Report Highlights:

Only modest growth in corn, wheat, and rice imports is forecast through 2014/15. The slow pace of imports reflects expectations for minimal growth in demand. Pork production is not increasing, and the poultry sector is growing slowly, limiting growth in corn import demand. The expected pace of increases in wheat imports is a function of population growth. Land constraints limit increases in rice production.

Executive Summary:

Domestic demand for flour is growing marginally, and wheat imports are forecast to grow modestly to 1.5 million tons in 2014/15. Local millers use U.S. wheat to blend with wheat imports from other origins to improve the functional characteristics of the flour. Very little growth is expected in corn imports as the pork sector is stagnant and the poultry sector is growing albeit slowly. Similarly, consumer demand for rice is not growing, and only a small increase in imports is forecast. Higher rice production is hampered by limitations in land availability. Malaysia is scheduled to implement a 6 percent Goods and Services Tax (GST) in April 2015, which is also clouding demand growth expectations.

Argentina and Brazil are the leading corn suppliers, while Australia dominates the wheat market. Rice imports come from neighboring Southeast Asian suppliers, primarily Vietnam and Thailand. In recent years, the U.S. has exported about 50,000 tons of DDGs and 60,000 tons of corn gluten meal to Malaysia.

Beginning July 1st 2014, corn importers will be required to apply for an import license and provide a phytosanitary certificate from the exporting country. In addition, on July 8th, 2014 the government of Malaysia (GOM) will implement a mandatory labelling requirement on products that contain ingredients derived from genetically engineered grains.

Corn

Corn imports are forecast to grow to 1.5 million tons in 2014/15, reflecting expectations for only a small increase in demand from the poultry sector. Pork production is not growing. Although GOM has reduced consumer subsidies for some products and services, poultry meat remains the key protein source, and while not growing strongly, demand remains firm. Lower corn prices will be beneficial to the poultry sector in 2014, and will result in some increase in demand.

Argentina is still the dominant supplier with over 40 percent market share, followed by India and Brazil. Local importers often state that U.S. corn moisture content is too high and cite that as the primary reason for not buying U.S. corn.

GOM must approve imports of genetically engineered grains, including for feed and industrial use.

Beginning July 1st 2014, GOM will require corn importers to apply for an import license and provide a phytosanitary certificate from the exporting country.

On July 8th, 2014, GOM will begin to implement a mandatory labelling requirement on products that contain ingredients derived from genetically engineered grains.

Wheat

Wheat imports are forecast to grow slightly in 2014/15 to 1.5 million tons, with consumption expected to remain relatively stable.

Prices for domestic consumption flour have been set by the government since May 14, 2007 RM1.35 (US$0.45) per kilo. Reportedly, the government is considering reducing or lowering the subsidy required to maintain this price. Industrial use flour prices are not controlled.

Australia remains the biggest exporter to Malaysia, holding about 60 percent market share. Imports from non-traditional suppliers such as Pakistan, Russia and Ukraine have been increasing.

Rice

Improvements in irrigation, increased planted area in East Malaysia, better management, and the use of high-yielding paddy varieties is expected to lead to improved overall production in 2014. Another slight increase is forecast for 2015, but land limitations preclude significant expansion. Improving rice yields continues to be a major priority for Malaysia. GOM support is provided via guaranteed purchase prices and provision of subsidized seeds, fertilizer, and other inputs. In January 2014, GOM set the support price for paddy at RM1,200 per ton.

While GOM has given up on full self-sufficiency, reducing reliance on rice imports continues to be of strategic importance.

Domestic consumption is relatively stable and is forecast at around 2.8 million tons in 2013/14 and 2014/15. Any growth can be attributed to the immigrant labor population.

The retail price of ST15-grade rice (15% broken) is controlled at RM1.65 (US$0.55) to RM1.80 (US$0.60) per kg (depending on transportation cost) to benefit the low-income group.

Vietnam still dominates rice imports, with Pakistan and Thailand in the second and third spots respectively