September 22, 2006

 

Hog production to expand in the Philippines

 

 

Hog production in the Philippines is forecast to expand in 2006 due to an increase in breeding stock imported, more live births last year and favorable swine prices, according to a USDA GAIN report.

 

This contrasts with that of the country's beef production which has been plagued by the decline in live animal births and fewer importation of live cattle, along with disease outbreaks.

 

However, high retail price of red meats and low purchasing power of consumers are likely to result in a fall in red meat consumption, the report noted.

 

The swine population in Philippines rose 4 percent in 2005 over the previous year to reach 36.8 million head, largely due to an 8 percent growth in live births and an increase in imports of breeding animals, the report said. 

 

The strong demand for pork as bird flu raged in the region and rising farmgate prices  also contributed to the strong growth of the sector in 2005, the report said.

 

In fact, hog production, valued at PHP126 billion (US$2.3 billion), may have contributed as much as 82 percent to total livestock production last year.

 

Outbreaks of porcine diarrhea syndrome (PDS) and other animal disease have not put the brakes on the industry, whose output is forecast to expand as more breeding stock were imported, USDA noted.

 

During the first half of 2006, hog production was estimated to have grown 4 percent and is expected to remain strong throughout the second half of the year. 

 

According to USDA estimates, output would likely continue to expand in the next year due to favourable prices.

 

While the share of commercial hog operations, which supplies 25 percent of production in the industry, is fast growing, most hogs are still supplied through backyard operations, USDA said.

 

In 2005, annual average farmgate price of swine increased by 4.49 percent to P71.88 ($1.30/kg) compared to last year. This year, farmgate prices have risen sharply by about 26 percent to P86.68/kg (US$1.64/kg) as costs increased, specifically that of animal health, transportation and feed such as corn and imported soybean meal.

 

Overall weaker farm output and slow export demand has led to the slower than expected GDP growth of the Philippines.

 

Political uncertainty in the country is leading to the weak growth in consumption. Rising consumer and oil prices and new taxes are expected to cut consumption further. 

 

Filipinos are relatively large consumers of pork and are known to generally prefer pork to chicken or beef.

 

Weak consumer prices and lower purchasing power have resulted in a decline in beef and chicken consumption whereas pork consumption increased slightly last year. The trend is likely the result of bird flu concerns in the region.

 

However, as pork and beef prices have risen substantially, a slowdown in total red meat consumption for 2006 is predicted. Retail price of pork in 2005 of P141.61/kg (US$2.57/kg) was 4 percent higher than the previous year.

 

Imports from China, Philippines' main pork and processed pork supplier, increased  by nearly 50 percent in 2005.

 

About 60 percent of all Philippine pork imports are processed pork products, mostly from China. Major suppliers were China (60 percent), the US (8 percent), Germany (7 percent) and France (6 percent).

 

Pork import levels were low due to prohibitive tariff rates of 35 percent (in-quota), as opposed to that of beef where a significant portion is imported.

 

Pork imports make up less than 10 percent of supply. 

 

The Minimum Access Volume for 2006 remains unchanged from the previous year's.  This level is expected to be maintained until a new WTO agreement is reached. 

 

Even so, pork imports are expected to remain low as most Filipinos preferred freshly slaughtered meat. Furthermore, there are restrictions on US beef imports due to mad cow disease. 

 

Ninety percent of Filipino meat products are still sold in wet markets. Since refrigeration in Philippine households is limited, fresh beef and pork are cooked very soon after slaughter.

 

Demand for processed meat products is expected to remain strong, especially that for canned food. Due to low purchasing power, demand for frozen food would remain price-sensitive. 

 

Demand for imported processed food products would remain strong as interest grows in western cuisine. More dual-income families and the increasing popularity of branded products also fueled growth in this sector. 

 

Meanwhile, the domestic meat processing industry is forecast to grow as well. The growing demand for processed meat, estimated to be about 60 percent of the domestic meat market, is expected to drive this growth.

 

Canned goods have strong growth potential as it enjoys a wide distribution network--from supermarkets to convenience stores to even rural grocery stores.

 

The processed meat industry is hoping to expand into the international market to leverage on the fact that the country is relatively free from major animal diseases.

 

However, export growth would likely be held back by lack of new investment,  stricter sanitary requirements for food products and limited sources of meat as raw materials.