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Chicken Prices To Increase: 4 Types Of Businesses Affected By The Export Curbs

·3-min read

On 23 May 2022, Malaysia announced that they would be imposing curbs on exports of chicken from 1 June 2022. This immediately set off a scramble for fresh chicken in Singapore which relies heavily on Malaysia for imports. Due to the export curbs, prices are expected to increase, especially for fresh chicken.

Singapore imports about 34 per cent of our chicken from Malaysia. Most of these chickens are imported as live chickens and slaughtered and chilled locally. This has a massive impact for many businesses (like Tian Tian Chicken Rice) that rely on fresh chicken.

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#1 Chicken Rice Sellers And Other F&B Businesses That Specialise In Fresh Chicken Dishes

The most obvious businesses affected are chicken rice sellers as well as other food businesses that specialise in using fresh chicken. Many of these F&B businesses pride themselves for the quality of chicken which is achieved by using only fresh or chilled chicken instead of frozen chicken.

Michelin Bib Gourmand awardee, Tian Tian Hainanese Chicken Rice, has indicated that they may stop selling their signature chicken rice if they are unable to source an alternative source of fresh chicken.

Already hit by rising prices in various food categories (such as cooking oil), the expected price increase in chicken is likely to make it difficult for these food sellers to maintain their prices in face of rising inflation and cost of labour.

#2 Chicken Importers

Chicken importers will also be affected. As the supplier, many of these businesses have obligations to their customers that may be bound contractually. This may result in financial penalties if they are unable to fulfill these contractual obligations.

With only 9 days from the announcement to the export curbs, these importers would have to scramble to find alternative sources. Aside from Malaysia, the top source of chicken in Singapore is from Brazil. About 48% of Singapore’s chicken supply originate from Brazil. However, even if importers switch to importing fresh chicken from Brazil or other countries, these supplies will take time to establish and arrive in Singapore.

#3 Chicken Exporters And Farmers

On the flip side, chicken exporters across the Causeway are also affected. With much of their businesses (and profit) derived from supplying Singapore importers and their related businesses, chicken farms no longer have access to their customers with the export curbs.

While supplying the domestic market is of strategic importance from the national point of view, it may not be a profitable business. Malaysia had set a price ceiling for standard chicken at RM8.90 per kg which would remain in effect until 5 Jun. After accounting for production costs (including rising cost of chicken feed), the price ceiling may even mean losses for chicken farmers.

#4 Large Food Chains Specialising In Chicken

While smaller F&B businesses may end up halting their operations due to the lack of alternative supply, larger food chains tend to have more diversified supply chains that can absorb the impact of the sudden export ban.

According to Straits Times, KFC will continue to serve chicken and that only a portion of its chicken is from Malaysia.

In general, the larger food chains such as McDonalds And KFC have not indicated any disruption to their business due to the export ban.

Small Businesses Are More Severely Impacted By The Export Curbs

For Tian Tian Chicken Rice, chicken rice is their signature dish and also their key revenue source. While specialisation has made their chicken rice famous, it has also made the business vulnerable to the sudden export curbs. Similarly, other F&B businesses that rely on a signature chicken dish that uses fresh Malaysian chicken are affected.

However, larger businesses are better able to absorb the impact as they tend to have higher margins and a more diversified supply chain. Likewise, F&B businesses that are able to use frozen chicken as their key ingredient are also largely unaffected by the export curbs.

The post Chicken Prices To Increase: 4 Types Of Businesses Affected By The Export Curbs appeared first on DollarsAndSense Business.

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