Although the conflict in West Asia has not yet triggered a sharp increase in food prices in Malaysia, the Khazanah Research Institute (KRI) has warned that food production cost pressures could potentially impact consumers.
According to KRI's latest discussion paper, the current domestic market situation is still stable. Intra-regional trade and the country's ability to divert logistics routes away from conflict zones act as a temporary buffer. However, this stability does not mean that we are safe.
KRI explained that the impact of the economic chain this time is gradual. The increase in the cost of agricultural inputs such as fertilizer and animal feed will be absorbed by producers first before the burden is gradually passed on to consumer retail prices over the next few months.
The first sign of rising local production prices was through the Producer Price Index (PPI) between February and March 2026. The mining and quarrying sectors recorded a drastic increase of 32.9 percent, surpassing the record of the 2022 crisis.
Important sectors in our food chain, namely agriculture and manufacturing, also showed an increase in costs of 2.8 percent and 1.7 percent respectively. For the local market, fishermen were burdened by the increase in diesel prices.
At the same time, long-term crop operators were also experiencing headaches due to the increase in global biofuel prices and the increasingly expensive cost of fertilizers.
However, the situation is different for the prices of daily necessities. Food prices in the retail market are seen to be flat and controlled due to the assistance of the festive season price control scheme until March 2026. However, consumers still felt the burden when transportation costs increased by 2.0%.
KRI stressed that this anomalous pattern is similar to the initial phase of the Russia-Ukraine conflict in 2022, where the transportation sector led the increase chart before being followed by the slow but severe food price crisis.
Therefore, the stability of food prices on store shelves today is only a temporary illusion as the country's agro-food production system is currently under severe cost pressures.
