PETALING JAYA: Measures to taper high poultry prices, which include allowing more approved permit (AP) holders to import chicken and lowering the maximum selling prices to RM8.90 per kg, will eat into the profitability of poultry companies.

       According to CGS-CIMB Research, poultry companies are expected to face pricing competition from imported chicken while caps on selling prices may result in margin compression.

       “Overall, we view this negatively for Malaysia’s poultry industry as we foresee margin compression due to rising costs and lower sales volume of chicken from these near-term government measures,” it said in a report.

       In view of rising poultry prices, the government recently announced it is maintaining the ceiling selling price of chicken eggs and lowering the ceiling selling price for whole chickens to RM8.90 per kg from RM9.10 per kg previously.

       It is also allowing all AP holders to import whole chickens versus certain parts previously and opening up APs for hypermarkets to import chicken.

       The government also plans to provide subsidies for poultry producers to lower farm selling prices.

       The research firm noted that there were several factors which have led to the rise in poultry selling prices.

       One is higher feed cost prices where the prices of corn and soybean meal have risen by 30.9% and 16.6% year-on-year (y-o-y), respectively, in 2021.

       Industry players also incurred higher operating costs due to a shortage of foreign workers and saw lower production volume because of the impact of Covid-19, while the weakening of the ringgit versus the US dollar has affected them.

       CGS-CIMB said allowing imports of whole chickens from overseas beyond a short-term period of three months would have long-term consequences on the supply-demand dynamics of Malaysia’s poultry market as local producers may have to cease operations due to their lower competitiveness.

       However, it believes the government is likely to only allow temporary imports of whole chickens until selling prices of local chickens decline.

       Among the players in the sector, the research firm said, QL Resources Bhd and CCK Consolidated Holdings Bhd seem to be less affected by the measures.