These huge numbers indicate that the Philippines is obviously a good market for dairy products. But local stakeholders admit that it would take some time before the country can be fully liberated from the clutches of imports but they are optimistic that steps are already being taken for this objective to fully materialize.

 

 

Data from the Bureau of Agricultural Statistics show that in 2009, fresh milk production in the country stood at 14.3 million litres, 3.34% higher than last year's level of 13.8 million litres. Of this total, 8.6 million litres or 60.6% were cow's milk, 5.4 million litres or 38.1% were carabao's milk and 0.19 million litres or 1.3% were goat's milk. Last year's imports reached 1,789.7 thousand tonnes, 10.56% higher than the 2008 level of 1,618.71 thousand tonnes. However, there was a decrease of 34.5% in the value of dairy imports from the 2008 level of US$712 million to US$466.7 million in 2009. The decrease was attributed to the lower prices of dairy prices in the world market. New Zealand was the leading source of imported dairy products, supplying a total of 729.72 thousand tonnes or 40.77% of the country's total dairy imports. Australia was the second biggest supplier at 340.81 thousand tonnes or 19.04%, followed by USA with 17.84% at 319.29 thousand tonnes.

 

From January to June 2010, imports have already reached 1,018 thousand tonnes valued at US$354.64 million. Due to increasing demand, imports are projected to soar further by the end of this year.  In local production, amid earlier projections of a 4 to 6% increase in 2010, the National Dairy Authority however expects a zero growth rate due to the El Niño-induced drought which parched grasslands which makes feeding more difficult and also forced farmers to slaughter dairy animals for fear of heatstroke.

 

According to NDA, climate and demand will dictate the flow of the dairy business for this year although they are hopeful that despite the obstacles, an improvement in production is still likely.

 

 

According to the Animal Production and Health Commission for Asia and Pacific, two distinct sectors make up the Philippine milk industry: a huge importing processing sector, among which are dairy giants Alaska Milk Corporation and RFM Foods Corporation that supplies 95% of the country's milk requirements and a small milk producing sector that provides the rest of the supply. These smallholders are usually composed of cooperatives with farmer-members owning 1 to as much as 75 dairy herds.

The (APHCA) pinpointed several major constraints as to why the dairy industry couldn't take off and these are:

Despite the odds, the NDA says there are already 134 dairy cooperatives which likely explain the decrease in imports by 11.66% in 2008, wherein liquid milk imports went down by 17%, automatically upping local production by 27% from 23% in 2007.

 

However, there is one obstacle that lessens the competitiveness of the dairy industry. According to Representative Edcel Lagman of the 1st District of Albay, the Philippines has the dubious distinction of being the only country in Asia that has a single digit tariff  of 3% on milk and milk products while the dairy levies in India, Japan, Vietnam and Thailand are more than ten times. Lagman said the tariff rate is "abysmally low not only compared to the rates imposed by our neighbouring countries but also very low compared to the bound rates allowed by the General Agreements on Tariffs and Trade of the World Trade Organization". In fact, he adds that the actual applied tariff of 3%, per NDA, is the same rate "enforced by industrialized countries with highly developed dairy countries.

 

The NDA's proposal of imposing an 18% bound rate for liquid milk was recently turned down by the Tariff Commission, thereby hurting the sector's chances to elevate itself from its infancy stage.

 

Lagman and the NDA know too well that it will be hard-pressed to fully develop the local industry if low taxes will continue even to the detriment of the fledgling dairy sector and to the disadvantage of small cooperatives whose local milk will never be able to compete with the much cheaper imports that are heavily subsidised by their governments.

 

Although the industry has welcomed foreign investments such as Fonterra and Land O' Lakes, it is not sufficient to prop up the industry since small farmers only engage in production but not in processing.

 

Given the situation, the obstacles are seemingly insurmountable but both trade players and NDA know once right policies are in place plus a very much needed support by the private sector, particularly by the commercial producers, the dairy industry will be able to fulfil its potentials and meet head-on with the global challenges.