Malaysia Agribusiness Report Q2 2009

In BMI's Malaysia Agribusiness Report for Q2 2009 we introduce the new Business Environment section. This section gives an overview of agriculture in Malaysia and its significance to the overall economy and labour market. We discuss the industry's key sectors including non-food agricultural products such as rubber, for which Malaysia is the world's third biggest producer. We also cover government support given to agriculture in the country.

Last year's high world commodity prices were a mixed blessing for Malaysia's agricultural sector. While export earnings for palm oil and rubber, two of Malaysia's most significant agricultural products, soared, the cost of imports of key food staples also shot up. High input costs also hurt the livestock sector with farmers largely reliant on imported feed corn.

With commodity prices having dropped rapidly in the final quarter of 2008, the situation is now reversed.

The world price for palm oil has fallen from more than US$1,200 per tonne a year ago to little over US$500 a tonne at the beginning of March 2009. Rubber prices have shown a similar trend, falling from around US$0.270/kg in March 2008 to US$0.135/kg a year later. This will see agricultural export earnings fall sharply. Production of both rubber and palm oil is also likely to fall as the government implements policies to attempt to shore up prices and producers bring forward work on replanting and rejuvenating their estates.

Conversely, the cost of imports of food staples such as rice, corn and dairy products, for which Malaysia is not self-sufficient, will also fall as prices of these goods on the world market has dropped. The government is also forecasting a 40% reduction in the volume of rice imports after 2008's total of around 1mn tonnes. Imports of rice were increased last year during and following the 'rice crisis' of early 2008 owing to public fears of shortages as world prices rose rapidly and supply was constrained by export restrictions in key exporting nations such as India and Vietnam.

Despite the fall in prices of food, the government has remained vocal in its desire to improve Malaysia's food security. In February 2009, Prime Minister Datuk Seri Abdullah Ahmad Badawi announced that the government would allocate an extra MYR5.6bn to improving food security with the aim of raising selfsufficiency in rice to over 85% in 2010. This follows a budget of MYR3bn granted to food security projects in the mid-term review of the Ninth Malaysia Plan in June 2008.

If this interest in improving agricultural production can be sustained through the myriad of other problems the government is likely to face during the economic slowdown expected in the coming couple of years, then strong growth could be seen in production of food crops and dairy products. This, however, is not the first time that the government has stated its desire to improve the country's food security and we will wait to see the early outcome of the new policies before significantly raising our production forecasts.

• Executive Summary
• SWOT Analysis
• Malaysia Agricultural SWOT
• Industry Business Environment Overview
• Market Overview
• Key Outputs
• Support
• Economic Outlook
  • Table: Malaysia - Economic Activity
• Sub-sector Supply & Demand Analysis
• Malaysia Livestock Outlook
  • Table: Malaysia Poultry Production, Consumption & Trade
  • Table: Malaysia Pork Production, Consumption & Trade
  • Table: Malaysia Beef & Veal Production, Consumption & Trade
  • Table: Malaysia Poultry Production, Consumption & Trade
  • Table: Malaysia Pork Production, Consumption & Trade
  • Table: Malaysia Beef & Veal Production, Consumption & Trade
• Risks To Outlook
• Malaysia Dairy Outlook
  • Table: Malaysia Milk Production & Consumption
  • Table: Malaysia Butter Production, Consumption & Trade
  • Table: Malaysia Cheese Production, Consumption & Trade
  • Table: Malaysia Whole Milk Powder Production, Consumption & Trade
  • Table: Malaysia Milk Production & Consumption
  • Table: Malaysia Butter Production, Consumption & Trade
  • Table: Malaysia Cheese Production, Consumption & Trade
  • Table: Malaysia Whole Milk Powder Production, Consumption & Trade
• Risks To Outlook
• Malaysia Grain Outlook
  • Table: Malaysia Corn Production, Consumption & Trade
  • Table: Malaysia Corn Production, Consumption & Trade
• Risks To Outlook
• Malaysia Sugar Outlook
  • Table: Malaysia Sugar Production, Consumption & Trade
  • Table: Malaysia Sugar Production, Consumption & Trade
• Risks To Outlook
• Malaysia Cocoa Outlook
  • Table: Malaysia Cocoa Production & Consumption
  • Table: Malaysia Cocoa Production & Consumption
• Risks To Outlook
• Malaysia Rice Outlook
  • Table: Malaysia Rice Production, Consumption & Trade
  • Table: Malaysia Rice Production, Consumption & Trade
• Risks To Outlook
• Commodity Price Forecasts
• Rice
• Sugar
• Corn
• Milk
• Cocoa
• Competitive Landscape
  • Table: Agricultural Commodity Producers & Traders
  • Table: Agribusiness Suppliers
  • Table: Integrated Agricultural Producers
• BMI Forecast Modelling
• How We Generate Our Industry Forecasts