Chickens come home to roost for Putrajaya

Food subsidies are usually not a good idea. Why? They tend to distort the working of free market mechanisms that restore the equilibrium between supply with demand.

Higher chicken prices signal farmers to expand their capacity. But when prices are kept artificially low because of example subsidies, chicken farmers do not see the need to increase capacity.

During the MCO, demand for chicken fell. So some farmers closed down capacity at their breeding farms.

But when demand for chicken picked up again (like after the lifting of the MCO) some farmers were caught short.

Supply shortages were the result because it takes time for chicken farmers to ramp up capacity again. Some unscrupulous chicken traders raised prices at wet markets. There was a rising chorus of complaints from Malaysian housewives unable to find any chicken.

Putrajaya's reaction to the angry clucking noises from its citizens unable to put chicken on the menu for dinner was to ban chicken exports. Not a smart idea in hindsight.

Now it seems our chicken farmers might lose the lucrative Red Dot Island live and frozen chicken market. Apparently having had a sour taste in their mouths because of the ban on exports from Malaysia, chicken suppliers in Red Dot Island are now sourcing their chickens elsewhere.

For 🤠's take on Putrajaya's subsidies on cooking oil and RON95 petrol see here.

Picture by Unsplash