FBA Issue 34: September / October 2010

 

 

 

Three years ago, the Philippine layer and egg industry underwent a crisis, whereby a supply glut forced breeders to sell eggs at PHP4.00 to PHP4.50 (US$0.08 toUS$0.10). With production at PHP5.00 to PHP6.00, this made for a massive net loss margin of around 30%.

 

This year, the industry is facing a climate-induced headache. After a promising first quarter, an intense, El Niño-induced second quarter heat wave triggered massive layer mortality.

 

Farmers are putting their hopes in the rainy season, which begins in June. The recent transformation of El Niño into La Niña promises to cool down the layers' environment.  Unfortunately, breeders believe the prolonged drought inflicted enough casualties to profoundly lower hen inventories through the end of this year.

 

 

The Bureau of Agricultural Statistics (BAS) reported a 4.43% gain in chicken egg output in the first three months of 2010 due to increased inventory of layers in Central Luzon, CALABARZON, Central Visayas and Northern Mindanao. Their production's monetary value registered a 3.11% increment to PHP8.51 billion (US$185 million), up from PHP8.23 billion (US$178 million) at the same time last year. 

 

However, these BAS statistics did not included the months of April and May when extreme temperatures reached 40ºC. "They are died of heat stroke because of the severe scorching weather. The abnormally high temperature even affected the eating pattern of the birds. Before, feed consumption was 110 grams, now it is less than 100 grams. They can't even drink properly because even the water is hot," lamented Greg San Diego of the National Federation of Egg Producers of the Philippines.

 

He added that while feed cost component is already at PHP2.50, farm gate small eggs per piece are priced at less than PHP3.00, medium sized eggs are PHP3.40 to PHP3.50 and the large ones at PHP3.70. "Farmers are already at a loss," he said. "We used to enjoy a production peak of 96%, now even 90% is already impossible because of the El Niño." 

 

San Diego is grateful that soymeal and corn prices were stable but he fears that the erratic flow of feed prices based on market demand and other factors may further impact layer production this year.

 

Moreover, electricity costs which rise during the summer months due to air conditioning demand, have disproportionately tripled this year.  San Diego tells of one layer breeder who temporarily stopped breeding due to the dizzyingly escalation in power rates.

 

"They were using a modern CCS or climate control system to ease the effects of the summer heat. Even in Malaysia, seldom you would see raisers using this equipment because this is expensive and is the newest technology used in layer breeding. In CCS, you are using bigger than the usual fans of the automated ventilation. So when they stopped the use of CCS and eventually their production, I asked them why and they said they may not be able to recoup costs due to high power rates," he said.

 

San Diego added that CCS is cost-effective for broilers, where they only use it for thirty days until they are well-brooded. But in layers, CCS is a necessity since the birds are laying eggs daily.  "However if the electricity rates are too high, the CCS isn't good or advisable because production costs will be really high, there would be no profit at all" tells San Diego. 

 

Other farmers have resorted to second-rate equipment like blowers to ease the heat but the ventilation it gives is humid, and they too, consume electricity. "That's our biggest problem now, the power rates. We are also concerned on how to market our eggs because the prices are too low. I think we have now is not just double whammy but a triple whammy," complains San Diego.

 

While the situation is too far gone for many breeders, layer stocks may recover later in the year. "Breeders who lost their birds to heat stroke may not eventually recover. But once the weather improves, I hope things would change. Actually we're concerned about the price [relative to the high production costs], we do not know yet if there will be problems in production throughout the year. We have to wait and see."

 

 

On the brighter side of things, with so many layers culled in the early year's adverse weather, a layer shortage may cause egg prices to rise. This should coincide with a fall in electricity rates. The net result should be that by year's end, layer profit margins should return back to their historic norms.