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Philippines - Hog Industry Updates

by 5m Editor
27 July 2010, at 12:00am

Pig production increased by more than 1.1 per cent in value terms in 2009 while per-capita pork consumption declined, according to Pia A. Ang in the latest GAIN report from the USDA Foreign Agricultural Service.

Report Highlights

Philippine hog production, valued at 161 billion pesos (PHP; $3.5 billion), increased by 1.16 per cent in 2009. Consumption of pork, estimated at 1.357 million metric tons last year, continued to decline on a per-capita basis. Imports of pork, on the other hand, rose by five per cent in 2009, comprised mostly of pork fats, rind and assorted pork cuts and offal, mainly from Canada (37 per cent) and the United States (32 per cent). Tariff rates of pork imports from the ASEAN region were lowered to zero to five per cent from 1 January 2010. In May 2010, Zones 1 and 3 in the Luzon area were recognised by the Office International des Epizooties as FMD-free without vaccination.

Production

In 2009, Philippine hog production was valued at over PHP161 billion [1] ($3.5 billion), increased by 1.16 per cent in liveweight basis from the previous year or 1.357 million metric tons (MMT) in carcass weight equivalent (CWE).

The local hog industry accounts for about 83 per cent of the total livestock production and is equivalent to almost 15 per cent of total value of agricultural production. As of January 2010, the total number of pigs is about 13.4 million head, of which 71 per cent are from backyard farms and 29 per cent are being raised by commercial farms. The highest number of pigs can be found in the CALABARZON Cavite-Laguna-Batangas (1.76 million), followed by Western Visayas (1.65 million) and Central Luzon (1.43 million).

From January to March 2010, hog production inched up by 0.35 percent. This slowdown was manifested in the lower stocks of fatteners and tight supply of piglets as observed in Cagayan Valley, Central Luzon and CALABARZON, according to the Bureau of Agricultural Statistics (BAS).

[1] Current Prices; US$1=PHP46.36 as of 8 July 2010

Consumption

Total demand for pork in 2009 reached almost 1.357 million metric tons (CWE), of which 97 per cent was produced locally and the remaining three per cent was imported. Pork supply is mostly for domestic food consumption which is about 98 per cent, and the balance is manufactured into canned or processed meat. The derived consumption of pork (excluding offal and processed meats) in 2009 was 14.87kg, lower that the previous two years.

According to BAS, higher prices offered by traders pushed farm-gate hog prices up by 4.70 per cent in 2009.

Trade

Pork imports increased by five per cent in 2009, comprised mostly of pork fats and rind for processing, as well as various pork cuts (i.e., hams and shoulders) and offal. Main country sources for pork were Canada, 37 per cent and the United States, 32 per cent. Imports from the United States nearly tripled from 10,351MT in 2007 to 36,809MT last year.

Policy

Foot and Mouth Disease (FMD): In May 2010, the Philippine Department of Agriculture (DA) secured a certification from Paris-based Office International des Epizooties (OIE) recognizing two of the three zones (Zones 1 and 3) in Luzon as FMD-free without vaccination. The DA announced that the provinces in North and South Luzon have been recognized by the OIE as ‘free from foot and mouth disease where vaccination is not practiced.’ The application for an FMD-free declaration without vaccination for Luzon’s Zone 2 is now pending with the OIE.

Mindanao and Visayas along with the island provinces of Palawan and Masbate were already declared by the OIE as FMD-free without vaccination in 2001 and 2002 respectively. To facilitate the Philippines’ application for a FMD-free declaration by the OIE, the DA had subdivided Luzon into three areas. Zone 1 or North Luzon comprises the Cordillera Administrative Region, Region II, and the province of Aurora in Region III, Ilocos Norte, Ilocos Sur and La Union in Region I; Zone 2 or Mid-Luzon covers Region III except the province of Aurora, Region IVA, National Capital Region and the province of Pangasinan in Region I; and Zone 3 or South Luzon includes Region IV-B and Region V.

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. In February 2009, after extensive and spirited consultations with local stakeholders and main trading partners, then Philippine Agriculture Secretary Arthur C. Yap announced that the current MAV system would remain in place and that no changes would be initiated under his watch. A new Secretary of Agriculture has been appointed in July 2010.

Data from the MAV Management Committee of the DA shows that in 2009, utilization rates of tariff-rate-quotas (TRQ) or MAV for pork increased from 58 per cent in 2008 to 69 per cent in 2009, 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 percent. 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 since 2008 due in part to the strength of the Philippine peso vis-à-vis the US dollar.

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 have been lowered to five per cent while AFTA-CEPT tariffs for processed pork products were eliminated starting January 2010 in full compliance with the AFTA.

Marketing:

San Miguel Corporation: On 31 May 2010, San Miguel Corporation (SMC) shareholders approved the sale of 51 per cent of its stakes in various core businesses, which include its poultry, livestock, feeds and packaging businesses for as much as $1 billion reportedly. During the shareholders meeting, SMC announced plans to further cut down the revenue share from its traditional food and beverage businesses and create a “more even” distribution with its power, infrastructure and energy portfolio. According its Chairman, SMC is still in talks with several buyers for the 49 percent stake in food subsidiary San Miguel Pure Foods.

Further Reading

- You can view the full report by clicking here.

July 2010