all. Many of these small-scale cattle holders will face the challenges of dwindling family size, hence a shortage of family labour, and increasing competition in land use with other economic sectors. These factors will further thwart the development of the cattle industry.
Cattle ranching under tree-crop plantation is problematic. When cattle gather densely together, they can cause soil compaction and localised erosion.
Other obstacles include cattle theft, accidental poisoning from agro-chemicals or open fertilising and human conflicts arising from crop destruction caused by straying cattle. Simply put, it is troublesome to safeguard mobile assets of roaming cattle when land is scarce or there is no natural pasture land.
The way forward for cattle farming in Malaysia is mass-scale feedlot farming, which should be linked efficiently with small-scale cattle holders and dairy farms for supplies of feeder cattle. This will relieve the limited holding capacity or space of many small-scale cattle farms and free more land for rearing breeder cattle.
Similarly, male calves from the dairy industry could be channelled to feedlot farms. Consequently, all these efforts would reduce the overwhelming dependence on imported feeder cattle.
I disagree with the concept of direct government funding for commercial cattle projects by allocating huge sums of money to entrepreneurs. Instead, the Government should build the necessary infrastructure, including access road, water and power supplies, and other fixed assets such as buildings. Feedlot operators or entrepreneurs need only to pay a certain rental sum at a rate at par with amortization costs of the fixed assets, of course excluding the public infrastructure costs. However, entrepreneurs should have the option to purchase those fixed assets at the prevailing market value whenever they wish to do so.
The idea of government giving out money directly to entrepreneurs is unwise when there are appropriate institutions that offer commercial banking services. Government agencies need not act as bankers but as facilitators, making project ease-of-start a priority. Thus, government funds allocated for a particular project should be used as collateral for securing bank loans, particularly from Agrobank, to meet cash flow and operational needs.
I also believe government funding for agricultural projects could be better monitored and controlled to avoid abuses.