Philippines Livestock and Products Annual 2006

By USDA, Foreign Agricultural Service - This article provides the pork industry data from the USDA FAS Livestock and Products Annual 2006 report for the Philippines. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.

24 September 2006

8 minute read

Report Highlights

Despite reported sporadic animal disease outbreaks, hog production is still forecast to expand in 2006 due to an increase in the number of breeding stock imported last year as well as a large rise in the number of live births. However, the decline in live animal births and the continuing decline in the importation of live cattle are expected to limit the growth of the Philippine cattle industry. Ensuing high retail price of red meats as well low purchasing power of consumers will likely result in a decrease in red meat consumption, as consumers shift to other lower priced protein substitutes.

Executive Summary

Despite reported sporadic animal disease outbreaks, hog production is still forecast to expand in 2006 due to an increase in breeding stock imported and a large rise in the number of live births last year as well as the prevailing favorable swine prices. On the other hand, the decline in live animal births and the continuing decline in the importation of live cattle are expected to limit the growth of the Philippine cattle industry. Ensuing high retail price of red meats as well as low purchasing power of consumers will likely result in a decrease in red meat consumption, as consume rs shift to other lower priced protein substitutes. Despite a decline in domestic beef production, total beef imports contracted by about 16 percent in 2005 as a result of weak demand for beef and beef products. Moreover, the decline in beef importation observed in 2005 is believed to be the result of a shift from manufacturing grade beef to lower priced mechanically deboned meat (MDM) of chicken/ turkey by the meat processing industry.

Production

Swine: According to the Bureau of Agricultural Statistics (BAS), the total supply of swine in the country was estimated at 36.8 million in 2005, an increase of about 4 percent from the previous year due mainly to an 8 percent growth in live births as well as a rise in imports of breeding animals. The strong demand for pork due to the continuing AI concerns in the region as well as rising farmgate prices have also contributed to the strong growth of the hog sector in 2005, reversing the previous year’s trend. It is estimated that hog production, valued at P126 billion ($2.3 billion), contributes as much as 82 percent to total livestock production.

Despite reported outbreaks of porcine diarrhea syndrome (PDS) and other animal disease concerns in some of the major hog producing regions, output is still forecast to expand this year due to an increase in the importation of breeding stock. During the first half of 2006, hog production was estimated to have grown by as much as 4 percent and is expected to remain strong throughout the second half of the year. Output will likely continue to expand in the next year due to the continuing trend of favorable prices, giving the industry an incentive to increase production.

While the share of commercial hog operations is fast growing, up 5 percent from only 20 percent a few years ago, the Philippine hog industry is still comprised mostly of backyard operations. At present, about 75 percent of total swine stocks are raised in backyard operations while only 25 percent come from commercial farms. More than half of the total swine population came from the top five producing regions namely: Central Luzon (13.8 percent), CALABARZON1 (12.5 percent), Western Visayas (9.8 percent), Eastern Visayas (7.5 percent) and Central Visayas (7.2 percent).

In 2005, annual average farmgate price of swine increased by 4.49 percent, from P68.86/kg ($1.23/kg) in 2004 to P71.88 ($1.30/kg) last year. Farmgate prices have risen by about 40 percent over the last two years from an average of P51.29/kg ($0.92/kg) in 2003. As of June 2006, the average farmgate price was P86.68/kg ($1.64/kg). The continued rise in farmgate prices has been mainly attributed to increased feed cost, particularly of corn and imported soybean meal, high costs of animal biologics and the rise in transportation costs.

The supply chain for the Philippine hog industry starts with procurement of feed ingredients sourced either domestically or from imports. Feed milling activities are integrated with operations of medium and large commercial farms. Live hogs are then brought to slaughter houses and eventually are sold through wholesale and retail distribution channels. Large integrators also have grandparent (GP) stock farms supplying their sow fattener operations, either by contract breeding for sows or contract growing for fatteners.

Consumption

Philippine GDP grew 5.1 percent in 2005, slower than its projected target of 5.3 to 6.3 percent. The slower growth has been attributed to weaker farm output and slow export demand. Philippine GNP, however, rose by 5.7 percent last year, buoyed by remittances from overseas workers, although still lower than the 6.2 percent GNP growth in 2004. Surprisingly, the significant increase in overseas remittances (which have fueled personal consumption in recent years) did not boost personal consumption to expected levels.

Many analysts have attributed the weak growth in consumption spending to the prevailing political uncertainty in the country. Average inflation was in the 7.7 to 7.9 percent range in 2005, and is projected at 8.0 to 8.5 percent this year. This year’s GDP growth target is between 5.7 to 6.3 percent, lower than the previous GRP estimate of 6.3 to 7.3 percent. Some private analysts, however, predict that the 2006 Philippine GDP growth rate will be similar to last year’s level. Rising consumer and oil prices, as well as the imposition of new and additional taxes, are expected to produce shifts in the consumption pattern of the average Filipino.

Filipinos are relatively large consumers of pork and are known to generally prefer pork to chicken or beef. However, as a result of the all time high retail price of pork and beef, a slowdown in total red meat consumption for 2006 is predicted, as consumers shift to other lower priced protein substitutes such as fish. Weak consumer prices and lower purchasing power of Filipino consumers have resulted in a decline in beef and chicken consumption. Pork consumption increased slightly last year, likely fueled by concerns about continued AI outbreaks and other animal diseases in the region.

Trade

Despite a decline in domestic beef production, total beef imports contracted by about 16 percent in 2005 as a result of weak demand for beef and beef products. Exports from relatively new supplier Brazil, declined by as much as 34 percent, while imports from other traditional beef suppliers India, Australia and New Zealand also declined. Imports of feeder cattle also declined from already low levels due to high import prices, further contributing to the tight beef supply situation in the country.

In 1990s, commercial feedlot fattening operations emerged and proliferated on account of the huge demand for meat and meat products brought about by the growing Philippine population, changing food preferences and import liberalization. However, the industry was heavily dependent on the importation of feeder stocks coming mostly from Australia and New Zealand. From 1990 to 1999, feeder cattle importation totaled 1.16 million head compared to breeder cattle importation of only 25,000 head last year. With the high dollar-peso exchange rate and increasing cattle import prices, importation decreased tremendously from about 250,000 to 300,000 head in 1990’s to only 25,0000 head in 2005.

About 98 percent of Philippine beef imports are boneless beef, mostly of manufacturing grade, used to produce processed meat products (i.e., hotdogs and canned corned beef). In 2005, the top suppliers of beef to the Philippines were India (67 percent), Brazil (25 percent), Australia (4 percent) and New Zealand (3 percent). The decline in beef importation observed in 2005 is believed to be the result of a shift from the use of manufacturing grade beef to lower priced mechanically deboned meat (MDM) of chicken or turkey by the meat processing industry. According to BAI, imports of MDM chicken increased by more than 300 percent last year, from just under 3,000 MT in 2004 to over 12,000 MT. Currently, over 40 percent of the total domestic beef supply is sourced from other countries.

Total pork imports increased slightly in 2005, with main pork and processed pork supplier China increasing exports to the Philippines by nearly 50 percent. About 60 percent of all Philippine pork imports are processed pork products (i.e., luncheon meat, sausages, etc.), mostly originating from China. Major country suppliers of pork were China (60 percent), the United States (8 percent), Germany (7 percent) and France (6 percent).

An uptrend in imports of live breeding stock of swine was observed in 2005, which will likely contribute to an increase in hog production this year. In 2005, Minimum Access Volume (MAV) utilization for fresh/frozen/chilled pork dropped from 19 to 10 percent. While beef imports make up a significant portion of total beef supply in the country, fresh/frozen pork imports represent less than 10 percent of domestic supply. Despite a MAV volume of 54,210 MT last year, imports of pork have not been significant due primarily to prohibitive tariff rates of 35 percent (in-quota) and 40 percent (out-of-quota). There have been no imports of pork (HS 0203) outside the MAV.