PETALING JAYA: There will be short-term volatility in chicken and egg prices following the lifting of the ceiling prices for the two items, say economists.
Tunku Abdul Rahman University of Management & Technology Associate Prof Dr Foo Lee Peng predicted that prices of chicken and eggs to rise slightly when subsidies were discontinued later.
“Subsidies are typically implemented to keep prices lower for consumers.
“When it is removed, prices tend to increase,” she said.
Foo urged the government to carefully choose a timing to lift the subsidies so that disruptions would be minimised.
“This will help ensure consumers, especially those in vulnerable situations, have time to adjust to the new price levels.
“An ideal time could be during relative price stability and when other economic conditions are favourable,” she said.
However, she noted that there was no one-size-fits-all solution, and the timing of implementation would depend on the country’s specific circumstances.
Malaysia University of Science and Technology (MUST) economics professor Dr Geoffrey Williams said the removal of price controls on chicken and eggs might cause short-term volatility in prices, but this should ease quickly, and eventually, prices should fall to the best market price.
“The price controls on chicken and eggs, although they worked to keep prices to consumers lower, it also cut suppliers’ income and profit margins.
“Supply has gradually improved, and the market prices have stabilised and become more affordable.
“So now the price controls can be removed.
“There may be some fluctuations in prices, but hopefully these will be temporary, and prices will stabilise quickly,” he said when contacted yesterday.
He noted that enforcement would not be an issue when the price controls were lifted as “there will be nothing to enforce”.
“It will be for suppliers, retailers and consumers to regulate price hikes.
“In particular, retailers will source the best-price suppliers, and consumers will buy from the best-price retailers,” he said.
Williams noted that there would be little incentive for hoarding when subsidies were unavailable.
“If the market is competitive at wholesale, retail and consumer levels, then the market mechanism will defeat hoarding.
“The issue is to remove anti-competitive behaviour among sellers,” he said.
He said the best time to lift the price control mechanism was now because inflation had moderated much and would normalise further.
Federation of Livestock Farmers’ Associations of Malaysia (FLFAM) president Tan Chee Hee said the move to lift the ceiling prices was apt in light of the stable supply of the two food items.
He said the initial easing period might see some price fluctuations, but expected market forces to quickly stabilise prices owing to sufficient chickens and eggs for consumption.
“There may be slight price fluctuations in the beginning, but consumers need to understand that prices of raw materials have gone up.
“When supply is enough to meet demand, prices will likely remain stable without much fluctuations,” he said.
The federation has been pushing for the floating prices of eggs and chicken due to financial constraints following the sharp price increase in chicken feed and other operating costs during and after the pandemic.
Tan said allowing the market float would let farmers protect their production and prepare sufficient cash flow for their daily operations.
“The price control mechanism was introduced due to inflation and bouts of global economic challenges in the past few years.
“Following years of the soft-landing measures, the time has come for the pricing to return to the normal practice.
“A ceiling price helps when there’s a food supply problem.
“But things are normal now, and it’s better to let the market decide the demand, supply and prices.”
Tan said the federation now would focus on ensuring sufficient supplies of the items in the market.
He called on consumers to be patient and to expect initial teething problems to arise when the price floating mechanism was lifted.
“Despite all challenges, it is a blessing that we can still enjoy fresh chicken and eggs at reasonable prices, which is ranked one of the top in the world,” he said.
