September 3, 2012

 

US drought to affect Philippine feed and meat prices

 

 

The ongoing drought in the United States may have a "demonstration effect" on rice and food prices in the Philippines as it led to a rise in corn and wheat prices in the international market.

 

National Food Authority (NFA) Administrator Angelito T. Banayo said that even as the country will not likely be directly affected by the US drought, the rising prices of corn, soy and wheat are likely to reflect on local food prices in the long run.

 

What this immediately means for the Philippines is an increase in the price of feeds-for cattle, hogs and chicken, even fish. But principally hogs and poultry, which would drive the prices of these food items up, wrote Mr. Banayo.

 

Corn and wheat are main ingredients of livestock feeds.

 

The Philippine Association of Feed Millers, Inc. (PAFMI) had however said in June that it has already booked at least 1.4 million tonnes of feed wheat imports from Australia to meet its feed stock requirements for the rest of the year.

 

In 2011, local feed millers imported 1.071 million tonnes of feed wheat, 11.33% higher than the 962,000 tonnes recorded in 2010.

 

PAFMI officials were not immediately available for further comment.

 

Should corn and wheat prices shoot up, Banayo said this could lead consumers to move towards rice, particularly in countries in which rice, corn and bread are considered major staples.

 

If wheat and corn become terribly expensive, countries whose populations eat corn, bread and rice could start shifting more consumption towards rice, and thus drive rice prices up, he explained.

 

Banayo adds that "a demonstration effect of high corn and wheat prices on rice is thus likely. By how much, we cannot tell. I do not expect a repeat of the 2007-2008 world food price crisis, but neither do I expect that things will be as "normal" as they have been since 2009."

 

In view of this, Banayo said, the Philippines must meet its rice production targets for the year to ensure that the price of the grain remains stable. But this depends on the current domestic crop (starting late September until early December), adding that if the country is saved from harsh and untimely typhoons, "we could muddle through". If production does not meet DA (Department of Agriculture) targets, Banayo said he is the least, quite worried, especially since the leadership expects self-sufficiency on 2013 an election year where rice is a "political commodity"..

 

The Agriculture department is targeting to produce 18.46 million tonnes of palay this year against the 16.684 million tonnes recorded in 2011.

 

Meanwhile, Rolando T. Dy, executive director of the University of Asia and the Pacific's Center for Agribusiness, had a different take on the matter.

 

In an email to local daily Business World, Dy said "the impact on the Philippines can be contained. There is ample supply of rice in Thailand and Vietnam, the world's top exporters. [The country] has also imported what it needs."

 

The Philippines is importing 500,000 tonnes of rice this year, 41.86% lower than the 860,000 tonnes procured in 2010.

 

Feed costs will likely rise, he said, as the NFA chief had also pointed out.

 

Howeverm Dy noted that this would be more directly reflected in the prices of pork, chicken and beef from outside the country.

 

Since rice is the main staple in Philippines, Dy isn't expecting any major price spike but there will certainly be an impact on imported feeds ingredients (soy, feed wheat) which will affect feed costs for hogs and poultry. The impact on the Philippines will be higher prices of imported pork, chicken and beef which may affect local prices and will benefit local producers, he explained.

 

Dy added that the high price of corn in the world market could also benefit local corn farmers.

 

Entry of imported corn will be contained. [As for exports, however,] the Philippines may not ready to export corn as we don't have excess production, he said.

 

Edilberto M. De Luna, Agriculture assistant secretary and National Corn Program coordinator, said last week that the department is studying the possibility of allowing commercial exports of yellow corn within the year to allow farmers to take advantage of the rising prices of the commodity in the world market.