PETALING JAYA: While there are benefits to cheaper eggs, experts and stakeholders say subsidising egg prices will not solve the supply issue.

Sunway University economics professor Dr Yeah Kim Leng said that while reduced egg prices would help mitigate the effects of inflation, channelling subsidy savings towards raising output would be better in the long run.

“Increasing local farm output and productivity is crucial to addressing the persistently high food prices, as well as rising food import costs.

“More concerted efforts by the government in collaboration with the private sector are needed to increase efficiency and productivity in the food sector in order to keep prices low and stable for all households,” he said.

However, Prof Yeah acknowledged that reduced egg prices would benefit the people by enhancing public acceptance of the diesel subsidy rationalisation plan, with savings from the exercise redirected towards addressing high food prices.

Tunku Abdul Rahman University of Management and Technology’s Centre for Business and Policy Research chairman Dr Foo Lee Peng said lower egg prices would benefit lower-income households the most.

“Lower egg prices will likely increase household consumption of eggs, making it easier for families to make it a staple food item that enhances overall nutrition and food security.

“Eggs are also a key component of the CPI (consumer price index) and the item’s reduced price can help control inflation, which is particularly beneficial in times of economic uncertainty,” she said.

Foo said the government should also consider allocating resources to reducing barriers to entry as well as improving its monitoring.

 The crux of the matter: Both Prof Yeah (left) and Ameer believe that channelling subsidy savings towards raising output would be better in the long run.

“Reducing barriers to entry, such as streamlining regulatory processes and providing access to finance for small-scale producers, will help foster a more competitive market that will, in turn, keep egg prices low without the need for subsidies.

“Effective monitoring of the egg market to detect price manipulation or anti-competitive behaviour, combined with anti-monopoly regulations, will also be key to preventing price hikes,” she added.

The comments came after the announcement by Prime Minister Datuk Seri Anwar Ibrahim yesterday that grades A, B and C eggs will now be 3sen cheaper, at 42sen, 40sen and 38sen respectively.

However, Bumiputera Retailers Association president Datuk Dr Ameer Ali Mydin described the latest announcement by the government, which started rationalising diesel pricing on June 10, as a “silly and flip-flop move”.

“The government cannot flip-flop by saying one day (it would) remove subsidies and then providing targeted subsidies by taking money saved from the diesel subsidy rationalisation to subsidise eggs,” he said.

Ameer, who is also Mydin Mohamed Holdings Bhd managing director, said the move would not help lower egg prices in the long run, with the situation being tied to market supply.

“Even with the earlier subsidy for eggs, there was still not enough eggs in the market as our current supply is only about 35% of the expected demand needed to keep egg prices low.

“While the supply of subsidised eggs in the market has increased by about 30% over the past few months, it is still not near the original level of supply before the subsidy was introduced.

“This means the problem is in the supply of eggs, not pricing,” he said, adding that the government was “barking up the wrong tree”.

Ameer suggested removing egg subsidies altogether to allow their prices to be determined by market forces.

To this, he cited the example of chicken prices at the end of last year, which were fixed by the government at RM9.40 per kg but later lifted after prices stabilised and went below the fixed prices.

Federation of Livestock Farmers’ Associations of Malaysia adviser Datuk Jeffrey Ng said the 3sen reduction in egg prices was agreed upon after discussions with the government.

He said the cost of production, especially where raw materials were concerned, had dropped, and this had allowed the price reduction.

“Most egg farmers were engaged, and what we are doing is for the good of the Malaysian public,” said Ng, adding that the federation had had consistent engagements with the government.

https://www.thestar.com.my/news/nation/2024/06/18/tackle-egg-prices-as-a-supply-issue-govt-urged