Country Focus: Malaysia
September 01, 1994
by Intern Intern1
Malaysian agriculture generally comprises two sectors: small family operations producing rice, fruits and vegetables and large-scale and commercial operations producing palm oil, rubber and cocoa.
AGRICULTURAL POLICY. National agricultural policy centers on enhancing the sector's contributions to overall economic development and reducing rural poverty. In the past 20 years, these programs have been successful, as only 15% of rural households were living below the poverty line in 1990, compared with nearly 45% in 1973.
At the same time, the country has expanded its manufacturing sector; the resulting rapid urbanization has reduced the availability of agricultural labor. The government currently is trying to address this issue by encouraging farm size expansion and greater mechanization.
Most agricultural commodities are traded on the free market, although rice and some wheat flour are subject to restrictions. Domestic and imported rice trade is controlled by LPN, which also sets price supports. Bulk wheat may be traded freely on the domestic and import markets, but the government sets prices for general purpose wheat flour.
FLOUR MILLING. The Malaysian flour milling industry is nearing the end of a three-year period of expansion that, by the end of 1995, will result in an increase in daily milling capacity to 4,500 tonnes, compared with 3,440 at the beginning of 1993. This capacity is estimated be sufficient to meet milling needs until 1997 or 1998, assuming wheat-based food demand continues to grow at around 5% to 10% a year.
Currently, six major milling companies operate in Malaysia. Estimates of each company's market share, based on rated milling capacities as of early 1994, indicated the largest company was Federal Flour Mill, with a 31% share. It was followed by Malayan Flour Mill, at 28%; Kuantan Flour Mill, at 13%; Sabah Flour and Feed Mill, at 11%; United Malayan Flour Mill, at 10%; and Seberang Flour Mill, at 7%.
Together, these companies currently operate eight plants, including the newest plant that began test runs in January 1994. Expansion of an existing mill is expected to be completed by the end of the year. Yet another new mill with a daily capacity of 250 tonnes should begin operations in early 1995.
Prices for general purpose flour are set by the government, although this type of flour accounts for only 10% to 15% of the total flour market. The price structure is relatively stable; in February 1994, prices for a 25-kg bag were U.S.$6.68 ex mill, U.S.$6.83 wholesale and U.S.$7.25 retail, and they had not been changed since 1991.
Competition in remaining markets is intense, with considerable overlap in marketing territories.
Noodles historically have accounted for the majority of domestic flour consumption, and the introduction of instant noodles has reinforced the trend. In general, about 40% to 50% of flour is consumed as noodles.
The most popular noodle type is Hokkien, an uncooked, thick noodle, which accounts for about 60% to 70% of the noodle market. Instant noodles account for 20% to 30%, although this market is growing.
Despite the traditional popularity of noodles, consumption of bread products is increasing, influenced by the growing number of fast-food restaurants and pastry shops. Bread products now account for 20% to 25% of the flour market, and their market share should continue to expand.
Biscuits and cookies also are an increasingly popular flour end use, with about 15% of the total flour market.
FEED MILLING. Malaysian feed milling has expanded along with the growth in the pig and poultry industries. About 55% to 60% of compound feed production is for poultry, with the remainder for pigs.
Maize is the predominant feed grain for poultry. Millers will substitute wheat, but only if the wheat price is at or below the maize price.
This is because of consumer preference for a yellow pigmentation in broilers and eggs. The use of wheat requires the addition of corn gluten meal or other ingredient to raise the pigmentation level.
Although the feed industry has experienced impressive growth, the rate of future growth may by slower. Malaysia intends to open gradually its market to meat and poultry imports, which would tend to temper expansion in the domestic industry.
In addition, indications are land development pressures and environmental concerns could slow the future growth in the livestock and feed industry.
TRADE POLICIES. Malaysia generally is open to trade and imports a wide variety of bulk agricultural products duty-free. The country is supportive of the new General Agreement on Tariffs and Trade accord, and non-tariff trade restrictions on some products, such as poultry and wheat flour, are likely to be eased over time.
The lack of a deepwater port adequate to accommodate Panamax-size vessels of up to 80,000 tonnes historically has been a major constraint to bulk grain imports. This problem will be eliminated by the end of 1995, on completion of new deepwater port facilities under construction at Port Klang. At least five feed, flour milling and soybean crushing companies are in some stage of planning or construction of storage and processing facilities near the port.