Malaysia’s Price Controls Hindered Rice Production, Aggravating Shortages
Published on: November 8, 2023.
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In September, Malaysia faced a shortage of white rice, leading to a challenging situation for rice mill operators and wholesalers like Allen Lim. Lim’s company, PLS Marketing, received calls from supermarkets requesting additional supplies, but they were unable to fulfill the demand due to the government’s price control measures that have impacted profit margins and hindered expansion.
Since 2008, the retail price cap for locally made white rice has been 2.60 ringgit per kilogramme. However, this policy conflict between supporting consumers with affordable rice and ensuring profitability for farmers and manufacturers has reached a breaking point this year. The shortage of rice in Malaysia was exacerbated by India’s restrictions on rice exports in July, causing global prices to soar.
As the price of imported rice surged, the demand for affordable domestic rice increased significantly. However, industry players are unable to increase production without higher prices to cover rising costs of fertilizers, pesticides, equipment, logistics, and labor. Many millers have already closed down because banks are reluctant to support unprofitable businesses.
The government acknowledges the issue and is concerned that lower domestic output will lead to higher reliance on costly imports. While Deputy Minister of Agriculture and Food Security Chan Foong Hin recognizes the need to review the ceiling price for rice to encourage higher output and quality, there are no immediate plans to raise the price cap, as the government aims to protect consumers amidst rising inflation. Food prices have risen by an average of 5.5% this year, outpacing overall inflation, which has been largely controlled through subsidies and price control measures.
Malaysia has implemented other measures to address the domestic rice shortage, such as increasing subsidies for paddy farmers and improving oversight of the rice supply chain. In October, the government raised the minimum price of paddy from 1,200 ringgit per metric ton to 1,300 ringgit per ton to provide stronger support for farmers. However, these efforts are still insufficient.
Approximately 70% of paddy farmers in Kedah, Malaysia’s primary rice-producing state, are in debt, and the new measures are barely helping them stay afloat. The government’s price controls have created distortions in the market, squeezing the middle segment. It is clear that a balance needs to be struck to ensure profitability for farmers and affordability for consumers.
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Malaysia’s White Rice Shortage Puts Industry Under Pressure
KUALA LUMPUR –
In September, Malaysia faced a shortage of white rice, leading to a challenging situation for rice mill operators and wholesalers like Allen Lim. Lim’s company, PLS Marketing, received calls from supermarkets requesting additional supplies, but they were unable to fulfill the demand due to the government’s price control measures that have impacted profit margins and hindered expansion.
Since 2008, the retail price cap for locally made white rice has been 2.60 ringgit per kilogramme. However, this policy conflict between supporting consumers with affordable rice and ensuring profitability for farmers and manufacturers has reached a breaking point this year. The shortage of rice in Malaysia was exacerbated by India’s restrictions on rice exports in July, causing global prices to soar.
As the price of imported rice surged, the demand for affordable domestic rice increased significantly. However, industry players are unable to increase production without higher prices to cover rising costs of fertilizers, pesticides, equipment, logistics, and labor. Many millers have already closed down because banks are reluctant to support unprofitable businesses.
The government acknowledges the issue and is concerned that lower domestic output will lead to higher reliance on costly imports. While Deputy Minister of Agriculture and Food Security Chan Foong Hin recognizes the need to review the ceiling price for rice to encourage higher output and quality, there are no immediate plans to raise the price cap, as the government aims to protect consumers amidst rising inflation. Food prices have risen by an average of 5.5% this year, outpacing overall inflation, which has been largely controlled through subsidies and price control measures.
Malaysia has implemented other measures to address the domestic rice shortage, such as increasing subsidies for paddy farmers and improving oversight of the rice supply chain. In October, the government raised the minimum price of paddy from 1,200 ringgit per metric ton to 1,300 ringgit per ton to provide stronger support for farmers. However, these efforts are still insufficient.
About 70% of paddy farmers in Kedah, Malaysia’s primary rice-producing state, are in debt, and the new measures are barely helping them stay afloat. The government’s price controls have created distortions in the market, squeezing the middle segment. It is clear that a balance needs to be struck to ensure profitability for farmers and affordability for consumers.
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