Food security a major risk in 2027 as Malaysia rank low in availability – MBSB Research

KUALA LUMPUR: Delayed transmission of the impact of the United States – Iran conflict on agricultural production cycle is the greater risk that Malaysia's food supply will be facing in 2027, said MBSB Research in a report.

This is because farmers make planting and production decisions several months in advance, so the full effect may only become visible in lower yields, tighter supply and higher food prices next year, even if the geopolitical conflict subsequently moderates, the research firm noted.

"Farmers facing higher costs or uncertain supply may reduce fertiliser application, delay planting or switch to less input-intensive crops. These adjustments may preserve cash flow in the near term but could weaken yields during subsequent harvests.

"The resulting food security risk is therefore not necessarily an immediate shortage, but a gradual deterioration in agricultural productivity and a tightening of supply in the following planting season," the research firm said.

Higher diesel prices increase the cost of mechanised farming, irrigation, fishing, food processing and road transportation, while elevated electricity costs affect cold storage, warehousing and manufacturing.

Meanwhile, higher crude oil and petrochemical prices can also raise the cost of plastic packaging, bottles, films and other materials needed to bring food products to market, noted MBSB Research.

Malaysia may also face an additional increase in landed costs for imported food through higher freight, shipping insurance and longer delivery routes, the firm stated.

"Food availability could be affected even where the underlying agricultural commodity remains sufficiently supplied, because packaging, storage or transportation becomes more expensive or less reliable," said MBSB Research.

These geopolitical pressures may be compounded by severe weather patterns, such as El Niño, which could simultaneously weaken biological output while input expenses remain high.

Malaysia's food security can still be threatened even with having a varied range of suppliers for several imported essential commodities, if key exporting countries simultaneously encounter severe climate impacts, elevated fertiliser prices, or domestic political demands to restrict food exports.

The risk to Malaysia is therefore likely to evolve from higher production costs, to lower future output, and ultimately to greater competition for internationally traded food, making 2027 potentially more challenging than the immediate period of the conflict, said MBSB Research.

Malaysia ranks 10th globally in the Resilient Food Systems Index (RFSI) with a score of 72.98, performing exceptionally well in "affordability" (84.82) but faltering in "availability" (62.04), underscoring a pressing need to strengthen long-term supply resilience.

Malaysia's food security is characterized by a dual-track agricultural economy, highlighted by the inverse relationship between its Self-Sufficiency Ratio (SSR) and Import Dependency Ratio (IDR).

The country maintains robust SSRs in poultry, producing a surplus of eggs (107 per cent) and maintaining high self-sufficiency in chicken (93 per cent).

However, this domestic strength masks severe upstream vulnerabilities; the industry is 99.8 per cent import-dependent for maize and effectively 100 per cent dependent on imported soybean meal.

MBSB Research warns that high final-output self-sufficiency rests entirely on imported inputs.

Rice remains a weak link, with an SSR of just 52.9 per cent in 2024, leaving Malaysia reliant on 1.5 million to 1.6 million tonnes of annual imports, primarily from Vietnam, Pakistan, India, and Thailand.

Meanwhile, critical kitchen essentials like onions, garlic, and shallots exhibit an IDR nearing 100 per cent. Beef and mutton are similarly exposed, displaying import dependencies of 83.5 per cent and 92.1 per cent, respectively.

In navigating these macroeconomic risks, MBSB Research advises prioritising food production companies equipped with domestic capacity, integrated operations, and diversified procurement networks.

The research firm noted that companies such as SD Guthrie Bhd, Genting Plantation Bhd and Ta Ann Holdings Bhd are viewed favorably, as Malaysia produces over 19 million tonnes of palm oil annually against just 3.3 million tonnes of domestic consumption.

Meanwhile, integrated poultry operators like Leong Hup International Bhd and QL Resources Bhd are better equipped to absorb feed-cost inflation through procurement scale, forward-purchasing, and control over the production chain.

Value retailers like 99 Speed Mart Retail Holdings Bhd are highly insulated from direct import disruptions due to its heavy reliance on local suppliers, stated MBSB Research.

Companies like Fraser & Neave Holdings Bhd and Nestlé Malaysia Bhd utilize scale, multiple suppliers, and domestic farm investments to smooth out external shocks. However, they remain exposed to imported ingredients like wheat, cocoa, and sugar, the firm noted.