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Malaysia Agribusiness Report Q3 2009
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Malaysia |
Published |
29 June 2009 |
Number of Pages |
63 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Malaysia imported 523,926 tonnes of cocoa beans in 2008
While the agricultural sector will not be as hard hit as other sectors, such as manufacturing, in the current downturn, falling demand for some of Malaysia's key agricultural exports like rubber and palm oil will see the value of the sector fall.
As Malaysia's economy contracts this year and jobs are lost in the cities, the agricultural sector will see an influx of new workers this year as laid-off employees return to their villages. The agriculture ministry has launched a programme offering low-interest loans to new entrants into the sector to begin small-scale production.
Despite the myriad distractions posed by the economic downturn and political difficulties currently being faced by the United Malays National Organisation (UMNO)-led coalition, support for the agricultural sector will remain strong under the new Prime Minister Najib Razak.
Government interest in improving productivity in the sector was boosted by the 'food crisis' of 2008 as the cost of Malaysia's key food imports of rice and corn soared. The crisis also moved the focus more onto food production and away from Malaysia's stronger sectors of rubber and palm oil.
While the food self-sufficiency worries of last year could easily be overshadowed by the current woes of the important export sector, the government's need to sure up its support should see interest in the sector continue. The UNMO's Barisan Nasional (National Front) coalition is seeing the toughest challenge yet to its monopoly on power and Prime Minister Najib knows that he needs to keep his base among ethnic Malays on side.
It seems likely that more funding will be given to agriculture this year following the allocation of an extra MYR5.6bn to improving food security in February by the previous prime minister Datuk Seri Abdullah Ahmad Badawi. The 10th Malaysia Plan, beginning in 2011, will also provide more funds to agriculture.
Though food security has been the main issue for the agriculture ministry of late, the Malaysian International Cocoa Fair held in May brought focus onto Malaysia's cocoa sector. Malaysian cocoa bean production has plummeted over the past couple of decades, falling from almost 250,000 tonnes at the start of the 1990s to under 30,000 tonnes last year. This has been driven mainly by producers, particularly large estates, switching to oil palms which are hardier and have offered better returns.
While primary production has been plummeting, Malaysia's cocoa grinders have been growing from strength to strength and in 2008 the country imported 523,926 tonnes of cocoa beans. The imbalance between Malaysia's valuable grinding industry and its increasingly insignificant domestic cocoa bean production is causing worries within the industry. Indonesia, Malaysia's chief supplier of cocoa beans, was last year hit by a devastating disease outbreak, increasing concern about security of the imports needed to fuel Malaysia's cocoa processing.
While the grindings sector will suffer in 2009 as the worldwide recession causes demand for chocolate to fall, we expect cocoa bean production to begin to see a turnaround. There is little chance of the large cocoa estates being re-established, but the government, through the Malaysian Cocoa Board (MCB), has been encouraging smallholders to move into cocoa growing. Subsidies are on offer for new or rejuvenated cocoa plantations and the MCB has been implementing programmes to improve productivity through training and the distribution of high-yielding plants.
While any recovery will undoubtedly be slow, and production is unlikely to see again the heights of 20 years ago, it looks like Malaysian cocoa production will be saved from dwindling down to nothing.
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