Fish and seafood prices in 2011

Fish is a daily food item for many Malaysians and it can served in many different sauces as well as can eaten by the Malay, Chinese and Indian in our country. Based on research, the per capita consumption of fish and seafood is estimated to be around 30-35kg in the country. By the way in the year of 2011 Malaysia shown that population was around 30million therefore, it proves that the total demand for fish is a lot.

Based on the article of fish and seafood prices from Kuching, Malaysia 2011, ( http://www.freemalaysiatoday.com/category/nation/2011/06/06/fish-seafood-prices-to-skyrocket/) it shows that the government fuel subsidies in local fishing industry is an important support mechanism for fishing industry in order to protect fisherman from rising fuel prices. In addition, fuel subsidies can help to stabilize the retail price of fish & seafood in the market as well as consequently reducing the impact of high fuel prices on fishermen’s income, however, government stated they wanted to abolish fuel subsidies and the decision of government had made has lead to many negative effects. Malaysia trawler operators claimed that by cutting the fuel subsidies, they need to bear additional cost RM10, 000 per trip; obviously they cannot afford the fuel price and explained that its decision to abolish the fuel subsidies will be the death of the local fishing industry. Besides, government refused to listen to their problems; hence, the fishermen who operate C2 trawlers nationwide were protest and launch a boycott to against the government’s decision in order to pull back their fuel subsidies in Kuching.

If the government really abrogates fuel subsidies to fishing industry, there will have some big changes in the market, demand and supply. As the government not giving fuel subsidies, there is a high cost of production for fish and seafood and it will become a burden for fishermen. As the cost of production goes up, producers are not willing to supply more because there is not much profit can earns, therefore supply for both will be decreasing. When supply decrease, there is a scarcity in fish and seafood market at the same time demand remain the same level, When the quantity supply more than quantity demands, shortage occur and eventually the price of the fish and seafood will rising rapidly because there is lack of fish and seafood. After that, since consumer cannot afford the price of the fish and seafood at the high level gradually the quantity of fish and seafood will decrease slowly.

Based on the graph above, it shows that decrease in supply and demand. Due to the reason of decreasing in supply of high cost of production, the equilibrium in the market will create a new equilibrium. For example, the initial equilibrium ( E0) above at the price of P and quantity of Q. When the supply decrease at the same time demand remains constant, the supply curve will shift to the left to S1 and creates a new equilibrium which is E1. When the quantity supply is more than quantity demand, shortage occurs in the market. But as the time goes on, consumer cannot afford at the Price 1, eventually demand for fish and seafood will start decreasing slowly and demand curve will starts to move to the left D1 eventually the price from P1 will move down to P again, therefore, S1 and D1 will creates another equilibrium ( E2 ) in future.

       In my opinion, there are few reasons can cause the price of fish and seafood increase, not only because of government cut down the subsidies, it also can be the seasonal effects on the fish and seafood price, for example monsoon or rainy season can drives the fish price up. The more it rains the higher price of fish and seafood consumer need to pay because fisherman would not be able to go out fishing during rainy season, it is dangerous for them. Therefore, when shortage occurs, local fish retail price hard to maintain and gradually price will push up by all these reasons.

On the other hand, government intervention should take action in this situation. If government might wants to protect the fishermen in local fishing industry, they can apply price floor which is set the price at minimum price level and above the market price. Therefore, fishermen can sells fish in the reasonable price which are buyers are willing to sell in the level of price and consumers are willing to buy in the level of price as well. By the way, if fish and seafood force to push up in the high price, is it fair to consumers? It would be a burden for lower income person because they cannot afford the high price of fish and seafood also fish is consider as a daily meal for Malaysian. 

Assume that, if the price of fish and seafood keep on increasing, demand for fish and seafood will decrease. As meat is consider as daily meal as well, when the price of fish and seafood increase, consumer will starts looking for substitute goods and meat are such as beef, lamb and chicken. When the price of fish and seafood increasing, demand for chicken as substitute goods will starts increasing, and then supply for chicken will increase as well because producers want to earn profits at this timing, so the price of chicken will eventually goes up.

Last but not the least, in my opinion, competition is good for fishing industry, they might compete with foreign industry and improve themselves by using more high technology to increase their output, however, as many foreign industry in the fishing market, the local infant fishing industry would be hard to survive in the domestic market because those infant industries are still in an early stage, their market are still small, so, government should protect them until they are able to take advantages of the economic scale. In order to protect our local fishing industry, government can reduce their fuel subsidies for foreign trawlers so there would be lesser competitive in the market as well as remain the price of fish and seafood in the market eventually local producers and consumers could enjoy the benefits.