After a half decade of stagnation in the mid 2000s, the years since 2008 have seen Philippine dairy milk output rise at an average rate of 5.3%. The trend's momentum is extending into 2013, with the USDA expecting dairy output to rise another 4.8%, to 22 million tonnes. This is 33% more than five years ago and on track to boost output by 50% in the eight years leading to 2016.  As positive as all this sounds, the industry is not even where it was forty years ago. It needs to reconquer the fresh milk sector before it can set itssights on higher goals.

Although the Philippines is not expected to become a producer of processed dairy products any time soon, at this point, nearly 35% of the country's ready-to-drink (RTD) milk is now domestically produced, higher than the 25% at the turn of the century. The bad news is that despite such impressive looking progress, after years of imports racing ahead of production, domestic output is barely enough to keep up with annual RTD milk consumption growth.

 

Such is the industry's weak position that the National Dairy Authority says their focus will be on the liquid milk or ready to drink milk (RTD), since the local sector cannot directly compete with the imported powdered milk from which most cheeses and yogurts continue to be made.   The NDA is confident of achieving this as liquid milk production in 2012 rose by 12.16% to 18.45 million litres (20.48 million tonnes) from the 16.45 million litres (18.26 million tonnes) produced the previous year.

 

For 2013, the NDA aims to produce 20 million litres (22 million tonnes) of milk coming from the forty thousand heads of dairy animals produced in 43 multiplier dairy farms last year. The agency also plans to produce 700 milking cattle to sustain local growth and bring the country's RTD milk self-sufficiency level to above 40% within a few years.

 

Granted, when total dairy demand is taken into account, both the NDA and agriculture department admit that the country has still a long way to go before the Philippines can keep up with other countries' progressive dairy industries. NDA data shows that local production only contributed 0.9% of the milk used in fresh and processed dairy products in 2011. Whereas there is limited domestic production of RTD milk, all higher value-added, processed dairy lines rely almost exclusively on imports.

 

Imported milk powder for from New Zealand, Australia, France and the United States are needed to bridge this large output gap. Although there is no way of meeting this supply shortfall anytime soon, secretary of agriculture Proceso Alcala believes that developing the local dairy industry is an effective strategy for reduce rural poverty.

 

One dairy animal can generate PHP7,000  (US$166.20) profit a month and a well-trained farm family can raise six animals which can earn them PHP40,000 (US$949.68) to PHP50,000 (US$1,187.10) monthly, which is approximately 2.8 times more than the Philippines per capita GDP.  NDA Administrator Grace Cenas says dairy cows produce milk for 300 days after they give birth while raising their calves, rest for two months and get impregnated again.

 

 

 

Although both the microeconomic and macroeconomic imperative for boosting dairy output is there, the industry's woeful state can only be appreciated from a historical perspective: Philippine dairy production was already at 20 million tonnes in the late 1960s, when the Philippine population was less than half of today's size.

 

Fluid milk production peaked at 28 million tonnes in 1976, when it equalled consumption of the same amount. Unfortunately, during the latter half of the reign of Ferdinand Marcos and throughout the years Corazon Aquino, Fidel Ramos and Joseph Estrada ruled, output fell into a long-term decline while consumption took off.

 

By 2002, output had sagged to 13 million tonnes, amounting to only 27% of RTD milk consumption of 48 million tonnes, with imports bridging the output gap. This year, output will have grown to 22 million tonnes, 69% above its 2002 volume –but consumption will have also have risen, by 50%, to 72 million tonnes.

 

So while domestic RTD milk production is inching up slightly faster than demand, it still has a long way to go before anything near total self-sufficiency can be achieved. Progress has been made but the following had to happen: Domestic feed costs must fall and stay well below dairy prices, to create the strong incentive for rural producers to expand their herds, which must increase at an even faster pace than they have over the last five years.