By Melissa Alexander
Malaysia is dependent on imports for most of its major food items except vegetable oils. The country also relies heavily on imported feedstuffs and feed ingredients.
The agricultural food sector, which consists of rice, livestock, fisheries, fruits and vegetables, primarily serves the domestic market. The production structure consists mainly of small and medium scale units, although consolidation to larger scale and commercial operations is taking place.
Malaysia continues to focus on its Third National Agricultural Policy (NAP3), which was adopted in the late 1990s and sets strategic direction for agricultural development to 2010. Specifically, the policy aims to enhance food security, increase productivity and competitiveness, deepen linkages with other sectors, create new sources of growth and conserve and utilize natural resources on a sustainable basis.
Structural changes in Malaysia’s economy in the past few years have created new issues and challenges in the agricultural sector. These include an acute labor shortage, limited availability of suitable land and increasing costs of production arising from intersectoral competition for resources. Although officials think increasing dependence on external food sourcing is not in the country’s long-term interest, economic factors limit Malaysia’s ability to expand domestic supplies to fully meet food requirements. Against this scenario, NAP3 is focusing on domestic production and strategic sourcing.
The development of high value-added resource-based products is still limited, and lack of domestic production coupled with inconsistent supplies has forced many small and medium scale value-added companies, including flour millers, to operate below capacity. To address these inefficiencies, the government is trying to strengthen inter- and intra-sectoral linkages with support and downstream industries.
WHEAT AND FLOUR MILLING
Malaysia currently has 11 wheat flour mills, and most flour milling companies are part of larger corporations involved in other agricultural areas such as feed milling, palm oil, transportation or packaging.
Recently, the devalued and fixed exchange rate has enhanced input cost stability for Malaysian mills, and millers are taking advantage to expand both their domestic flour output and exports to the region.
Although only 50% to 60% of the country’s milling capacity is currently used, new milling capacity is being brought on line at several port facilities, and two more mills are in the planning stages.
FFM, for instance, announced last year it was investing MYR 62 million (U.S.$16.3 million) to expand its state-of-the-art flour mill in Port Klang. The expansion, scheduled to come on line in mid-2004, was designed to allow FFM to cut labor and shipping costs for imported grains.
The new storage and flour mills at port facilities will enable the mills to handle Panamax vessels, opening new opportunities to import combination cargoes of feed grains and soybeans, as well as medium and high protein wheat. The locations also will make exports of processed goods more competitive.
Although rice is the main staple of the Malaysian con-sumer’s diet, wheat-based products are important, with per capita consumption at approximately 39 kg.
Domestic consumption of wheat was marginally down in 2001-02, as a drop in biscuit exports offset a slight increase in household consumption. Noodle exports were steady, with major markets including Australia and the ASEAN nations.
The Malaysia economy is poised to experience growth in 2003, and the government has abolished a 5% sales tax on six common types of noodles. Consequently, wheat consumption is forecast by the U.S. Department of Agriculture to expand by 5% to 6 % over for the next two years.
Wheat prices are controlled by the Malaysian government under the Supplies Regulation Act (1974), and the retail flour price has remained at MYR1.20 (U.S.$0.32) per kg since 1997.
Australia typically is the largest wheat supplier to Malaysia, although Australia wheat imports dropped by 26% in 2001-02, reflecting Australia’s drought-ravaged harvest. Almost all the losses in Australian wheat imports were substituted by imports of Indian and Chinese wheat. Malaysian millers also are turning increasingly to Ukraine and Kazakhstan for wheat.
COARSE GRAINS AND FEED
Malaysia’s total annual demand for mixed feed is estimated at more than 1 million tonnes, and the commercial feed industry produces about 600,000 tonnes of compound feed annually. The balance is produced by larger farms that manufacture their own mixed feed.
The commercial sector consists of about 70 feed mills throughout peninsular (East) Malaysia, with an additional six mills in the West Malaysian states of Sabah and Sarawak. Of the feed produced annually by these mills, poultry use accounts for more than two-thirds, with the rest mainly for swine.
The principal ingredients used in manufactured feed in Malaysia are maize, sorghum, rice bran, wheat bran, fish meal, meat meal, soybean meal, coconut oilcakes, groundnut oilcakes, palm kernel cakes, molasses and kathin meal. Product quality is monitored by the government under the Feeds Act, instituted in the early 1960s.
Rice is considered a security item, and the government has targeted 70% self-sufficiency in rice production. Although this target in recent years generally has been met, challenges are expected to arise as trade liberalization increases the impact of overseas competition.
The Agriculture Ministry is adopting a strategy to change farmers’ mind-set to make domestic production more competitive, but so far, it has met with limited success.
Driven by growth in domestic feed demand for soybean meal, Malaysian soybean imports jumped 20% to 721,000 tonnes in 2001-02. Soybean imports are expected to increase by 7% to 8% in 2002-03, with Argentina and the U.S. as major suppliers.