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On Jun. 1, 2022, chicken exports from Malaysia will come to an abrupt halt, cutting Singapore off from about a third of its supply of the poultry.
The reason? As revealed by neighbouring Prime Minister Ismail Sabri Yaakob on May 23, Malaysia is currently experiencing a national shortage of chickens.
Already, in Singapore, we are seeing the ramifications of the impending suspension.
Chickens are flying off supermarket shelves, while prices for chicken rice are expected to rise, according to reports by Bloomberg and The Straits Times.
Some chicken rice stalls will even have to shut down temporarily.
So what's behind Malaysia's shortage?
Chicken feed is expensive
According to Malaysiakini, our neighbours are actually almost entirely self-sufficient when it comes to chickens; Malaysia produces 98.2 per cent of its poultry needs.
Yet, its poultry farming industry is highly reliant on imported chicken feed, which is derived from grain largely bought from Brazil and Argentina.
S&P Global reported in February this year that weather conditions in both countries had led to considerable reductions in crop yields, resulting in higher grain prices for the first half of 2022.
Set against the backdrop of a weakening ringgit, this meant that chicken farmers in Malaysia were facing an increasing steep rise in the cost of their operations.
Malaysia's Agriculture and Food Industries Ministry, reported Malaysiakini, estimated that grain corn prices had gone up from RM500 (S$156.22) per tonne to RM1,900 (S$593.63) per tonne in some instances — a 280 per cent increase.
While the government responded to the soaring prices of chicken feed with subsidies, farmers in Malaysia have said that the delays in its distribution and the ringgits continued downward trend have aggravated the situation.
In the end, this means that chickens which are now on a skimpier diet are not fattening up at the same rate, causing a delay in supply.
Image from Mothership
Chicken Cartels exacerbating the problem?
During his announcement of the export halts, Ismail Sabri said his government was aware of reports of chicken cartels who were controlling poultry prices and production, wrote the Malay Mail.
He added that the Malaysia Competition Commission was conducting a probe into the veracity of the reports.
"If it is found that there is a cartel, the government will take legal action against them," he said.
The investigation followed a series of reports by Utusan Malaysia claiming that a group of poultry industry cartels planned to close farms on May 21 and 22 as a protest against the government's delay in handing out subsidies.
The cartels, if they exist, are said to control almost the entire poultry industry in Malaysia, wielding influence over market prices.
Undoubtedly such squeezes in supply are felt almost immediately in the marketplace.
"I used to have 1,000 fresh chickens sent to me daily, but this has been reduced to between 400 and 500," said a chicken seller from a wet market in Klang, speaking to The New Straits Times.
"I think they are purposely withholding stock now," he added, without direct reference to a cartel.
Price ceiling hitting hard
When supply is short and demand remains, market forces typically dictate that prices will increase — unless a higher power intervenes.
Malaysia already had a price control on standard foods — chickens included — before Ismail Sabri announced that he would be temporarily lowering the price ceiling for chickens by RM0.20 (S$0.06) to RM8.90 (S$2.78) per kg.
"Proactive measures are needed to ensure that the price of chicken remains affordable while at the same time, the poultry industry will not be affected and supply remains stable," he said in a statement on Jan. 31 according to The Star.
The lower ceiling was meant to last from Feb. 5 to Jun. 5, but the government recently announced that it was considering an extension to the control measure.
The price ceiling, while an attempt to help consumers, further complicates the matter when you take into account the rising costs of chicken production explored above.
If producers can't increase the price of chickens in accordance with the costs of feeding chickens, then profit margins inevitably take a hit.
For farms already struggling to make ends meet, such a development could be catastrophic.
Unless of course, you can export your chickens to a country where such a price ceiling does not exist.
"Exporting helps keep the farms running, because the government’s ceiling price at RM8.90 (S$2.78) keeps chicken prices low, but costs of chicken feed keep increasing month by month," said Johor farmer Caleb Rajah Selvarajah to CNA.
In addition, earning Singapore dollars through the exports, with its relative strength compared the ringgit, would help keep Caleb Rajah's business viable.
However, if the current conditions hold — the export ban, lowered price ceiling, and high cost of feed — a closure to stem the losses may make more sense for smaller farms.
Fewer farms ultimately mean fewer chickens.
Can Singapore make it through the chicken shortage?
While disruptions are expected here in Singapore, Minister of State for Sustainability and the Environment Desmond Tan said on May 26 that the country would have an adequate supply of chickens.
"One-third of our chicken imports are from Malaysia, and almost all are live chickens which are slaughtered and chilled in Singapore," wrote Tan on Facebook.
"However, be assured that our supply of the other 70 per cent of frozen chicken from other countries has not been impacted."
Tan also urged Singaporeans not to hoard chickens and to purchase them "responsibly".
"We can also play our part by only buying what we need. I encourage everyone to be open to other options such as frozen chicken, processed chicken like canned chicken and chicken nuggets, and other protein types."
SFA monitoring the situation closely
The Singapore Food Agency (SFA) released its own statement saying that it was monitoring the situation closely and was working with importers to minimise disruptions.
"For example, they will activate their supply chains to increase imports of chilled chicken from alternative sources, increase import of frozen chicken from existing non-Malaysia suppliers, or draw from their stocks of poultry," read a statement from the agency.
Meanwhile, local supplier Kee Song has pledged to increase its chicken production before Malaysia halts the export of chickens on Jun. 1.
In a TikTok video posted on Wednesday (May 25), the company said it will process "as much fresh chicken during this period to ensure there's more stocks available before the ban kicks in".
The video was accompanied by the caption: "Fret not, we're working extra hard to provide the best while we can."
Top image from Arisa Chattasa