The Philippine dairy industry: Gradual but steady development

 

 

 

 

In recent years, production has also been dismal compared to other countries. According to Fengxia Dong from the Centre of Agricultural and Rural Development at Iowa State University, the Philippines' highest output only reached 10,000 tonnes compared to China's 19 million tonnes, India's 20 million tonnes and Thailand's more than 800,000 tonnes. The gap is filled with imports- only 1% meets the demand while 99% of the country's dairy requirements are sourced abroad. According to the USDA, dairy products are the country's largest agricultural import after wheat and figures from the Bureau of Agricultural Statistics show that imports reached 1.78 million tonnes in 2009 up 10.56% from the 1.61 million tonnes the previous year. However, value of imports has decreased by 34.45%, from US$712 million in 2008 to US$466.72 million last year with New Zealand as the biggest importer, accounting for 40.77% or US$229.52 million of the country's shipments, followed by Australia with 19.04% (US$79.61 million); and US, 17.84% (US$71.05 million).

 

The outlook of the industry for this year is still uncertain but the government's effort to fight malnutrition through dairy programmes is expected to increase consumption in the coming years.

 

 

 

On the whole, the local dairy industry as a smallholder-based sector which is made up of three distinct groups: the smallholder producers with 1 to 10 head of milk animals; the smallholder producers with growing dairy herds numbering from 20 to 75 head of milk animals and the producer-processors that maintain farms with about a hundred milk animals or more and can operate a milk pasteurising plant as well as undertake marketing of milk in urban centres.

 

According to the National Dairy Authority, there are roughly 8,000 dairy farming families in 223 families nationwide. These farms pour milk to over 100 dairy cooperatives accounting for 23% of national liquid milk supply - 11 million kilogrammes of milk from some 8,900 milk animals. The local dairy herd is composed of cattle and buffaloes mostly sourced from crossbred (e.g. Holstein) animals from Australia and New Zealand. Liquid milk is the main produce of the local dairy sector. On the commercial side, global food leader Nestle and local milk giant Alaska Milk Corporation have been the dominant players of the market.

 

Despite being a PHP65-billion (US$1.44 billion) industry, it never became as prominent as with the swine and poultry sectors due to the following factors outlined by NDA: Intermittent support from the government, shortage of dairy stocks, limited industry entrants, competition with cheap imported milk powders and trained technicians and farmers leaving the country to work in dairy farms in New Zealand and Australia.

 

Yet, there have already been moves in effort to give the sector its much-needed boost. NDA chairman Orkhan Usman announced the government's target to procure 11,000 heads of dairy animals to increase production and reduce the country's dependence on imported milk. Of the 11,000 heads, seven thousand will be buffaloes and four thousand are cattle which will be dispersed to farmers. Usman said the administration has been on track in beefing up the country's dairy animal stocks long before the Food and Agriculture Organization issued a worldwide alert on dwindling livestock population that is seen to reach critical levels in the years ahead.

 

Usman also said former Agriculture secretary Arthur Yap was able to unlock the so-called PL-480 funds of the USDA under the custody of the Department of Budget and Management with a total amount of PHP450 million (US$10.11 million) which will help imported stocks to be placed in the multiplier farms which will undergo artificial insemination to effectively propagate more dairy animals.

 

The government has also approved the mandate of reducing the level of drug residues which will include dairy breeds. According to BAI, the measure will effectively look into drug filtrates which have been plaguing livestock farms for so long and have been a matter of concern for foreign trading partners. Though the industry has never encountered major health problems, the directive will assist dairy farmers produce quality milk and help them conquer a big chunk of the market which is currently dominated by processed milk manufacturers.

 

On the other hand, conglomerates are doing well. Net earnings of Alaska Milk Corporation has rose up to more than four-fold last year to PHP1.4 billion (US$21.79 million) due to intensified marketing activities as well as improvements in logistics and supply chain managements. The company's registered sales reached PHP10.59 billion (US$229.84 million) in 2009, up 6% on sustained growth in sales volume across its core milk business.

 

Nestle Philippines meanwhile formally opened its new PHP700-million (US$15.58 million) ice cream and chilled dairy factory in Pulilan, Bulacan. Company executives reveal that the plant is one of Nestle's long-term investments and is touted to become a benchmark for manufacturing world-class ice cream and chilled dairy.

 

The new developments may well translate to new opportunities for the dairy industry which has been left behind by the much vibrant hog and poultry sectors. However, stakeholders are still confident that despite uncertainties, the future of dairy industry is still brimming with potentials waiting to be tapped.