3 Increase in the Prices Of Eggs In Malaysia

In October 26, 2012, there was an issue on the increases on the price of eggs in Malaysia. Based on the article from The Star, the egg producers will gain from higher price of egg because the price of egg was set lower than the production cost. Price of eggs increase will benefit the producers however what is the impact to the biggest consumer of eggs such as the restaurateurs and bakers? What are the causes of the price egg to increase to 2 cents?

 Based on my analysis, those major consumers are not impacted on the price increase as they are willing to absorve the cost at the moment. However, it the situation  continue for  a few months, there is possiblity that they will pass on the cost to the end consumers. The question now what cause the price of egg to increase?



Drought of corn in the US

The cause of egg price to increase is due to the increase of price of corn which is imported from the United Staes. Based on Federation of Livestock Farmers' Associations of Malaysia advisor, Datuk Fong Kok Yong point of view, high prices of corn and soybean was due to the drought in the United States recenly.  

To illustrate the situation, the diagram below indicate the increase in price due to shortage of supply while the demand remain the same. The previous price of egg was 29.0 cents per egg (P1) and currently the price of egg is 31.0 per egg (P2). The price change from (P1) to (P2) with quantity demanded remain the same (Q1&2) and the supply curve will shift leftward. This occurs due to shortage of supply. 

Major Consumer

Even though there is an increase on the price, the quantity demanded remains the same for the time being as the major consumers are willing to absorb the cost due to minimal impact on the overall production costs. This situation will change if the producers are unable to sustain their production cost anymore.

In conclusion, there is no sudden impact on the increase of the price but if it prolong, there is possibility the end consumers will feel the heat in the price of the food. If that happens, there could be changes in quantity demanded and the egg producers may have to find other alternatives for imported supplies for the chicken.



References:

http://www.fas.org/sgp/crs/misc/RL34580.pdf
http://www.flfam.org.my/
http://www.malaysiandigest.com/news/36-local2/147572-egg-price-increase-eateries-and-bakers-willing-to-absorb-costs.html
http://biz.thestar.com.my/news/story.asp?file=/2012/10/26/business/12230104&sec=business
http://thestar.com.my/news/story.asp?file=/2012/10/25/nation/12216733&sec=nation
http://thestar.com.my/news/story.asp?file=/2012/10/25/nation/12216057&sec=nation