Required Report - public distribution

**Date:** 2/22/2006

**GAIN Report Number:** MY6007

MY6007

**Malaysia**

**Grain and Feed**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

U.S. Embassy, Kuala Lumpur

**Prepared by:**

Raymond Hoh

**Report Highlights:**

2004/05 brought cheers to the Malaysian grain/feed industry with both
domestic consumption and imports showing strong growth. Despite the
recent outbreak of Avian Influenza (the second since 2004), Post still
expects corn imports to increase 2.9 TMT in 2005/06. Rice imports are
also expected to increase to 750 TMT to offset the drop in domestic rice
production in CY2006. Wheat imports, however, are expected to decrease
as millers work down on stocks in 2005/06.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Kuala Lumpur \[MY1\]

\[MY\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Corn 4](#corn)

[Wheat 8](#wheat)

[Rice 13](#rice)

# Executive Summary

Malaysian grain imports rebound 2004/05. The livestock sector performed
very well in response to the strong increase in demand for poultry meat
and pork. Consumption of wheat-based products experienced a steep climb
while the rice imports saw a steady increase in order to compensate a
small decline in domestic production in CY 2005.

The outlook for 2005/06 is brighter. The anticipated GDP growth of 5 to
6% in 2006 augurs well for the imports of grains. The pig sector is also
performing well with ex-farm prices for live pigs 22% higher than in
2005. Despite the recent isolated outbreak of Avian Influenza outside
Kuala Lumpur, the Malaysian poultry sector is optimistic in the near
term. Current broiler ex-farm prices nearly about 4% higher than 2005.
Post expects corn imports to increase 10% to 2.9 MMT and wheat imports
to decrease 6% to 1.5 MMT as millers seek to work down on stocks in
2005/06. Malaysia also needs to import 750 TMT of rice in CY2006 to meet
growing domestic consumption as well as compensate a reduction of
harvested area due to unfavorable weather conditions.

The best prospect for U.S. grain sales is in the hard-wheat sector.
However in view of stiff competition from Canada, U.S. should be able to
capture 5-6 percent of the Malaysian wheat market in 2005/06. As for
corn, U.S. will face strong competition from Argentina and China and
will be relegated to a residual supplier. Historically, the U.S. has
been an insignificant player in the Malaysian rice market.

  --------- --------- ------------ ------------- ------------ ---------------
                      Production   Imports       Exports      Domestic.
                                                              Disappearance

                                   (In 1,000 MT)              

  Corn      2004/05   72           2355          8            2430

            2005/06   75           2630          10           2670

            2006/07   80           2860          15           2880

  Wheat     2004/05   0            1636          84           1464

            2005/06   0            1540          100          1510

            2006/07   0            1720          120          1590

  Rice      2004      1415         600           0            2045

            2005      1440         670           0            2100

            2006      1420         750           0            2160
  --------- --------- ------------ ------------- ------------ ---------------

# Corn

(in 1000 Hectares and 1000 MT)

+-------------------+-------+--------+------+-------+-------+-------+
| **PSD Table**     |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| **Country**       | **    |        |      |       |       |       |
|                   | Malay |        |      |       |       |       |
|                   | sia** |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| **Commodity**     | **C   |        |      |       | (1000 |       |
|                   | orn** |        |      |       | HA)   |       |
|                   |       |        |      |       | (1000 |       |
|                   |       |        |      |       | MT)   |       |
+-------------------+-------+--------+------+-------+-------+-------+
|                   | 2004  | R      | 2005 | Est   | 2006  | For   |
|                   |       | evised |      | imate |       | ecast |
+-------------------+-------+--------+------+-------+-------+-------+
|                   | USDA  | Post   | USDA | Post  | USDA  | Post  |
|                   | Off   | Es     | Offi | Est   | Off   | Estim |
|                   | icial | timate | cial | imate | icial | ate\[ |
|                   | \[    |        | \[O  |       | \[    | New\] |
|                   | Old\] | \      | ld\] | \[    | Old\] |       |
|                   |       | [New\] |      | New\] |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| **Market Year     |       | 1      |      | 10    |       | 10    |
| Begin**           |       | 0/2004 |      | /2005 |       | /2006 |
+-------------------+-------+--------+------+-------+-------+-------+
| Area Harvested    | 24    | 24     | 25   | 25    | 0     | 25    |
+-------------------+-------+--------+------+-------+-------+-------+
| Beginning Stocks  | 241   | 241    | 263  | 230   | 288   | 255   |
+-------------------+-------+--------+------+-------+-------+-------+
| Production        | 72    | 72     | 75   | 75    | 0     | 80    |
+-------------------+-------+--------+------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 2400  | 2355   | 2500 | 2630  | 0     | 2860  |
| Imports           |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| Oct-Sep Imports   | 2400  | 2355   | 2500 | 2630  | 0     | 2860  |
+-------------------+-------+--------+------+-------+-------+-------+
| Oct-Sep Import    | 4     | 12     | 0    | 10    | 0     | 10    |
| U.S.              |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| TOTAL SUPPLY      | 2713  | 2668   | 2838 | 2935  | 288   | 3195  |
+-------------------+-------+--------+------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 0     | 8      | 0    | 10    | 0     | 15    |
| Exports           |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| Oct-Sep Exports   | 0     | 8      | 0    | 10    | 0     | 15    |
+-------------------+-------+--------+------+-------+-------+-------+
| Feed Dom.         | 2300  | 2300   | 2400 | 2530  | 0     | 2730  |
| Consumption       |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| TOTAL Dom.        | 2450  | 2430   | 2550 | 2670  | 0     | 2880  |
| Consumption       |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+
| Ending Stocks     | 263   | 230    | 288  | 255   | 0     | 300   |
+-------------------+-------+--------+------+-------+-------+-------+
| TOTAL             | 2713  | 2668   | 2838 | 2935  | 0     | 3195  |
| DISTRIBUTION      |       |        |      |       |       |       |
+-------------------+-------+--------+------+-------+-------+-------+

**Production**

Domestic corn production in Malaysia is insignificant.

**Consumption**

The Malaysian poultry sector recovered from the brief localized outbreak
of avian influenza (AI) in the northeast region of the Peninsula (in
September 2004) and performed well during 2004/05. Most of the big
players in the market reporting record profits and look to another year
of growth in 2005/2006. Malaysia experienced a second outbreak of AI in
a non-commercial, free-range backyard outside the capital city of Kuala
Lumpur on Feb 20 2006. Reportedly, the virus caused the death of about
40 chickens. The authorities have responded quickly to the outbreak by
culling poultry flocks in the area, restricting the transport of
poultry, disinfecting coops in the neighborhood and monitoring the
surrounding area. Singapore immediately suspended imports of poultry and
eggs from the state of Selangor where the outbreak occurred.
Fortunately, all the public-listed poultry companies are located outside
Selangor. At the moment, the situation is under control and there is no
reason to be pessimistic about the future of the sector.

The current ex-farm price for broiler hovers around US\$1.07/kg compared
to US\$1.03 in February 2005 and US\$0.66 in February 2004. During
festive season, the price reached US\$1.34/kg, the highest level in the
last 10 years. The ex-farm price for chicken egg also rose from
US\$0.062 in February 2004 to US\$0.637 per unit in February 2005.

The pig sector is also performing well with ex-farm price for live pigs
hovering around US\$169/100kg compared to US\$139/kg in February 2005. A
pork seller could easily rake in US\$290 per 88 kg of meat sold. Farmers
are optimistic that the sector will maintain its momentum for the
remaining part of the year and look to importing more breeders, partly
to replace some animals lost to the recent outbreak of 'foot and mouth'
disease. At this point, post expects domestic corn consumption to
increase 9 - 10% to 2.7 MMT in 2005/06 and 7 -- 8% to 2.9 MMT in
2006/07.

**Trade**

In line with the sharp jump in domestic consumption, Post expects
Malaysian corn imports to increase 12% to 2.6 MMT in 2005/06 and 9% to
2.9 Mt in 2006/07. The two biggest competitors against the U.S. are
still Argentina and China. Despite of the drop in exportable supplies in
Argentina, Malaysia will increase buying South American corn as long as
the prices are below the US's. On the other hand, Malaysia has been
China's second biggest corn market after South Korea for many years and
receives preferential treatment from China. Furthermore, Malaysia could
also turn to neighboring Thailand and Burma for corn purchase. Faced
with these challenges, U.S. is expected to be relegated to a residual
supplier.

**Corn Imports**

  ------------------- ------------------ ---------------- ----------------
  **Import Trade                                          
  Matrix**                                                

  **Country**         Malaysia                            

  **Commodity**       Corn                                

  Time Period         Oct04/Sep05 for    Units:           1000MT
                      2005, Oct05/Sep06                   
                      Not Available                       

  Imports for:        2004                                **2005**

  U.S.                12                 U.S.              

  Others                                 Others           

  Argentina           1334                                 

  China               460                                  

  Thailand            268                                  

  Singapore           173                                  

  Burma               75                                   

  Indonesia           15                                   

  India               13                                   

  Australia           2                                    

                                                           

                                                           

  Total for Others    2340                                0

  Others not Listed   3                                    

  Grand Total         2355                                0
  ------------------- ------------------ ---------------- ----------------

**Stocks**

With the shift to buying more from South America, feed millers are
expected to keep about one and a half month of stocks at the end of
2005/06 in order to adjust to the longer shipping time.

**Policy**

Production Policy

The GOM has no definite plans to develop a viable domestic field corn
industry. Domestic corn production is unlikely to expand significantly
in the foreseeable future.

Market Development opportunities

GMO/Biotech Safety Issue: While Malaysia has not officially approved the
imports of GM corn, it has not restricted the importation of GM corn.
The GOM is still working on the National Biosafety Act which is expected
to be tabled at Parliament during the month of April. The acceptance of
GM products and the labeling requirement could be constraints to
importing US grains.

A significant increase in corn consumption in Malaysia will largely
depend on a robust poultry and pig industry. Any assistance from APHIS
or an international organization to prevent a recurrence of the Avian
Influenza outbreak could be a big help to the poultry sector. As for the
pig sector, the industry has yet to recover fully from the effects of
the outbreak of the Nipah virus (Japanese Encephalitis) in 1999. As the
farmers and governmental officials have to develop a modern, integrated
pig farm system, there are opportunities to link resources in the U.S.
to assist in the following areas:

a\. the use of good-quality US swine breeds/semen;

b\. improvement of nutrition for swine; and

c\. transfer of technical knowledge on swine management, swine housing,
waste treatment and slaughter plants.

The National Swine Registry has conducted two training courses on
artificial insemination and breeding management in the past 4 years.
These courses were well received and Post would like to see these
programs be conducted in other selected locations throughout the
country. Buying missions to the U.S. should also be considered in face
of growing competition from the European and Canadian counterparts.

At the current moment, Malaysia is amending the importation protocol for
breeding pigs and boar semen. Post had submitted AHPIS's comments and
recommendations and awaits a response from the Malaysian side.

# Wheat

(in 1000 Hectares and 1000 MT)

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **    |       |       |       |       |       |
|                   | Malay |       |       |       |       |       |
|                   | sia** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **Wh  |       |       |       | (1000 |       |
|                   | eat** |       |       |       | HA)   |       |
|                   |       |       |       |       | (1000 |       |
|                   |       |       |       |       | MT)   |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2004  | Re    | 2005  | Est   | 2006  | For   |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | Off   | Est   | Off   | Est   | Off   | Est   |
|                   | icial | imate | icial | imate | icial | imate |
|                   | \[    |       | \[    |       | \[    |       |
|                   | Old\] | \[    | Old\] | \[    | Old\] | \[    |
|                   |       | New\] |       | New\] |       | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     |       | 07    |       | 07    |       | 07    |
| Begin**           |       | /2004 |       | /2005 |       | /2006 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Area Harvested    | 0     | 0     | 0     | 0     | 0     | 0     |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 242   | 242   | 297   | 330   | 272   | 260   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 0     | 0     | 0     | 0     | 0     | 0     |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 1412  | 1636  | 1350  | 1540  | 0     | 1720  |
| Imports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Imports   | 1412  | 1636  | 1350  | 1540  | 0     | 1720  |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Import    | 137   | 117   | 0     | 90    | 0     | 130   |
| U.S.              |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 1654  | 1878  | 1647  | 1870  | 272   | 1980  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 107   | 84    | 125   | 100   | 0     | 120   |
| Exports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Exports   | 107   | 84    | 125   | 100   | 0     | 0     |
+-------------------+-------+-------+-------+-------+-------+-------+
| Feed Dom.         | 50    | 50    | 50    | 30    | 0     | 50    |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.        | 1250  | 1464  | 1250  | 1510  | 0     | 1590  |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 297   | 330   | 272   | 260   | 0     | 270   |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 1654  | 1878  | 1647  | 1870  | 0     | 1980  |
| DISTRIBUTION      |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

**Production**

Wheat is not produced in Malaysia.

**Consumption**

The Malaysian economy is expected to grow 5 to 6% in 2006. The current
high palm oil and petroleum prices are contributing to higher purchasing
power. Post expects a 3.0 -- 3.5% growth in wheat consumption for the
2005/06. Café and Delis are becoming very popular in major cities
throughout the country. Bakeries are also looking into manufacturing
bakery products for distributing to neighboring countries such as
Singapore, Thailand, Indonesia and the Philippines. Overseas demand for
Malaysian biscuits recorded a strong growth in 2005 with the main
markets being Japan, Taiwan and the US. Exports of packaged instant
noodles dipped slightly in 2005 after recording a strong growth in the
pervious year. The major markets for Malaysian noodles include the EU,
Australia and the ASEAN nations.

Domestic wheat prices are controlled by the Malaysian Government under
the Supplies Regulation Act (1974). The retail general-purpose wheat
flour price remained at RM1.20 (US\$0.32) per kilo since 1997. However,
the price of wheat flour for industrial uses has increased from by RM150
(US\$40.29) to RM1,294 (US\$347.57)/MT since June 1 2005.

**Trade**

With a better crop in 2004/05, Australia captured 70% the total
Malaysian wheat import market. Despite the strong return of the Canadian
hard wheat, the US market share rose to 7%. The main purchaser liked the
quality of US wheat and had regard for the efforts of USWA's marketing
program. Malaysia also turned to competitively priced wheat from
Argentina and Ukraine.

Post expects a reduction in total imports in 2005/06 as millers seek to
work down on stocks. Faced with stiff competition from Canada, US wheat
exports to Malaysia are expected to drop to 90 TMT in 2005/06. As for
soft wheat, Australia aims to dominate the market with its current
problems of shipping wheat to Iraq.

Malaysia exports rose marginally to about 84 TMT (wheat equivalent) of
wheat flour to Singapore, Thailand and Indonesia in 2004/05. Post
expects an uptrend in exports in the near term as one miller is making
extra effort to export 1kg pack flour to Singapore, the Philippines and
Thailand in the coming year.

**Wheat Imports**

  ---------------------- ---------------- ---------------- ---------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**            Malaysia                          

  **Commodity**          Wheat                             

  Time Period            Jul04/Jun05 for  Units:           1000MT
                         2004,                             
                         Jul05/Sep05 for                   
                         2005                              

  Imports for:           2004                              **2005**

  U.S.                   117              U.S.             10

  Others                                  Others           

  Australia              1159             Australia        234

  Canada                 189              Canada           8

  Argentina              96               Ukraine          2

  India                  68                                 

  Ukraine                5                                  

  Germany                1                                  

                                                            

                                                            

                                                            

                                                            

  Total for Others       1518                              244

  Others not Listed      1                                  

  Grand Total            1636                              254
  ---------------------- ---------------- ---------------- ---------------

**Wheat Exports**

+----------------------+---------------+--------------+---------------+
| **Export Trade       |               |              |               |
| Matrix**             |               |              |               |
+----------------------+---------------+--------------+---------------+
| **Country**          | Malaysia      |              |               |
+----------------------+---------------+--------------+---------------+
| **Commodity**        | Wheat         |              |               |
+----------------------+---------------+--------------+---------------+
| Time Period          | Jul04/Jun05   | Units:       | 1000MT        |
|                      | for 2004,     |              |               |
|                      |               |              |               |
|                      | Jul 05/Sep05  |              |               |
|                      | for 2005      |              |               |
+----------------------+---------------+--------------+---------------+
| Exports for:         | 2004          |              | **2005**      |
+----------------------+---------------+--------------+---------------+
| U.S.                 |               | U.S.         |               |
+----------------------+---------------+--------------+---------------+
| Others               |               | Others       |               |
+----------------------+---------------+--------------+---------------+
| Singapore            | 41            | Singapore    | 7             |
+----------------------+---------------+--------------+---------------+
| Thailand             | 24            | Thailand     | 4             |
+----------------------+---------------+--------------+---------------+
| Indonesia            | 7             | Indonesia    | 1             |
+----------------------+---------------+--------------+---------------+
| Maldives             | 6             | Brunei       | 1             |
+----------------------+---------------+--------------+---------------+
| Brunei               | 4             |              |               |
+----------------------+---------------+--------------+---------------+
| Philippines          | 2             |              |               |
+----------------------+---------------+--------------+---------------+
|                      |               |              |               |
+----------------------+---------------+--------------+---------------+
|                      |               |              |               |
+----------------------+---------------+--------------+---------------+
|                      |               |              |               |
+----------------------+---------------+--------------+---------------+
|                      |               |              |               |
+----------------------+---------------+--------------+---------------+
| Total for Others     | 84            |              | 13            |
+----------------------+---------------+--------------+---------------+
| Others not Listed    |               |              |               |
+----------------------+---------------+--------------+---------------+
| Grand Total          | 84            |              | 13            |
+----------------------+---------------+--------------+---------------+

**Marketing**

Market Development Opportunities

GIPSA's program of sending an officer to the ASEAN region for a
three-month stint every year since mid-2002 is in the right direction.
Millers/importers welcome the opportunity to iron out various
dissatisfactions over qualitative issues. In addition, GIPSA should have
a good opportunity to do outreach work. Perceived poor quality image of
US grains and beans has to be addressed seriously by USWA and GIPSA.

In normal times, U.S. wheat is less price-competitive than Canadian
wheat. Furthermore, the Canadian Board is a one-stop, 'solve all
problems' center with the authority to quote prices as well as handle
freights and logistics. This system appeals to the Malaysian purchasers.
In addition, wheat boards in Canada and Australia can offer price
discounts that render US as a residual supplier. It is crucial that
importers should be encouraged to purchase split cargo with U.S.
soybean/corn in order to reduce cost of importation. In addition, the
Canadian Wheat Board is putting much effort to produce a variety for the
Malaysian noodle sector. USWA has to do some catching up to avoid losing
some of its market share.

On-going activities such as regional buyers conventions and training
trips to the U.S., conducted by USWA, are well received by the local
millers/purchasers.

# Rice

(in 1000 Hectares and 1000 MT)

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **    |       |       |       |       |       |
|                   | Malay |       |       |       |       |       |
|                   | sia** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **    |       |       |       | (1000 |       |
|                   | Rice, |       |       |       | HA)   |       |
|                   | Mil   |       |       |       | (1000 |       |
|                   | led** |       |       |       | MT)   |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2004  | Re    | 2005  | Est   | 2006  | For   |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | Off   | Est   | Off   | Est   | Off   | Est   |
|                   | icial | imate | icial | imate | icial | imate |
|                   | \[    |       | \[    |       | \[    |       |
|                   | Old\] | \[    | Old\] | \[    | Old\] | \[    |
|                   |       | New\] |       | New\] |       | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     |       | 01    |       | 01    |       | 01    |
| Begin**           |       | /2004 |       | /2005 |       | /2006 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Area Harvested    | 675   | 652   | 677   | 660   | 0     | 650   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 270   | 370   | 380   | 340   | 480   | 350   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Milled Production | 1420  | 1415  | 1450  | 1440  | 0     | 1420  |
+-------------------+-------+-------+-------+-------+-------+-------+
| Rough Production  | 2185  | 2177  | 2231  | 2215  | 0     | 2185  |
+-------------------+-------+-------+-------+-------+-------+-------+
| MILLING RATE      | 6500  | 6500  | 6500  | 6500  | 0     | 6500  |
| (.9999)           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports     | 700   | 600   | 700   | 670   | 0     | 750   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jan-Dec Imports   | 700   | 660   | 600   | 750   | 0     | 780   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jan-Dec Import    | 0     | 0     | 0     | 0     | 0     | 0     |
| U.S.              |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 2390  | 2385  | 2530  | 2450  | 480   | 2520  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Exports     | 0     | 0     | 0     | 0     | 0     | 0     |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jan-Dec Exports   | 0     | 0     | 0     | 0     | 0     | 0     |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.        | 2010  | 2045  | 2050  | 2100  | 0     | 2160  |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 380   | 340   | 480   | 350   | 0     | 360   |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 2390  | 2385  | 2530  | 2450  | 0     | 2520  |
| DISTRIBUTION      |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

**Production**

Preliminary estimates indicate a 1.8 percent increase in milled rice
production to 1.4 MMT in 2005. An increase in harvested area as well as
a slight improvement in padi yields contributed to the growth in output.

The outlook for 2006 is less optimistic with a small decrease in planted
and harvested area. Abnormal heavy rainfall in the northern part of the
Peninsula has delay planting and affected some newly planted area. In
addition, some areas were affected by a rice leaf-folder moth
(enaphalocrocis). Post forecast rice production at 1.42 MMT for 2006.
For the longer term, the GOM encourages large scale private sector
commercial padi production, especially in the states of Sabah and
Sarawak, where land is still abundant.

**Consumption**

Domestic consumption increased by 2.7% to 2.1 MMT in 2005. This amount
includes unofficial rice imports from neighboring Thailand. Rice
smuggling is still rampant despite the GOM's efforts to curb such
practices. Post expects consumption to increase 2.9 to 3.0% in 2006.
While the rice consumption per capita show a slight increase from 79 kg
in 2004 to 79.6 kg in 2005, the figure does not account for the influx
of foreign workers and tourists into the country. In reality, the
consumption per capita has been on the slide vis-à-vis the consumption
of wheat.

The support price for padi rice has increased from RM55.00 to RM65 per
100 kg fin 2005. In addition, all rice farmers receive a subsidy of RM25
per 100 kg of padi delivered to a licensed mill or drying facility.

**Trade**

Imports of 600 TMT in the trade matrix include unofficial rice imports
of 82 TMT from neighboring Thailand in 2004. Thailand and Vietnam were
the top suppliers followed by Pakistan, India and Burma. Rice sales from
U.S. amounted to only 23 MT, mainly Calrose rice consumed by Japanese
and Korean expatriates.

For 2005, rice imports (including unofficial imports) could reach 670
TMT with Thailand and Vietnam being the major suppliers. As for 2006,
the country may need to import about 750 TMT to meet the shortfall in
domestic rice production.

**Rice Imports**

+-------------------+--------------+-----------------+----------------+
| **Import Trade    |              |                 |                |
| Matrix**          |              |                 |                |
+-------------------+--------------+-----------------+----------------+
| **Country**       | Malaysia     |                 |                |
+-------------------+--------------+-----------------+----------------+
| **Commodity**     | Rice, Milled |                 |                |
+-------------------+--------------+-----------------+----------------+
| Time Period       | Jan-Dec for  | Units:          | 1000MT         |
|                   | CY04,        |                 |                |
|                   |              |                 |                |
|                   | Jan-Sep for  |                 |                |
|                   | CY05         |                 |                |
+-------------------+--------------+-----------------+----------------+
| Imports for:      | 2004         |                 | **2005**       |
+-------------------+--------------+-----------------+----------------+
| U.S.              |              | U.S.            |                |
+-------------------+--------------+-----------------+----------------+
| Others            |              | Others          |                |
+-------------------+--------------+-----------------+----------------+
| Thailand          | 370          | Thailand        | 211            |
+-------------------+--------------+-----------------+----------------+
| Vietnam           | 179          | Vietnam         | 193            |
+-------------------+--------------+-----------------+----------------+
| Pakistan          | 40           | Pakistan        | 23             |
+-------------------+--------------+-----------------+----------------+
| India             | 7            | Burma           | 9              |
+-------------------+--------------+-----------------+----------------+
| Burma             | 4            | India           | 9              |
+-------------------+--------------+-----------------+----------------+
|                   |              | Cambodia        | 1              |
+-------------------+--------------+-----------------+----------------+
|                   |              |                 |                |
+-------------------+--------------+-----------------+----------------+
|                   |              |                 |                |
+-------------------+--------------+-----------------+----------------+
|                   |              |                 |                |
+-------------------+--------------+-----------------+----------------+
|                   |              |                 |                |
+-------------------+--------------+-----------------+----------------+
| Total for Others  | 600          |                 | 446            |
+-------------------+--------------+-----------------+----------------+
| Others not Listed |              |                 |                |
+-------------------+--------------+-----------------+----------------+
| Grand Total       | 600          |                 | 446            |
+-------------------+--------------+-----------------+----------------+

**Policy**

Production Policy

Considered a 'security' item, the GOM targets 65% self-sufficiency in
rice production. Even in order to maintain production at 65%
self-sufficiency, the GOM estimated US\$658 milllion is required to
upgrade drainage and irrigation facilities in the country's granary
areas during the Ninth Malaysia Plan (2006 --2010). Another US\$131
million will be needed for other infrastructure development. So far, all
the GOM's effort to increase rice production has proved to be an arduous
task. In the latest announcement by the Agriculture Minister on turning
Malaysia into a net food exporter by 2010, rice was not included on the
list of commodities (such as vegetables, fruits and flowers) under
consideration.

## Marketing

Rice imports from the United States are mainly Calrose rice consumed by
Japanese and Korean expatriates. Contributing factors to the U.S.
absence from the market include lower prices from neighboring suppliers;
the desire to enhance regional relationships and cheaper freight &
shorter shipping times for competitors' rice. While the opportunities
for sales of U.S. rice in Malaysia are still very limited, the absence
of a price ceiling on imported high grade rice and the incorporation of
LPN, the Malaysian Rice Authority, may help to create a small niche
market for imports of branded, packaged rice, especially for the small
organic food sector from the United States.