If the Philippine government increases the price it pays farmers for corn by 30 percent, domestic demand for feed could decline, an industry executive said on Friday (August 29, 2008).

 

Earlier this week, a Department of Agriculture official said the government was considering raising "price support" for yellow corn to PHP13 per kilogramme from PHP10/kg, as requested by farmers complaining of high input costs, but the move could reduce the country's already declining feedmill output in 2008, an executive at the Philippine Association of Feed Millers Inc. said.

 

"We wouldn't mind an increase in corn's support price if there was good demand for feeds, he said, but this move "would only drive away demand for feeds."

 

Feedmill output is expected to decline by as much as 15 percent to 5.5 million tonnes in 2008 amid surging commodity input costs.

 

Local corn farmers, led by the Philippine Maize Federation Inc., or Philmaize, are seeking the PHP3 increase to reflect sharp increase in the cost of fertiliser - a knock-on effect of surging oil prices.

 

Last week, Philmaize said output in the second half of the year could fall by up to 23 percent on year unless the government approves the proposed hike.

 

This could boost local corn prices to as much as PHP18/kg, compared with prevailing rates of PHP11/kg, the group said.

 

"We need to accept that food prices are bound to increase because of rising input costs," said Philmaize President Roger Navarro said.

 

In late July, the National Food Authority, a state-owned grain-trading firm, increased its price support for yellow corn to PHP10/kg from PHP7.50/kg, citing higher input costs. At the same time, the white corn support price was raised from PHP8.50/kg to PHP13/kg.

 

Corn farmers have said the yellow corn price increase wasn't sufficient.

 

Yellow corn is a major constituent of animal feeds while white corn is for human consumption.