This article first appeared in Forum, The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

Malaysia’s tropical climate is conducive for the cultivation of a wide variety of crops, including oil palm, rubber, paddy, cocoa, pepper and fruit. In addition to crop cultivation, the agriculture sector encompasses livestock farming, aquaculture and forestry, all of which are crucial components of the country’s economy.

The agriculture sector provided 12.3% of employment opportunities and contributed 7.1% to the country’s gross domestic product in 2021. Despite its significant contribution to the economy, the sector faces several challenges, including an ageing workforce, low productivity and the effects of climate change. Additionally, small farmers, who produce most of the food crops, face numerous obstacles, such as limited access to capital, technology and knowledge, and marketing challenges.

Currently, about 8.6 million hectares of land in this country is dedicated to agriculture, with 5.8 million hectares primarily utilised for oil palm planting. The remaining area is used for growing rubber and food crops such as paddy, cocoa, pepper, vegetables and fruit.

These commodities are mainly cultivated by small-scale farmers. For instance, paddy farming alone occupies 645,000ha of land and is managed by roughly 600,000 farmers, who typically have small and fragmented plots. These farmers generally have low yields, which would not be economically viable without the assistance of input subsidies and output incentives.

In Budget 2023, the government has allocated RM1.6 billion for various subsidies and incentives for the paddy and rice industry, including RM228 million to provide cash assistance for 240,000 paddy farmers. However, such policies are arguably one of the main reasons behind the lack of progress in the paddy and rice industry as they have created farmers who are subsidy-dependent, uninventive and uncompetitive. This problem is also compounded by farm-related issues such as irrigation quality, soil fertility, and improper use of fertilisers and pesticides.

Vegetable farmers in Malaysia also face similar issues. There are 65,900ha of land planted with vegetables that are managed by more than 43,010 farmers. Many of them find it difficult to optimise their yield due to their farm size, limited resources and lack of access to modern farming techniques, resulting in low productivity and profitability. Their output scale also makes them vulnerable to the pricing strategies of middlemen.

Similarly, the ruminant sector in Malaysia is also dominated by small-scale operations, despite the considerable number of livestock. As at 2020, the ruminant population in the country was reported to be slightly over 1.2 million, with cattle being the most populous species.

In 2021, the self-sufficiency rates for mutton, beef and fresh milk were 10.7%, 18.9% and 56.7% respectively, indicating that Malaysia’s production of these commodities is not enough to meet its domestic demand, thus necessitating imports from countries like India, Australia and New Zealand. The low productivity in Malaysia’s ruminant sector can be attributed to a range of factors, including insufficient resources, high feed costs, inadequate quality breeds and import competition.

The low productivity of small farmers in Malaysia can have significant consequences for both their livelihood and the economy. With low yields, farmers may struggle to generate a profit or break even, which can cause severe poverty issues among small farmers. In addition, low productivity in the agricultural sector could result in scarcity of supply, leading to higher prices and food insecurity, which can have adverse effects on the population’s well-being.

There are several solutions to this problem, such as providing small farmers access to capital to speed up technological adoption, and organising them into cooperatives or associations.

Providing access to capital can help small farmers to invest in modern farming equipment and technology and expand their farms. This can lead to higher yields, increase in income and greater competitiveness in domestic and international markets.

Organising small farmers into cooperatives can help them to pool resources and benefit from economies of scale, share knowledge and experience, negotiate better prices with buyers and gain better market access. A good example of this is Fonterra, a New Zealand-based dairy cooperative that has around 10,000 farmer members.

Fonterra collects and processes milk from 85% of its members and exports dairy products to feed and nourish millions of people in 138 countries around the world. By working together, Fonterra’s farmers are able to achieve scale efficiency, receive better prices for their milk than they would if they were selling it individually and penetrate global markets.

Another key aspect that would increase long-term productivity and sustainability in agriculture is research and development (R&D), and its knowledge output dissemination and ground application. R&D in agriculture can boost small farmers’ productivity by providing them with new, innovative farming techniques and technologies.

Through R&D and effective extension efforts, farmers can learn new farm management techniques and gain access to high-yielding varieties that are more resistant to the vagaries of the weather, pests and disease.

The recent budget announcement outlines various measures to help increase the productivity of the agrofood industry, such as the financing scheme by Bank Negara Malaysia, tax relief on capital expenditure and tax incentive on modern agriculture projects.

However, it is important to note that increasing productivity in the agrofood industry often requires a combination of both financial support and investment in R&D. Although these measures are undoubtedly beneficial, it would have been ideal if the budget announcement had directly indicated an increase in R&D expenditure for agriculture to ensure a greater long-term impact on the industry.

While it is most probable that funding for agrofood R&D has been included in the overall budget allocation for the Ministry of Agriculture and Food Security, a specific R&D allocation would have provided greater clarity and focus on the importance of research and development in this area.

Finally, agrofood production would be more profitable and rewarding if farmers extend their value chain participation and become agropreneurs. Value chain participation refers to the process of adding value to farm outputs by engaging in activities such as processing, packaging and marketing.

Today’s farmers must do more than simply produce farm outputs if they want to succeed in the agrofood industry. Attracting youth to agriculture to replace ageing farmers can help us achieve this objective. The youth would view agriculture entrepreneurship as a viable and rewarding career option if we highlight the potential for innovation and modernisation in the sector, provide access to training and education on sustainable and profitable agricultural practices, offer financial and technical support and create business networking opportunities. By emphasising the value of agriculture as a dynamic and impactful sector, young Malaysians would be encouraged to take up entrepreneurship in agriculture and contribute to the growth of the sector in this country.

Small farmers hold the key to Malaysia’s future food security and sustainability. Neglecting their development would have severe consequences, not only for the agriculture sector but also for the broader economy.

By prioritising the needs and aspirations of small farmers, Malaysia can build a more resilient, inclusive, and sustainable agriculture sector that benefits all stakeholders, from producers to consumers. Therefore, it is imperative for Malaysia to invest in the growth and development of small farmers to ensure a sustainable and secure food future.

Nur Ameera A Jaz is an independent researcher working on agriculture and natural resource issues. Shaufique F Sidique is a professor of agricultural economics in the School of Business and Economics and the director of the Institute of Plantation Studies, Universiti Putra Malaysia.

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