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,
13:51uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,
13:54uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,
13:55uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,
13:55uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,
13:55uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh
