FEED Business Worldwide - April, 2012

 

 

by Gemma C. DELMO in Manila, with additional inputs by Eric J. BROOKS

 

 

Being a highly politicised crop, issues about corn usually ignite controversies within Philippine agribusiness.

 

The latest incident occurred d late last year, when the Philippine Association of Feed Millers Incorporated (PAFMI) and the Pork Producers Federation of the Philippines (ProPork) sought government approval to import 100,000 tonnes of yellow corn duty free during 2012's January to March first quarter. The request was a surprise: Our previous 2011 article on Philippine corn projected that the country expected a harvest surplus and would not require imports.

 

PAFMI and ProPork justified the request by warning of a possible first quarter price hikes and corn shortages, due to the domestic supplies destroyed by two late 2011 typhoons. Their request sparked a heated conflict between feed mills, livestock farms and their corn farm supply chain partners, with the latter alleging a gross distortion of facts.

 

 

 

Farmers group Samahang Manggagawa protested the move, emphasizing that importation should be the last resort of feed millers and livestock farms, especially at a time when corn farmers suffered devastating losses brought by on by two consecutive, late year typhoons.

 

The farmers' group blamed the situation on corn cartels based in the major producing areas of Luzon and Isabela provinces, as they have reportedly hoarded corn stocks, in hope of reaping higher prices. And there does appear to be truth to their allegations: No less than agriculture secretary Proceso Alcala confirmed that 90% of the corn from last season's harvest had been stored in various warehouses long before the year-end typhoons hit.

 

With such evidence in mind, Samahang Manggagawa added that the typhoons did not cause sufficient damage to justify an increase in corn prices, much less import reliance. They noted that even as corn prices went up, farm gate prices of pork went down from PHP110/kg (US$2.59/kg) in January 2011 to its March 2012 price of PHP80/kg to PHP90/kg (US$1.88/kg to US$2.12/kg).

 

Yet, pork's retail price has not moved from PHP155/kg to PHP180kg (US$3.65/kg to US$4.24/kg). Samahang Manggagawa blames this on the corn hoarders who have benefited on the price, rather than on the farmers, low-end workers or small operators that have suspended or closed down due to unreasonably high feed costs.

 

Samahang Manggagawa's sentiments received additional support from another farming group, the Philippine Maize Federation (PhilMaize). PhilMaize president Roger Navarro insisted that the government should consider buying corn as a form of assisting typhoon damaged farmers, as it has broken its promise to buy 200,000 tonnes of yellow and white corn.

 

With department of agriculture statistics showing farms suffering typhoon-relate losses of PHP522 million (US$12.3 million), Navarro points out that importing corn at a time like this would only make matters worse.

 

 

 

At first, to the delight of the corn farmers, the department of agriculture rejected the corn importing proposal, stating there is already enough domestic and imported grain to supply the local requirements. Even so, feed mills and livestock farms remained firm on their insistence that imports are needed, as corn prices touched PHP18/kg (US$10.76./kg) in January 2012, much higher than the average of PHP12/kg (US$7.17/bushel) a year earlier. –And their complaint is legitimate, as CBOT corn stayed around US$6.40/bushel in the first few months of this year.

 

One reason the agriculture department rejected the proposal is because 100,000 tonnes already allowed in duty-free by law was already on its way, but would not come in on time to alleviate early year corn shortages. With the already permitted imports on their way, it expects 25% of January to April livestock demand to be met via imports, even with this new importing request turned down.

 

Moreover, feed and livestock holders intend to apply for an import permit in the next quarter, and the government has said it would consider such applications on a case-by-case basis.

 

But even that may not be necessary: Shortly after their initial application was rejected, feed mill bought 56,000 tonnes of yellow corn, which arrived in late February –and being from Southeast Asia's AFTA trade zone, it is not subject to the importation restrictions of other foreign corn. An industry executive said this corn was bought at a total price of US$327/tonne (US$8.23/bushel) from Thailand. However, it was slapped at a duty of only 5%, as it was imported under the ASEAN Free Trade Agreement's (AFTA) common effective preferential tariff.

 

But as it turns out, domestic corn farmers were in for an even bigger headache, as the government also approved the duty-free shipment of 491,000 tonnes of feed wheat from Australia for the first quarter of 2012.