The Philippine meat sector is yet to see the outcome of Asean Free Trade Agreement (AFTA) but speculations have already been drawn - the 0-5% tariff reduction is said to shake Southeast Asia's trade as industries.

 

In perspective, the hog and poultry industries will be greatly affected by AFTA due to the influx of cheaper meat, particularly from Thailand.  For instance, the farm gate price of local live chicken is PHP66 (US$1.43) per kilogramme, 61% higher than Thailand's PHP48/kg  (US$1.04) while its dressed chicken is priced 20% cheaper than its local counterpart.

 

The National Federation of Hog Farmers Incorporated (NFHFI) said the farm gate price of swine is PHP85/kg (US$1.85), 38% higher than Thailand's PHP60/kg (US$1.30). Before AFTA, tariff rates of 35-40% gave protection for pork and chicken imports and pundits say a zero to five import duty in less than five months would jeopardise the livelihood of farmers, particularly the backyard operators.

 

According to the Alyansa Agrikultura - an alliance of federations and organisations representing all agricultural sectors - Asean countries export 2.4 million tonnes of chicken per year and import 404,000 tonnes. For swine, AFTA countries export 570,000 tonnes and import 80,000 tonnes.

 

Alyansa Agrikultura chairman Ernesto Ordoñez says Asean exporters are likely to target the Philippine market because the new 0-5% tariffs will render poultry and swine producers at a great price disadvantage and this will severely affect poultry and hog farmers. While the 0-5% tariff rate is a good goal, Ordoñez said a deferment of AFTA implementation will give the needed time to adjust to the challenge and save the farmers' existing jobs. Unfortunately, the heed to delay AFTA was snubbed by the government.

 

Corn, another important segment for the meat sector, is also seen to suffer from the AFTA. According to Philippine Maize Federation, without tariff protection, the local corn trade could collapse with the full unrestricted entry of imported corn. This standpoint is supported by the USDA statistics which shows that Philippine corn production for the marketing year 2008-09 will drop as the 2.655 million hectares of corn area will also shrink this year until 2011 due to increased competition from corn imports originating from the Asean. The recent 35-50% tariff of corn imports –which is currently pegged at 400 million tonnes - will drastically change the production of Philippine 2010-11 corn farming.

 

 

The AFTA may also have its advantages albeit its drawbacks. The Philippine Association of Meat Processors Incorporated (PAMPI) sees an opportunity to penetrate the export market due to cheaper raw materials that will considerably reduce production costs. Though it poses as a challenge, PAMPI executive director Francisco Buencamino says AFTA will serve as a springboard for Philippine meat products to dive not just in Asean but on the worldwide meat trade.

 

On the other hand, meat processing firm Foodsphere Incorporated is already prepping for AFTA, investing a PHP300-million (US$6.48 million) modern manufacturing and distribution facility over a 9-hectare property in Malvar, Batangas, as its preparation for the deluge of processed meat imports. The plant is expected to expand the company's capacity by adding 150,000 kg of food products daily. As its initial salvo, the firm has expressed interest on tuna canning business, citing the bright potentials of domestic tuna, particularly of its new product that is expected to boost the canned tuna sector.

 

Corned tuna is the first of its kind in the Philippines and it is expected to expand the market for healthy products demanded by consumers with active and healthy lifestyle. Foodsphere is confident of cornering a big share of both the Asean and Philippine markets because of corned tuna's healthy content and zesty taste, two factors sought by modern consumers who want to have satisfying meals while staying fit and active.

 

Also readying for AFTA is San Miguel Foods which is expanding its facilities to increase its exports of bird-flu free chicken and even eyeing Thailand - the world's fifth biggest chicken producer - as its market. It even forecasted that demand for chicken will skyrocket from 16.5 million tonnes in 2007 to 24.1 million tonnes in 2011 which will certainly give a big boost to the country's poultry business. Though Southeast Asia's biggest food and beverage producer has already poured some investments in the region, San Miguel is keen on expanding its ventures on Asean countries due to numerous opportunities brought by AFTA.

 

Another good offshoot of the AFTA is a huge investment of Charoen Pokphand Foods for aquaculture.

 

Thailand's largest agribusiness company has poured PHP2.36 billion (US$50.99 million) for the production of aqua feeds in Capas, Tarlac which is also seen to boost the country's shrimp output. Sprawled on an 8 to 10-hectare area along the Capas' national highway, the operations of CP Aqua Feeds will commence on January 2011 and is expected to produce 114,000 tonnes of aqua feed. CPF's investments in the offing include a shrimp feedmill in Cebu  with a production capacity of 30,000 tonnes a year and a THB1.52 billion (US$45.57 million) pig farming operation in Luzon where it will start raising 1,200 hybrid sows that are expected to breed 10,400 pigs. 

 

While brooding on a fierce competition, poultry and pork producers are also seeing AFTA's benefits.

 

According to United Broilers Raisers Association vice president Attorney Elias Inciong, alternative feed grains such as tapioca pellets from Thailand - currently slapped with a 35% duty – could become cheaper with zero tariffs. NFHFI chairman Albert Lim said the free trade will make feed inputs such as soymeal and DDGS more affordable. On the other hand, local corn farmers are seeing export opportunities in Vietnam and Indonesia as prices of domestic corn can be as low as PHP6 (US$0.12) a kg, which is already price competitive globally.

 

Amid these developments, it is still early to conclude on how AFTA will influence the Philippine livestock business but the industry can only hope that the agreement can live up to its promise of bringing more investments and opportunities to the country and not the other way around.