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Philippines - Livestock and Products - 2009

Monday, March 23, 2009

USDA Foreign Agricultural Service

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  • The latest GAIN report from USDA Foreign Agricultural Service offers an update on the pig industry in the Philippines in a report subtitled Philippine Hog Industry Update. Last year, pork production was down and imports were up by 38 per cent. There is also information on Foot and Mouth disease, the Ebola Reston Virus and San Miguel Corporation's expansion.

    Report Highlights

    To partially offset the slight decline in Philippine hog production in 2008, total pork imports increased by 38 percent from the previous year, mostly pork fats and skins for further processing. In October 2008, the Ebola Reston Virus in local pigs was initially reported in two commercial farms in the Philippines. The Philippine government announced plans to immediately depopulate the affected hog farm to prevent the further spread of the virus. San Miguel Corporation, the largest food and beverage conglomerate in the Philippines, announced plans for a $100 million expansion of their hog operation.

    Production

    In 2008, Philippine hog production was valued at nearly 150 billion pesos (PHP; $3 billion), 11.29 per cent higher than the previous year despite the contraction of 1.60 per cent in the volume of production. The detection of the Ebola Reston Virus (ERV) in two commercial farms in Luzon and outbreak of other swine diseases – as well as the continued increase in production and feed costs – is expected to affect the growth of the pig industry this year.

    Production ('000 metric tons liveweight)
    Source: Bureau of Agricultural Statistics
      2006 2007 2008 2006 vs. 2007 2007 vs. 2008
    Hogs 1,836.14 1,886.01 1,855.74 2.72 -1.60

    The local hog industry accounts for about 83 per cent of the total livestock production and is equivalent to almost 15 per cent of the total value of agricultural production. As of January 2009, the total number of pigs is about 13.6 million herd, of which 71 per cent are from backyard farms and 29 per cent are raised by commercial farms. The higher number of pigs can be found in the province of Bulacan with about 1.2 million head, followed by the province of Batangas (0.8 million) and Leyte (0.66 million).

    Consumption

    Total pork supply in 2007 reached almost 1.7 million metric tons, of which 97 per cent are produced locally and the remaining 3 per cent are imported. Demand is mostly for domestic food consumption which is about 98 per cent, and the balance is processed into canned or processed meat. The derived consumption of pork (excluding offal and processed meats) in 2007 was 15.07 kg.

    Per capita consumption of pork (kg per year)
    Source: Bureau of Agricultural Statistics
      2005 2006 2007
    Carcass 13.69 14.80 15.07
    Offal 3.03 3.38 3.55

    Prices

    Average livestock prices were up by an average of 12.17 per cent, with hog prices realizing the largest gain at 13.11 per cent. This was mainly due to the drop in hog production and an increase in production costs, specifically feed and fuel costs.

    Farmgate prices (PHP per kg)
    Source: Bureau of Agricultural Statistics
      2006 2007 2008 2006 vs. 2007 2007 vs. 2008
    Hogs 69.23 71.27 80.61 2.95 13.11

    Trade

    To partially offset the decline in local hog production, total pork imports increase by 38 per cent in 2008 compared to the previous year. While imports were mostly pork fats and rind for processing, there were also large increases in the importation of various pork cuts, i.e. hams and shoulders, and pork bellies. Main country sources for pork were Canada, 29 per cent and the United States, 27 per cent. Imports from the United States nearly tripled from 10,351 metric tons in 2007 to 29,575 metric tons in 2008.

    Policy

    Foot and Mouth disease (FMD)

    After having failed to secure FMD-free certification from the World Organization for Animal Health (OIE) in 2008 due to administrative issues, the Philippine Department of Agriculture (DA) has reapplied for FMD-free, with vaccination status with the OIE (see GAIN RP8012). The DA recently submitted to world animal health authorities all documents required to have Luzon certified as free of the Foot-and-Mouth Disease and pave the way for the declaration of the Philippines as an FMD-free country. The islands of Visayas and Mindanao have already been declared free of FMD.

    Ebola Reston virus (ERV)

    ERV in pigs was initially reported in October 2008 in two commercial farms in Pangasinan and Bulacan, in the main island of Luzon. An increase in pig mortality on swine farms in Luzon in 2007 and 2008 prompted the Philippine government to initiate laboratory investigations. Samples taken were sent to international reference laboratories which confirmed in October last year that the pigs were infected with a highly virulent strain of porcine reproductive and respiratory syndrome (PRRS) as well as the ERV. ERV was first isolated in Reston, Virginia in 1989, in a quarantine research facility with cynomolgus monkeys imported from the Philippines.

    Immediately after, the Philippine DA and the Department of Health (DOH) formed a joint task force and imposed quarantine on the two farms and a voluntary ban on the export of pork. Test results done by the DOH and the US Centers for Disease Control and Prevention (CDC) suggests that there is an on-going viral transmission from an unknown source in the pig farm in Bulacan and that there was past infection of ERV with recovery in Pangasinan. As a result, the Philippine government has decided to lift the quarantine in Pangasinan and immediately depopulate the Bulacan farm, which is necessary to prevent the further spread of the ERV within and outside the farm or enter the food chain. The government also announced plans to increase surveillance and monitoring of pig farms and to expand testing of ERV to other areas where there are reports of sickness in pigs.

    Moreover, the Department of Health (DOH) of the Philippines has reported that six workers from the said farms and slaughterhouses were found to be positive with ERV antigens and antibodies. To date, all close contacts of humans positive for ERV have been tested and remained free from infection. According to experts, ERV poses a low risk to human health at this time.

    Minimum Access Volumes

    Minimum Access Volumes (MAV) for pork and all other commodities subject to MAV or Tariff Rate Quotas (TRQ) have not increased since 2005, when the Philippines reach its 10th/last year commitment under the WTO Uruguay Round. According to the DA, it would not initiate any reforms to the MAV system in the meantime. Data from the Minimum Access Volume (MAV) Management Committee of the Philippine Department of Agriculture (DA) shows that in 2008, utilization rates of tariff-rate-quotas (TRQ) or MAV for pork increased from 19 per cent in 2007 to 58 percent in 2008, indicating more imports of higher-value pork cuts, such as bellies and other cuts.

    In the past, MAV usage for pork has been relatively low, due in part to the entry of large quantities of buffalo meat with a low tariff rate of 10 per cent and illegally imported pork in the market. Buffalo meat, from India, has been traditionally used in the Philippines as a substitute for pork by the local meat processing industry. MAV utilization increased significantly last year due in part to the strength of the Philippine peso (PHP) against the US dollar. The Philippine peso appreciated by as much as 13 per cent in 2008 from the previous rate.

    Tariff rates

    In-quota and out-of-quota tariff rates for MAV commodities have not changed since 2005. AFTA-CEPT tariff rates for frozen and chilled pork are expected to drop to 5 per cent while AFTA-CEPT tariffs for processed pork products are expected to be eliminated by 2010.

    China ban

    On 22 February 2009, the DA temporarily banned the importation of cattle and other animals susceptible to the foot-and-mouth disease (FMD) from China. The Department stopped the entry of cattle and other animals susceptible to FMD after the World Animal Health Organization (OIE) confirmed outbreaks of the disease in the Chinese provinces of Hubei and Xinjiang. The ban includes the immediate suspension of the processing, evaluation of the application and issuance of Veterinary Quarantine Clearance (VQC) to import these animals from China. DA veterinary quarantine officers and inspectors were also ordered to stop and confiscate all such commodities and by-products into the country originating from China.

    Marketing

    In February 2009, San Miguel Corporation (SMC), the largest food and beverage conglomerate in the Philippines announced that it has earmarked nearly PHP10 billion ($200 million) for the expansion of its food group program in the next few years. San Miguel Corporation enumerated the key components of this expansion plan as follows:

    • PHP4.89 billion ($100 million) for the expansion of the Monterey Hog Farm
    • PHP3.37 billion ($68 million) for the expansion of the Magnolia Poultry Farm
    • PHP840 million ($16.8 million) for the B-Meg Animal Feeds Program
    • PHP231 million ($4.6 million) for the Purefoods-Hormel Corporation Nuggets line, and
    • PHP215 million ($4.3 million) for the new Magnolia Ice Cream Plant.

    Further Reading

    - You can view the full report by clicking here.


    March 2009

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