Searca study warns of ‘unequal competition’ for hog industry under liberalized Asean market

  • 23 May 2014, Friday

Source: Business Mirror
Date: 2 Apr 2014

THE hog industry has a long way to go to be competitive in the Association of Southeast Asian Nations (Asean) region since other member-states provide subsidies to their domestic producers and provide substantial funds to expand their domestic markets.

A recent study conducted by a team of experts commissioned by the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (Searca), under the Productivity Growth in Philippine Agriculture (PGPA) project of the Bureau of Agricultural Research (BAR) of the Department of Agriculture (DA) and the Philippine Rice Research Institute (PhilRice), said the hog industry will be feeling the pinch of “unequal competition” as the Asean common market is put in place next year.

The analysis, undertaken by Dr. Liborio Cabanilla, U-Primo E. Rodriguez and Antonio Jesus A. Quilloy, all from the College of Economics and Management of the University of the Philippines at Los Baños (UPLB-CEM) should be good reading for backyard hog raisers and commercial growers alike, said Searca Director Dr. Gil C. Saguiguit Jr., since it should provide them with good inputs into the status of the hog industry and how they could maneuver to give pork from Asean countries a run for its money.

Since 2010, the Asean Free Trade Area-Common Effective Preferential Tariff has been implemented and it will cut tariffs on meat products from zero to 5 percent, allowing foreign countries enough reason to dump their products in the Philippines.

One significant factor that should give an advantage to the hog industry is the fact that the country is free from the dreaded foot and mouth disease (FMD) that hobble the livestock industries of countries in mainland Asia.

Moreover, the Philippines is certified to be free from the deadly avian influenza (AI) that had been regularly decimating the poultry industries in China, Vietnam, Malaysia, Thailand and South Korea.  

The Searca is significant to the hog industry, which is holding its Hog Convention and Trade Exhibit in General Santos City from April 3 to 5, since it offers insights into the growth of total factor productivity (TFP) of the hog industry, and how self-sufficiency in corn would further reduce the cost of production for swine breeders.

From a high of 77 percent in 2001, the share of backyard raisers in the total pork market has dwindled to only 72 percent, indicating the growth of medium-scale hog farms and contract growers.

Cabanilla and his team members said  that their analysis showed TFP was at 3.5 percent from 2003 to 2008, with the basic data culled from the operations of hog producers in Batangas and Laguna.

“Prospects for continued growth, however, are less bright in the advent of increasing competitive forces brought about by the pressures of globalization,” they noted. 

One of the most signficant factors affecting the hog industry is the abundance of yellow corn, which is essential for the hog feed since it represents 70 percent of the production cost of hog farms.

For this reason, said the Cabanilla study, the small farms with 20 or less adult animals are less efficient in the use of inputs compared to the medium-scale and large agribusiness corporations.

The Searca assessment will eventually take into consideration the figures released recently by the National Corn Program (NCP) under Assistant Secretary Edilberto de Luna.

High corn prices had been responsible for the closure of many farms in the Laguna-Batangas livestock belt from 2008, when the prices of grains shot up, until about two years ago.

For the same period, pork imports doubled, further hitting the pockets of hog producers.

De Luna said the country achieved yellow corn sufficiency last year and added that if the yield from January to March 2014 reaches 2.1 million metric tons (MMT), the country may have enough yellow corn for animal feed until December.

Moreover, he added, statistics culled from the Bureau of Agricultural Statistics (BAS), Philippine Center for Postharvest Development and Mechanization (PhilMech), Livestock Development Center (LDC) and the Philippine Association of Feed Millers (Pafmi) showed that the ending stock was sufficient to last for five months without imports of feedwheat.

With imported yellow corn and feedwheat, the total inventory would be sufficient for the next 7.5 months.

“We attained sufficiency last year and we are confident to supply the needs of the livestock and poultry industries even if yellow corn registers zero growth for 2014,” de Luna explained.

If a huge surplus is secured this year, some officials argue that corn and feedwheat imports may have to be controlled to compel the private sector to buy local corn and corn substitutes.

Based on the official data submitted to Agriculture Secretary Proceso J. Alcala, the supply of yellow corn and corn substitutes sans imports last year was 7.8 million metric tons (MMT), with the beginning stock placed at 2.386 MMT and the net local yellow corn available at 4.871 MMT.

The gross local yellow corn output was actually 5.248 MMT but the NCP subtracts 7.18 percent, or 377,000 MT, from the total volume as postharvest losses.

NCP also adds cassava as corn equivalent for animal feed, with the volume at 543,000 MT.

All told, the demand for feeds last year was 5.265 MMT, leaving the 2013 ending stock at 2.535 MMT, which is enough for industry needs for five months, or until May 2014.

One DA official said the picture changed significantly when private-sector imports of yellow corn and feedwheat are taken into account.

Pafmi reported that a total of 1.349 MMT of yellow corn and feedwheat were imported in 2013, broken down into 404,000 MT of yellow corn and 945,000 MT of feedwheat.

With the imports included in the equation, the total supply of yellow corn and corn substitutes for 2013 zoomed to 9.149 MMT.

Subtracting the demand of 5.265 MMT from the total supply of 9.149 MMT, the ending stock would rise to 3.884 MMT, which is enough for 7.5 months.


Source: Business Mirror
Date: 2 Apr 2014