Chicken prices are no longer capped. So WHY are they CHEAPER?

Starting 1 Nov 2023, the Malaysian government announced that they would be lifting subsidies on chicken prices. The reasoning for withdrawing bulk chicken subsidies is to reduce subsidy leakage, which foreigners and high-income people enjoy.

Subsidies are intended to improve societal well-being. It is part of the government’s non-plan expenditure to ensure that the prices of everyday things don’t make life difficult for the rakyat.

So, when it was announced that the subsidies on chicken would be lifted…

…EVERYONE expected the prices of chicken to rise.

Explaining how the removal of the subsidy will affect chicken prices, Sarawak Food Industry, Commodity and Regional Development Minister, Datuk Seri Stephen Rundi Utom said this:

“As the government no longer provides subsidies to chicken producers to prevent losses, the price will rise in accordance with the cost of production, and it will be set by supply and demand. If the price becomes too high, we can begin importing to stabilize it.”

Pretty straightforward la. If before this, the gomen has been subsidizing chicken prices by paying chicken sellers RM3.8 BILLION to keep the prices of chicken BELOW RM9.40 per kg, once they stop subsidizing the price… means chicken sellers can charge whatever they want, including by increasing the price la right?

In an interview with the New Straits Times, the Education Officer for the Consumers’ Association of Penang, N.V. Subbarow, put it like this:

“All the sellers are waiting for the ceiling price to be removed to set a new high price… They would just set the price as they like, and customers would be the ones that suffer from the high price“

However, what happened INSTEAD surprised everyone because…

Chicken prices actually DROPPED after subsidies were lifted

After 1st November rolled around and the subsidies for chicken prices ended, sellers in a few states actually LOWERED prices from the previously set ceiling price of RM9.40/kg, breaking the expectations many people had. According to Berita Harian‘s investigation in Kuala Terengganu, chicken prices fell 15 PERCENT from the previous ceiling price of RM9.40 to between RM7.20-RM7.99 per kilo!

In Kangar, Perlis, they also found that chicken prices had fallen from the previous high of RM9.40-RM10.40 per kilo DOWN to RM8.50-RM10 per kilo.

Not just that, according to Acting Domestic Trade and Cost of Living Minister, Armizan Mohd Ali, the lowest recorded price that chicken had fallen to was RM6.49 per kilo in Johor.

In fact, out of 1,484 premises inspected in Peninsular Malaysia including retail shops, supermarkets, and mini-markets, chicken prices had fallen at MOST of them, with ONLY 68 premises (4.8 percent) increasing their prices for chicken.

But WHY did prices drop?

To answer this question, you need to understand when the government removed the subsidies, they were actually shifting chickens from a fixed price to something known as a floating price.

What that means is, that instead of the gomen deciding how much chicken prices should be before subsidies were removed, it’s now left instead to sellers to decide how much they should sell their chickens for. This means now, sellers not only have to think about selling chicken at the highest price they can – but they also have to make sure their prices are cheaper than their competitor because otherwise, no one will want to buy from them.

Explaining how competition between sellers can result in lower prices, Federation of Livestock Farmers’ Association of Malaysia adviser Jeffrey Ng said this to MalaysiaKini:

“All the supermarkets compete on price: RM7 per kg at Mydin and RM7.50 per kg at Lotus’s. As consumers, that’s what we want so we can get the best offer instead of just one price, which is the ceiling price. There are fewer offers since everyone knows there is only one price.

The floating price gives better and bigger business opportunities and creates better offers to consumers.”

In any case, whether chicken prices STAY low still remains to be seen. But in the meantime, let us know what you think! Will chicken prices remain cheaper even after the gomen removed the subsidy, or will they eventually go back up?