PETALING JAYA: As food inflation escalates, driven by runaway commodity prices, it is possible that the Malaysian government might need to step in by providing targeted subsidies should the situation worsen.
Sunway University Business School professor of economics Dr Yeah Kim Leng explained that considering crude oil and crude palm oil (CPO) prices have shot up in recent months, the Bottom 40 (B40) income segment might require assistance to cope with the rise in food costs.
“This presents a good case for cash transfers to those around and below the hardcore poverty line,” he told SunBiz.
At the moment, the Brent crude price is trending above the US$110 per barrel mark and the CPO price closed at RM7,546 a tonne on Friday.
Furthermore, the oil price is intrinsically linked with the fertiliser price as the fuel is a crucial input in the latter’s production process.
In a news report, the UK’s National Farmer’s Union highlighted that the fertiliser price closed above the £1,000 (RM5,469) a tonne threshold from £650 at the start of March. On a year-on-year (y-o-y) basis, it said, the price of nitrogen fertiliser has gone up by a staggering 200%.
To deal with this situation, Yeah said it is imperative for the government to ensure that there are no undue challenges in production and in the supply chain, as well as no hoarding among the middlemen.
“The price can increase according to market forces but the government has to make sure if it is not affected by compounding factors such as shortages and it must ensure the producers have access to substitutes, for example alternative fertiliser for the farmers.”
On the other side of the coin, he noted that the government should make sure there are options for consumers to deal with shortage or price inflation. If chicken is expensive, for example, substitutes such as beef, mutton and fish should be made available at reasonable prices.
On increasing supply through food imports, Yeah cautioned that the government should be wary of hampering local production efforts. “It is important to avoid creating a market distortion which only benefits a handful of players and disincentivising local producers,” he said.
“To achieve food security, the long-term goal is to cultivate healthy competition in the local market as well as promote new market entrants as this will result in increased productivity.”
Universiti Putra Malaysia research fellow and professor Dr Fatimah Arshad opined that in increasing imports, it is crucial that it is not done through restricted approved permits but via open competition to ensure lower prices.
To alleviate the plight of the poor, she suggested that the government could look into providing food coupons for the poor until the economy has recovered from the Covid-19 pandemic impact as well as to establish more food banks.
Fatimah pointed out that food inflation in December 2021 rose 3.2% y-o-y while average inflation stood at 1.9%. For January-November 2021 Malaysia’s food deficit stood at RM22.7 billion compared with RM17 billion in the same period of 2019.
“Production has not been able to keep up with consumption as reflected in the decline of self-sufficiency level of most food commodities in the last 40 years despite a number of agricultural policy documents,” she said.
“Lower food production means lower food availability and hence the need for imports.”
Adequate supply notwithstanding, Fatimah highlighted that affordability is a serious issue among the B40 which have seen their purchasing power significantly eroded by the Covid-19 pandemic.
She said a Unicef survey found 60% of the flat dwellers it sampled reported a 40% reduction in monthly income.
“Malaysia’s food security systems are not resilient to withstand shocks where nutrition insecurity occurred among the poor particularly in the urban areas,” said the UPM professor.
In the long run, it is important for Malaysia to develop a food-first policy, which focuses on research and development, adoption of advanced technology, and development of local inputs as the country has plenty of biomass and food waste and other resources.
On the ground, Epic Food Hall co-founder and CEO Lai Wick Kee shared that his food and beverage business has observed an increase in raw material costs since the second half of last year.
“Due to our mission of offering affordable delivery, we absorbed the cost for quite some time but are no longer able to do so, especially after the fierce price hike seen this year,” he said.
Nonetheless, Lai stated that the increase in selling prices is done minimally, about 5% on average, to ensure business survival.
He said an ingredient that has seen the highest price increase is chicken. A kilogram of chicken thigh used to cost RM9.80 but, today, it is priced at a little over RM14.50.
The F&B operator opted to reduce wastage, bulk buying and improve its inventory management to get ahead of the situation. In addition, Lai introduced plant-based meat into the menu. “It tastes almost the same, and at the same time, it is healthy and has a positive environmental impact.”
Source: The Sun Daily
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