According to the Philippine Association of Feed Millers Incorporated (PAFMI), the continuous production decline was attributed to increasing cost of feed inputs such as soymeal, fishmeal, rice bran and coconut oil, which led to significant and sustained decrease in backyard hog raisers population - the biggest livestock business in the country and accounts for 60% of the total feed output. Animal diseases also contributed to the slump.

 

Currently, 60% of the local feed business is composed of commercial feedmillers or those who are solely engaged in the feed manufacturing business. Another 10% are the integrated farm feedmillers or those who are engaged in either livestock and poultry production and at the same time sell feeds commercially, while 30% are the home mixers or backyard feedmillers or those who produce feeds for their own farms.

 

PAFMI said that 2009-10 production drop is estimated to reach 6.5% as against the 2008-09 output. While performance for this year remains to be seen, stakeholders are already bracing for the worst but at the same time hopeful for a better state of the industry.

 

 

 

PAFMI cites that last year's relentless rise of grain prices were mainly responsible for sector's production woes and the group noted several reasons for the price jump. Foremost is the push to produce corn-based biofuels in the US. The US, which exports 66% of the world's corn, has already consumed 25% of the grain for ethanol in 2008 as compared to only 5% in 1997.

 

Rising fuel prices is also another big factor. From US$38 to US$60 a tonne in 2009, fuel prices have already reached US$60 to US$110 tonne as of April 22, 2010 which makes production and transport of agricultural commodities costlier. PAFMI said it costs 83% more to ship grain from the Gulf Coast to Japan and 97% more from the Gulf Coast to Europe.

 

Trade restrictions have also strained tight supply, hence, adding pressure on prices. According to PAFMI, some major exporting countries have introduced or increased export taxes, bans and other restrictions on agricultural products to keep down their local prices.

 

PAFMI also noted the weather aberrations such as heat waves, droughts, excessive rains in big-grain producing countries have taken a toll on crops in the past several years, thus resulting to falling world cereal stocks which jacked up grain prices.

 

The booming economy and income growth in Asia, particularly in India and China, have also intensified grain costs. With diets moving away from starchy foods toward more meat and dairy, especially in China where per capita meat consumption has increased 150% since 1980, PAFMI said more grain is now needed to feed livestock which means there is less for human food.

 

Based on PAFMI's 2010 price monitoring, the price increase for feed ingredients per kilo was prominent of both local and imports--corn prices were pegged at PHP11.80 in January to PHP16 in December; feedwheat from PHP12.30 to PHP16.00; rice bran from PHP8.50 to PHP11.50 and crude coco oil from PHP34 to PHP77. If it is any indication, these figures may probably reflect this year's further price flow of feeds, thus, pushing higher costs of meat and meat products in the market.

 

 

 

Figures from the Bureau of Agricultural Statistics show that last year's corn production of 6.38 million tonnes went down by 9.34% from the 2009 record due to the long dry spell in the first nine months of the year.

 

Significant decreases were registered in the Cagayan Valley, SOCCSKSARGEN (South COtabato, Cotabato, Sultan Kudarat, Sarangani and General Santos City), Western Visayas, Northern Mindanao and the Cordillera Autonomous Region. BAS said the fourth quarter posted an increase in production but this was not enough to cover for the decreases recorded earlier.

 

However, that was last year and 2011 would most likely be a different scenario for the corn sector, according to Dr. Arturo Salazar of the Institute of Plant Breeding from the University of the Philippines-Los Banos (UP-IPB). He believes that corn production will be on the rise due to the establishment of several post harvest facilities in some provinces. ''We are now addressing the issue on post harvest because this has been our problem particularly during the wet season. Since we receive two metres of rain every year and corn doesn't have a shell like that of rice which protects it from moist, these facilities will help boost production this year.''

 

The Reina Mercedes Corn Processing Centre (RMCPC) in Isabela province in southern Philippines is the latest post harvest infrastructure which is touted to be the biggest in Southeast Asia. The US$11.5-million facility boasts of 200,000-tonne processing capacity as well as state-of-the-art silos that can store up to 60,000 tonnes. There is also the US$790,000 corn processing and drying facility that will be constructed also in Isabela this year through a funding by a private Korean company as well as a planned similar facility in Cagayan.

 

Another convincing reason why Salazar is setting high hopes for the sector is the efforts of some private companies to produce superior corn varieties. These yields, he said, are of a much better quality that will likely boost prices.

 

However, what concerns Salazar is the entry of cheaper substitutes, such as feed wheat. In recent news, Philippine feedmillers are reported to import 300,000 tonnes of feed wheat from Australia priced at US$290 per tonne at zero duty under the Australia-New Zealand - Asean Free Trade Area. The grain's landed price is supposed to be cheaper that of local corn which is currently priced at PHP15 to PHP16 a kilo.

 

While he understands the sentiments of feed producers for cheaper feed grains, Salazar stresses that the priority should be the corn farmers. ''The government should balance everything and the first thing it should do is to manage importation because once the corn farmers are discouraged from planting, it will entirely the sectors that are depending on it -feed, livestock and food industries.'' 

 

Months after the Asean Free Trade agreement was implemented, there were attempts to export corn at a lower price. ''Just to boost the morale to say that from a perennial importer, we are now an exporter,'' chides Salazar. However, this move was halted by the livestock raisers, stating that that corn farmers should sell it to them rather than ship it overseas. ''The exports were an attempt to stifle the sinking prices of corn and save the industry. The (AFTA) agreement was meant to lower the tariffs and move the goods freely. It was a commendable action of the corn sector to export but I think the basic idea of the accord was the capacity of the country to compete and I think we're still not capable of doing it unless the right tariff protection is in place,'' he said.  He added that exporting countries are usually shipping their old stocks of corn as they are using the fresh harvest. ''That's why it's important to have domestic corn available, at least we are assured of the supply.''

 

While some livestock groups cast doubts over the entry of Thai conglomerate CP Group in local shores for fear that this would jeopardise domestic animal trade, Salazar said that this is a welcome development for the corn industry since this would entice more construction of corn post harvest infrastructure.

 

As other Asean countries frown over genetically-modified corn, the Philippines has fully embraced it. Salazar revealed that most seed companies are selling GM corn and shunned the traditional varieties since it is medically-proven that this does not threaten human health. However, he cautions the planting because it causes soil erosion, thus, diminishing the soil's natural nutrients.

 

The onset of La Nina phenomenon is now battering the country with continuous rains and devastating floods.  However, Salazar is confident that this freak weather pattern will not affect production as corn farmers would just adjust their planting period. ''It's just a matter of proper timing and farmers in the past have overcome La Nina. Plus, corn is mostly planted on elevated areas so when floodwaters come, it will just drain out. I don't remember a La Nina destroying corn crops unlike the El Nino because corn is planted on the uplands, they are naturally rain-fed and they don't easily get washed out by floods.''

 

Overall, Salazar is confident that 2011 will be a good year for the corn industry. ''I think the industry has learned from its mistakes in the past and I believe the government will handle the situation, particularly the climate change, well.

 

 

 

While Thailand, Indonesia and even Vietnam are enjoying robust soy production, the grain's condition in the Philippines seemed to be on the doldrums. According to Elmer Enicola, a researcher from the UP-IPB, local soy production is less than 1,000 hectares in more than a decade. Why the dismal yield? Enicola reasons that farmers would always want a crop that is profitable and soy is not among them. ''Unlike corn where prices are protected by tariff, soy would always follow the prices in the world market. So naturally prices would always be cheaper for soy and of course, it will be set aside,'' he explained.

 

Although the government has imposed a 3% tariff for soy, Enicola said animal raisers would oftentimes request a zero duty for the grain but they cannot do the same for corn which is shielded by the government's tariff programmes upon the lobby of corn farmers.

 

Another reason why soy has not fully taken off is its un-maximised utilisation. Enicola illustrates that in Thailand, Indonesia and Malaysia soy, is also used for human food aside from animal feed. Only rice and corn serve that similar purpose in the Philippines. ''Soy is part of their diet and also as part of their food security programme, while we only do it with rice and corn. Even if we incur loss, we still plant them not only because we make a living out of it but we also consume it as food.''

 

Enicola thinks the only way that soy production would be sustainable is to repackage the grain as both food and animal feed at the same time, just like corn. Nevertheless, the grain's traditional low price in the world market has discouraged the farmers. ''Farmers whenever they plant, they would always ask who would buy their produce, not how they are to optimise their produce. Soy unfortunately does not have much to offer plus the fact that prices are always low. So soy has to be relegated.''

 

One opportunity to up the level of soy is to establish soy extraction plants which produce soymeal and Enicola says this is possible as livestock raisers will be the immediate market. However, it would be costly to put up such facility as in the case in one extraction plant in Bataan wherein it was not able to cope with the requirements. ''They were not able to optimise feed since it was not able to reduce the oil content in the soymeal. However, we cannot discount the possibility of one day having these facilities, so that we can maximise our own soy.''