Brace for higher egg prices [WATCH]

KUALA LUMPUR: Malaysian consumers face rising egg prices over the next three to six months, with supply constraints, weather disruptions and farm shutdowns driving a sharp market turnaround after years of surplus.

Grade C egg prices, which dipped to around 20 sen in April and May, recovered to roughly 33 sen by the end of June and surpassed 40 sen in August, lifted by Perak farm closures and rising feed costs, Hong Leong Investment Bank Bhd (HLIB) analyst Jonathan Ooi said.

QL Resources Bhd, one of Malaysia's largest integrated poultry players, expects the uptrend to persist, though margins face pressure. Corn and soybean meal costs are already over 10 per cent higher year-to-date, with cheaper inventory providing only a roughly two-month buffer, Ooi said.

"Management expects egg prices to further increase over the next three to six months but remains cautious as the same feed inflation pressures QL's own cost base, with corn and soybean meal already more than 10 per cent higher year-to-date and cheaper inventory providing a two-month buffer on our estimation," he said.

El Nino conditions are adding modest headwinds, Ooi said, adding that heat stress is lowering layer hen productivity, particularly at open-air farms, with QL describing its impact as neutral to slightly negative.

Strategically, the group aims to grow branded eggs to 25 per cent of egg revenue within five years, from about 18 per cent currently.

Ooi said the retail premium is significant. Branded trays at Jaya Grocer fetch roughly 80 sen per egg versus 40 sen for standard unbranded equivalents, though QL's actual producer-level margin is narrower after accounting for retailer markups, packaging, and enhanced feed for omega-3 varieties.

"Management indicated that its Malaysia operations will focus on efficiency and mix, while Indonesia and Vietnam carry the capacity-growth runway, and Vietnam's losses are expected to narrow as egg prices recover," Ooi said.

Notably, El Niño works in QL's favour elsewhere. Its Marine Products Manufacturing (MPM) division saw revenue rise 18.2 per cent year-on-year and pre-tax profit surge 51.5 per cent, driven by a tighter global fishmeal supply linked to Peru's reduced anchovy catch.

Ooi expects the next two quarters to mark the peak of the current cycle, supported by seasonally stronger fish landings. The key indicator will be Peru's second fishing season in November, which should determine whether the supply squeeze extends into FY28 or begins to ease.

Public Investment Bhd (PublicInvest) onfirms similar recovery signals at Teo Seng Capital.

The firm said recent discussions with the management indicated that egg prices are beginning to recover as excess supply gradually moves back towards equilibrium following the full removal of the government egg subsidy.

"We met with management recently and gathered that there are early signs of egg price recovery, as the oversupply situation gradually returns to equilibrium post subsidy removal," it said.

"Supply tightening is driven by the exit of layer farms that were not able to convert from open-air to closed-house systems. Hot temperatures and air pollution from the haze have adversely impacted egg size and volume," the firm said in a note recently. "The research house said in a note recently.

PublicInvest said birds exposed to higher pollution levels could experience poorer respiratory health, weaker immunity and lower egg production, further tightening supply.

"We expect egg supply in the coming quarter to be lower, with a higher proportion of smaller-sized eggs, providing some near-term price support, though the magnitude and duration remain uncertain," the firm said.

The developments are significant for an industry that has swung sharply between oversupply and shortage.

PublicInvest said Malaysia's egg market has historically experienced sharp cycles. During the Covid-19 pandemic in 2020, an oversupply drove farm-gate prices down by 38 per cent. The market swung into shortage in 2022 before returning to oversupply by 2026.

The imbalance became particularly pronounced after the subsidy was removed in August 2025.

National egg production reached about 16.7 billion eggs, compared with annual consumption of only around 11.6 billion, leaving producers with a substantial supply surplus.

The removal of the subsidy exposed the underlying weakness in the market, with producers unable to sustain previous production levels amid depressed prices and rising operating costs.

The resulting oversupply pushed producers into a prolonged period of weak prices and depressed margins.

Teo Seng's 2QFY26 results reflected the pressure, with revenue remaining broadly flat year-on-year at RM171.4 million as lower sales volume was offset by stable average selling prices.

Core profit after tax and minority interest, however, plunged 83.5 per cent to RM6.9 million after the full removal of the egg subsidy, while its core net profit margin fell 20.6 percentage points to 4 per cent.

PublicInvest now sees the industry moving into a gradual recovery phase, supported by farm exits, lower production and relatively inelastic egg demand.

"We believe the early signs of egg price recovery are encouraging, supported by supply tightening from farm exits and adverse weather conditions, while inelastic egg demand provides a degree of earnings floor," the firm said.