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The National Security Council held an emergency meeting this week to discuss the war on Iran. They warn that Malaysia may have to brace for the economic fallout of a prolonged conflict in West Asia, where rising oil prices and supply disruptions could translate into higher food costs at home. So how exposed is Malaysia’s food system? Are we prepared for what’s coming? On this episode of #ConsiderThis Melisa Idris speaks with Dr Shaufique Fahmi Sidique, Professor of Agricultural Economics at UPM and former Director of the university’s Institute of Plantation Studies.
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00:09Hi, welcome back to Consider This, I'm Melissa Idris. Let's continue our discussion about the
00:15possible economic fallout of a prolonged conflict in West Asia, including higher prices or higher
00:22food prices for Malaysians. Just how vulnerable is our food supply chain to global shocks and
00:29what should the government and consumers be doing now to prepare. Joining me on the show to discuss
00:35this further is Dr Shalfik Fahmi Siddiq, who is a Professor of Agricultural Economics at UPM. He was
00:43formerly the Director of the University's Institute of Plantation Studies there. Dr Shalfik, good to
00:49have you back on the show. Thank you so much for joining me. What's your perspective of how
00:53significant this impact could be, the impact of the war on Iran, could be on Malaysian food prices? I
01:00mean, what are you watching for significantly? Specifically, excuse me. First of all, thank you,
01:05Melissa, for having me here. Okay, this war, you know, from an economic perspective, is very, very
01:13significant because it affects the Gulf countries and the Strait of Hormuz. We all know that large oil and
01:21petrochemical trade goes through the Strait and the Strait itself handles around a quarter of our global
01:33oil trade and, you know, a disruption or a blockade will have a huge impact, will choke the global supply
01:41of oil. And we all know that here, everything that we touch is made somewhat from petroleum. So it will
01:51have an
01:51impact, a huge impact on prices of goods and also services. And these Gulf countries, they don't only produce
02:02petroleum and diesel. And talking about diesel, transportation uses diesel. Fortunately for
02:10Malaysia, I think the transportation companies in Malaysia, they have a fleet car. So right now,
02:15they are a bit insulated. They get a certain amount of subsidy. They pay subsidized price.
02:23But farm machinery, for an example, they run on diesel. So diesel prices go up, then production costs,
02:32will go up. It will be translated into higher agriculture output prices. We would expect that
02:38to happen. Right now, I think in Malaysia, farmers can actually apply for some budi agro something that
02:48you get around 200 ringgit. But it's not going to be enough. At current diesel prices, it's not going to
02:53be
02:53enough. Okay. And apart from that, apart from that, these Gulf countries also host fertilizer plants.
03:01Okay, they produce a huge amount of urea. I think more than a quarter of global urea supply
03:08comes from the Gulf. Also phosphorus, because they have petroleum, they produce sulfuric acid that
03:16they use to melt. I don't know whether the term is right, phosphate rock to produce phosphorus.
03:24They don't, they get the supply from countries like Morocco and some of these countries like Saudi,
03:29they do have some reserves as well. So they produce fertilizer and you don't get to move the fertilizers
03:36due to the blockade. And you are already seeing a high in fertilizer prices. Urea prices are set to have
03:45increased to more than 40% or around 40%. That is significant. It will impact production costs. And
03:53you, you, you, you have a statement from, from fertilizer producers in Malaysia, they're already
03:57complaining about not getting enough supply and high prices. And global nutrient crop nutrient producers,
04:07Russia and China, I think they decide to be a little bit naughty right now. They're holding back
04:14export. I mean, that's what you would expect these countries would do for the choking supply and
04:20increasing price. Malaysia, we rely our, our, our nitrogen. I mean, we use a bit of education here. We use
04:30nitrogen,
04:30phosphorus and potassium for plants. And we can only produce urea, but the urea that we produce are not
04:38used in Malaysia. We export our urea. We import urea from, I think we import ammonium sulfate for nitrogen
04:46from China. And right now I think China is withholding export. So it's impacting the industry as a whole.
04:54And you would expect to see that being translated into higher agriculture, um, output prices. This is
05:03not something that is not unanticipated. Yeah. Sorry. Dr. Shafiq, just, just to ask you, are you anticipating
05:11higher costs or are you anticipating lower output or is it a mixture of both? It's going to be both.
05:19See,
05:19when fertilizer prices are high, uh, farmers will naturally apply less fertilizer to the crop. You
05:28see that happening all the time, unless they are being subsidized or being supplied. I think the petty
05:33farmers are, uh, uh, are subsidized, are supplied with, uh, subsidized, uh, fertilizer. But then again,
05:40that alone is not enough. Uh, with current prices, I do not think they will invest in buying more
05:48fertilizers and that will be translated into lower yield. But that, you know, reducing supply and
05:59increasing pressure on prices, you will see escalating prices. Uh, we anticipate that to happen.
06:07And it's unfortunately, I would say inevitable. Okay. Uh, you mentioned, um, so we're talking about
06:15kind of plantations and, uh, food, food, uh, fruits and vegetables. Would livestock and poultry also be
06:23affected by, I'm wondering whether they have a reliance on, on imported feed or the like?
06:29Oh, definitely. I mean, see, we, I know we are not self-sufficient in, in, in, in many areas,
06:37you know, it's okay at times at normal times, but you know, we right now today live in very strange
06:43times,
06:43you know, I thought COVID was, was weird. This one is going to be as, you know, no different, I
06:51guess.
06:53So going back to the point that we import our feed. Yeah. And for, for poultry, we import, uh, grain
07:01corn,
07:02uh, you see grain corn prices are already going up, although not as much as, uh, it went, you know,
07:09it went up, uh, even more during the, uh, Russia Ukraine war, because these are direct producers of,
07:15of, of grain corn. Now, um, grain corn uses a lot of nitrogen. Okay. So we are fortunate as of
07:28this year,
07:28early this year, we have a bumper harvest of grain corn. So it's not too bad, but producers anticipate,
07:35uh, problems in output due to high urea prices, nitrogen prices. So if, um, if this persists,
07:47you will see, um, persistent increase in grain corn prices, which is a major feed for, uh, poultry
07:55in Malaysia. And, and, and not only that, you know, there are other things, um, amino acids,
08:02for example, they come from, um, a chemical called methionine. This is synthetic amino acid produced
08:10from, uh, petroleum. So Gulf countries, uh, I can't remember where produces that and the supply
08:20is disrupted and the prices have gone up. So you expect higher feed prices again in, in,
08:27in poultry. Um, Dr. Shafiq, something you said a bit earlier that was, was quite alarming to me when
08:33you use the word inevitable. So this is a looming crisis in terms of food prices that's heading our
08:40way. What should, um, the government be thinking about to cushion or to mitigate the impact? And is
08:47there anything that we, as, um, the end consumer can do? Yes. I, although I say that I'm, I'm also
08:56a
08:56bit optimistic if, if this war stops and I think it should, rationale thinking says that it has to
09:02stop. Uh, but if, even if it stops, escalating prices will be translated into escalating, uh, current
09:10escalating input prices will definitely be translated into, uh, higher output prices, which I think will
09:16eventually taper, which is fine. This is just a temporary shock. Uh, this is a more optimistic
09:23view, but if it persists, then we are in trouble. Uh, even if it doesn't persist, what the government
09:29should do is the government should be thinking of how to dampen the effect of higher food prices on
09:40the lower income group. Now, this is the time where I think we do not have to be egalitarian anymore.
09:48Look at, look at, look at what we have, right? Right now, Budi Badani, uh, petrol, right? Uh, is given
09:54to
09:54everyone. Even somebody who drives a Mercedes will get 300 liters at 199. I think they're going to reduce
10:02that. What we should do is we should not give to the rich and give more to the poor. Uh,
10:08I'm very
10:09sure there are ways to, to identify and do that effectively. Um, another thing is that we get that
10:16100 ingit an hour IC. I don't think everybody needs that. So it's better to give more to the poor
10:24than to, um, to people who don't really need them. I mean, money, everybody can, I mean, I can use
10:30a bit
10:30more money at any point in time. I mean, I'm not going to say that I'm not grateful, but Hey,
10:36don't you think we should give more to the poor and less to the ones who do not need them?
10:42Um, but
10:43it's a very popular political economy, uh, you know, to, to reach to the largest crowd possible, but this
10:52is not the time to be political about this. So what the government should do, the government should
10:56rationalize subsidy, uh, give the whatever assistance that you can give to the needy.
11:05Okay. Well, while you're talking about, um, subsidies to the end, uh, user, I'm wondering how
11:11effective are subsidies as a measure of control, mitigating increase in food prices are subsidies on
11:20inputs like fertilizer, like a fuel that you mentioned, all the, uh, diesel, for instance,
11:25as you mentioned earlier, would that be effective in cushioning farmers and food producers alike?
11:31And then there's the pass on effect to the consumer. Is that, or is that physically unsustainable?
11:37Well, for the short run in the short run is necessary, but of course not sustainable at all.
11:43In the, in the longer run, what we're talking about right now is trying to mitigate the shock.
11:48Okay. To mitigate the shock is necessary. It has to be quick. And this is why, uh, at times like
11:54this,
11:55uh, resources, uh, when resources are scarce, it's very important for you to channel them to the right
12:00places. You know, this is not the time to give everybody everything. Blanket subsidy is definitely
12:06not the way to go right now. I think, okay, I get, I have an idea, you know, that, that,
12:10that thing that you
12:11get in your, in your IC, instead of making it one year or six months, make it, you know, two,
12:16three weeks
12:17so that the people in need will cash in immediately. People like you, Melissa might, might forget and not,
12:22not, not take the money.
12:25I, I will definitely remember. Um, Dr. Sharpie, can I ask you, the, uh, Minister of Agriculture had,
12:32uh, a few weeks ago proposed that we all, uh, contribute to the national efforts to fortify a food supply
12:40by, uh, growing our own vegetables in our, uh, in our households. Well, what do you make of that?
12:46Um, do you think that that could help, uh, in any way, I guess, um, bolster our, our food supply?
12:53Yeah. Community gardening, I think this is not new. Uh, we have, uh, proposed that a long time ago. We,
12:58we, we even want subsidized community gardens and so on and so forth. This kind of effort is good.
13:04I think we should do that. It's a, it's a good hobby as well. You know, you, you,
13:08if you have a bit of a plot of land is a good way to, to, to, to, you know,
13:13to perspire or exercise.
13:17And yeah. Okay. So, so definitely something that we should all be, um, thinking about or
13:22contributing to, to mitigate some of those, um, food inflation pressures. Uh, Dr. Shafiq, thank you
13:28so much for being on the show with me today. Dr. Shafiq Fahmi Siddiq, who's a professor of
13:32Agriculture Economics at UPM. Wrapping up this episode of Consider This, I'm Melissa Idris,
13:38signing off for the evening. Thank you so much for watching and good night.
13:41And, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,
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