Malaysia Agribusiness Report Q1 2009 - new market and company analysis

Malaysia is an upper middle income country and the most developed large country in South East Asia. In 1991, then Prime Minister Dr Mahathir Mohamad proclaimed Vision 2020, which aims to transform Malaysia into a fully developed country by that year. Now just over halfway to that deadline, Malaysian agriculture reflects the transition with some modern and efficient sectors such
as poultry which are able to compete with the developed world while other sectors such as rice production see yields that are far closer to in neighbouring Indonesia than in industrialised countries. In BMI´s new Malaysia Agribusiness Report for Q1 2009 we examine what challenges and opportunity the industry faces as it moves towards the 2020 goal.

Agriculture remains a highly significant sector of the economy, contributing just over 10% to GDP in the second quarter of 2008 and employing 12% of the labour force. In Q208, the sector grew by 5.9%, slightly less than the GDP growth rate of 6.3% for the quarter, according to data from the Malaysian Department of Statistics. The main driver of this growth, however, was palm oil rather than any large expansion in food production.

As a net importer of key crops such as rice and corn, Malaysia was badly hit by the soaring prices of soft commodities on the world markets through the first half of 2008. The rising prices and fears about the ability of the government to secure enough rice to feed the country´s population led to much discussion about agriculture in the country and criticism of why Malaysia is able to produce only about 70% of its needs for its staple food. The government has announced new plans to increase rice production toward the eventual aim of self sufficiency. BMI forecasts growth in rice production of 17.5% to 2012 to reach 1.67mn tonnes. Despite the increase, Malaysia will still be a long way off producing enough rice to meet domestic demand.

The rising commodity prices caused problems for farmers as well as consumers, with the livestock industry being hard hit by high corn prices. In the first half of the year, poultry farmers complained that the rising cost of feed and government-imposed ceiling prices on chicken meant they were losing money on each bird they produced. Despite the squeeze on profits, we expect poultry production to have grown 3.7% in 2008 to 1.08mn tonnes.

Malaysia´s extremely underdeveloped dairy sector was given a boost in 2008 with the opening in April of First Dairy Farm, a high-tech operation in the East-Coast state of Pahang. The company said that it aims to be producing 19,000-22,000 litres of milk per day by the middle of 2009. This is very good news for the sector, which currently sees some of the lowest average milk yields per cow of any country in the region and produces less than 5% of the country´s dairy demand.

source:http://www.pr-inside.com