September 29, 2003

 

 

Philippines Livestock And Products Annual 2003

 

Report Highlights:

 

The total Philippine livestock sector is expected to continue to expand through 2004; overall meat consumption is likely to continue growing through 2004 due to the rapidly growing Philippine population.  Imports of premium beef cuts are likely to remain insignificant relative to overall beef and veal imports through 2004.  No significant changes in live swine and pork imports are expected for the next two years due to good local production.

 

Executive Summary

 

The total Philippine livestock sector is expected to continue to expand through 2004 due to the expanding domestic swine industry.  Overall meat consumption is likely to continue growing through 2004 due to the rapidly growing Philippine population, currently estimated at 82 million.  Beef imports are likely to post modest increases for the next two years mainly due to increasing beef demand by the expanding domestic meat processing industry.   Imports of premium beef cuts are likely to remain insignificant relative to overall beef and veal imports through 2004.  No significant changes in live swine and pork imports are expected for the next two years due to good local production.  Currently, the DA is contemplating imposing a special safeguard duty for pork products as a result of the clamor of the livestock industry for more protection from the alleged onslaught of illegal pork entering the market. 

 

Production

 

Driven by strong demand for pork and pork products, hog production is expected to continue growing through 2004.  Last year, swine production comprised roughly three-quarters of overall livestock production.  This made the domestic swine industry the second largest agricultural commodity in 2002, contributing around P87 billion ($1.58 billion) to the overall agricultural output.

 

Further consolidation of the industry is expected in the next two years as the share of backyard farms is expected to decline while that of large commercial hog farms is forecast to increase.  This indicates increasing scale of swine production and continued inflows of investment into the industry.

 

Cattle production (inclusive of "carabaos" or water buffalos) last year, was adjusted downwards consistent with estimates from the Bureau of Agricultural Statistics (BAS).  Although the 2002 calf crop of water buffalos was higher than the previous year, the decline in live cattle births pulled down overall live cattle production in 2002.  There were more-Cthan-usual losses as a result of a higher mortality rate.  The overwhelming majority, or around 90 percent of all live cattle in the country continue to come from backyard raisers.  These small-scale operations usually involve a few head of feeder cattle for fattening and/or carabaos used as work animals.  The few head of cattle are usually contracted out to these small-scale operators by large feedlot operators which have integrated abattoir operations.

 

Cow-calf operations are declining in number due to reasons that discourage investment in commercial cattle ranching.  These, to name a few, include peace and order problems in production areas, policies on pasture leasing, agrarian reform uncertainties, land conversion, etc.

 

Due to lower cattle production numbers, cattle slaughter rates were likewise pared down during the year.  The domestic cattle industry is expected to recover this year and grow through 2004 because of continued expansion of water buffalo production.  Carabaos are currently estimated to comprise around 55 percent of the overall Philippine bovine sector.

 

Farm gate prices of live cattle last year, in general, were higher than previous year  levels mainly due to the decline in local production.  Monthly average farmgate price per kilogram for cattle last year was P51.14 ($0.94), slightly higher than the P50.73 ($0.93) average of last year.

 

Prices Table
Country Philippines
Commodity Animal Numbers, Cattle

Prices in

Pesos

per uom

kilogram

 

 

 

Year

2001

2002

% Change

 

 

 

Jan

50.28

50.74

0.91%

 

 

 

Feb

51.1

50.73

-0.72%

 

 

 

Mar

50.55

51.73

2.33%

 

 

 

Apr

51.61

51.38

-0.45%

 

 

 

May

51.24

51.87

1.23%

 

 

 

Jun

51.03

51.14

0.22%

 

 

 

Jul

50.52

50.4

-0.24%

 

 

 

Aug

50.08

50.68

1.20%

 

 

 

Sep

50.27

50.91

1.27%

 

 

 

Oct

49.72

51.12

2.82%

 

 

 

Nov

51.45

51.52

0.14%

 

 

 

Dec

50.86

51.42

1.10%

 

Source: Bureau of Agricultural Statistics

The average live weight prices of hogs in 2002, on the other hand, decreased slightly (2.03 percent) from the previous year's average price due to good production.  Local hog raisers, however, blame the entry of smuggled or illegally imported pork and pork products for the decline in prices.  As a result, concerned industry groups have petitioned the GRP for appropriate protective measures (see POLICY).

 

Prices Table, Farmgate
Country Philippines
Commodity Animal Numbers, Swine
Prices in Pesos

Per uom

kilogram

Year 2001 2002

% Change

Jan 50.52 51.68 2.30%
Feb 51.44 52.35 1.77%
Mar 52.13 52.09 -0.08%
Apr 52.82 52.66 -0.30%
May 53.43 52.27 -2.17%
Jun 52.81 51.7 -2.10%
Jul 53.09 50.89 -4.14%
Aug 51.95 50.23 -3.31%
Sep 51.87 49.96 -3.68%
Oct 51.45 49.99 -2.84%
Nov 51.77 49.76 -3.88%
Dec 52.43 49.44 -5.70%
Source: Bureau of Agricultural Statistics

 

Like swine, good water buffalo production resulted in lower farm gate prices last year.  Water buffalo farm gate prices during the period averaged P41.04 ($0.75) per kilogram, slightly below the 2001 level of P41.80 ($0.77) per kilogram.

 

Prices Table, Farmgate
Country Philippines
Commodity Animal Numbers, Water Buffalo
Prices in Pesos

per uom

kilogram

Year 2001 2002

% Change

Jan 40.59 39.85 -1.82%
Feb 41.65 41.72 0.17%
Mar 40.93 41.29 0.88%
Apr 42.84 40.91 -4.51%
May 42.94 41.16 -4.15%
Jun 43.86 41.42 -5.56%
Jul 42.09 40.42 -3.97%
Aug 42.06 41.97 -0.21%
Sep 40.55 40.33 -0.54%
Oct 41.02 41.23 0.51%
Nov 41.66 41.36 -0.72%
Dec 41.35 40.81 -1.31%
Source: Bureau of Agricultural Statistics

 

Consumption

 

According to the National Economic Development Authority (NEDA), the Philippine domestic economy grew 4.6 percent last year, faster than the 3.2 percent increase posted in 2001.  The 2002 growth rate was the highest for the country since the 1997 financial crisis, and surpassed the government's GDP target of 4.5 percent. 

 

For this year, the GRP has forecast a GDP growth rate of 4.2 to 5.2 percent.  Economists from the International Monetary Fund (IMF) and the World Bank, however, have projected Philippine GDP growth to fall to 3.9 to 4.0 percent range in 2003.

 

Despite the lower projections, however, overall meat consumption is likely to continue growing through 2004 due to the rapidly growing Philippine population, currently estimated at 82 million.  Expanding at a rate of 2.3 percent annually, there will be roughly an additional 2 million Filipinos to feed next year.

 

Increased consumption likewise is enhanced by the relatively low inflation rate (forecast at 4.5 to 5.5 percent this year) and the ensuing stable food prices.  The average Filipino household spends roughly half of its earnings on food.  Food and meat consumption traditionally peaks in the fourth quarter to coincide with the holiday season. 

 

In addition, increased spending on food is expected in the near future, as a result of Presidential election-related activities scheduled for May 2004.  Campaign activities start very early in the Philippines. 

 

Pork, as in the past, will continue to dominate meat consumption through 2004, and relatively low pork prices are expected to further strengthen quantities moving into distribution.  Household demand is estimated to account for 86 percent of total pork consumption, while hotels, restaurant, institutional buyers and processors account for the balance.

 

Prices Table
Country Philippines
Commodity Meat, Swine
Prices in Pesos

per uom

kilogram

Year 2001

2002

% Change

Jan 110.66

115.8

4.64%

Feb 115.04

116.37

1.16%

Mar 118.36

117.86

-0.42%

Apr 119.08

118.27

-0.68%

May 119.52

115.92

-3.01%

Jun 118.89

113.69

-4.37%

Jul 117.28

112.72

-3.89%

Aug 115.69

111.32

-3.78%

Sep 113.79

108.7

-4.47%

Oct 113.28

108.13

-4.55%

Nov 113.33

108.45

-4.31%

Dec 114.61

109.19

-4.73%

 Source: Bureau of Agricultural Statistics

 

The retail price of beef increased by an average of 5.6 percent in 2002, with January  posting the highest price increase of 10.54 percent over the previous year.  The price of beef was highest during May 2002, averaging P170.78 per kg.   The retail price of beef during the first three months of 2003 continued its upward trend with an average price increase of 8.7 percent between January to March 2003.  Since, the local cattle industry is mainly composed of small backyard operations, traders play a significant role in the marketing of cattle and beef.  This drives up local beef prices as evidenced by the difference in farmgate and retail prices.

 

Prices Table
Country Philippines
Commodity Meat, Beef and Veal
Prices in Pesos

per uom

kilogram

Year 2001

2002

% Change

Jan 151.49

167.46

10.54%

Feb 158.88

166.55

4.83%

Mar 158.93

166.46

4.74%

Apr 158.25

169.71

7.24%

May 158

170.78

8.09%

Jun 158.9

169.57

6.71%

Jul 158.96

169.01

6.32%

Aug 159.49

169.18

6.08%

Sep 159.28

168.95

6.07%

Oct 159.22

168.15

5.61%

Nov 163.99

164.55

0.34%

Dec 165.82

168.46

1.59%

Source: Bureau of Agricultural Statistics

 

Water buffalo meat prices are not readily available but are generally regarded to be cheaper than beef or meat from conventional breeds.

 

Trade

 

Live cattle import statistics for 2002 were revised as local production was lower than expected and beef demand started to strengthen due to the diminishing concern over BSE.  Feeder cattle represent about 99 percent of all live cattle imports, and local cattle raisers turned to imports to replenish their feeder stocks.  Live cattle imports are expected to remain flat in 2003 mainly due to renewed weakness of the Peso.  Australia is the overwhelming source of Philippine live cattle imports and is also a major beef supplier.

 

For meat, beef imports are likely to post modest increases for the next two years mainly due to increasing beef demand by the expanding domestic meat processing industry.   Imports of premium beef cuts are likely to remain insignificant relative to overall beef and veal imports through 2004.  India is the dominant source of manufacturing grade beef imports and is expected to maintain its dominance in that sector.   India provides over 60 percent of the country's overall beef imports, with Brazil and Australia roughly supplying 20 percent each. 

 

Local livestock farmers have raised animal health concerns, particularly foot and mouth disease (FMD), relative to the continued entry of buffalo meat from India, which is not FMD-free.  Outbreaks of FMD still occur in the Luzon and Visayas regions and disease control is a major problem of the local livestock sector.  Indian beef, however, is cheaper compared to traditional beef sources and is a major ingredient used by meat processing firms.  Despite robust growth, the domestic hog industry has claimed injury from the proliferation of buffalo meat in the wet markets.  In response, the Philippine Department of Agriculture (DA) released last December, Administrative Order No. 31 (AO 31) or "Supplemental Guidelines on the Importation and Utilization of Buffalo Meat from India" (refer to RP 3004).  AO 31 requires that imported Indian buffalo meat be used for processing only and that a third party inspection certificate accompany all Indian beef imports.  AO 31 likewise specifies appropriate labeling to enhance traceability of manufacturer/producer.

 

Also in late 2002, Department of Agriculture (DA) officials together with a group of Philippine meat importers, went to South America to establish relations with alternative meat sources.  They reportedly accredited meat processing plants and abattoirs. 

 

No significant changes in live swine and pork imports are expected for the next two years due to good local production.  Legitimate pork imports remain minimal and go mostly to the expanding domestic meat processing industries.  Local hog raisers are positioning themselves to gain a share of this growing market and are therefore quite vocal about illegal imports.  Local meat processors, however, prefer imported frozen pork for their raw material, contending that locally produced pork does not conform to their quality specifications, uniformity, consistency, etc.  The major sources of frozen pork (carcasses/half-carcasses, hams, shoulders and cuts) include Denmark, Canada, United States, Korea and Australia.

 

Tariff-Rate Quota

 

Utilization of the Minimum Access Volume (MAV) or tariff-rate quota for fresh, chilled or frozen pork last year was 13.3 percent.  MAV usage for pork has remained low and has been declining since 2000.  This may partly be the result of the inflow of illegally imported livestock and poultry meats, including pork.  For 2003, the MAV for pork is 50,595 MT.  The in-quota duty for fresh, chilled or frozen pork (0203) is 30 percent while the out-of-quota rate is 40 percent.

 

 

 

 

 

 

 

 

 

 

Heading No./ N.?./.

CY

MAV

MAVIC'S* Issued (MT)

Utilization

Description

 

(MT)

Jan-Mar

Apr-Jun

Jul-Sep

Oct-Dec

TOTAL

 

 

 

Mar

 

 

 

 

HS 02.03

 

 

 

 

 

 

 

 

Fresh

2002

48,185

1,450

1,295

 

 

6,410

13.3

Chilled, Frozen

2003

50,595

1,548

2,834

798

 

5,179

10.2

Pork

Source: Department of Agriculture   
* Minimum Access Volume Import Certificates

 

MAV utilization for this year will likely not deviate significantly from the previous year's performance.  Based on issued Minimum Access Volume Import Certificates (MAVICs), the in-quota importation of pork for the January to July 2003 period represents just a little over 10 percent of the total tariff rate quota for the whole calendar year.

 

Duties for fresh, chilled or frozen swine meat (0203) and processed pork products (1602) were supposed to be brought down to 40 percent beginning January 1, 2003.  Executive Order No. 164 (EO 164), dated January 10, 2003, however, effectively delayed the scheduled tariff rate reduction until June 30, 2003.  Effective July 1, 2003, fresh, chilled and frozen pork out-of-quota imports will be levied a 40 percent duty.  In-quota tariff will be 30 percent.

 

2003-2004 Tariff rates for live swine follow:

TARIFF RATES FOR 2003-2004

H.S. Code

Description

Rate of Duty

103

Live swine

2003

0103.10.00 

Pure-bred breeding animals

3

 

Other

 

103.91

- - Weighing less than 50 kg

 

0103.91.10

- - - In-Quota

30

0103.91.20

- - - Out-of-quota

35*

103.92

- - Weighing 50 kg or more

 

0103.92.20

- - - In-Quota

30

0103.92.20

- - - Out-of-Quota

30

(* In effect as of July 1,2003 as amended by Executive Order No. 164)

 

There is no change in import tariffs for live bovine animals and their meats from thei 2002 rates.  Duties for live bovine animals, whether pure-bred or otherwise, remain at 3 percent while imported fresh, frozen or chilled meat of bovine animals is levied a 10 percent tariff.

 

Marketing

 

Although the wet markets supply about 90 percent of the food demand of the  Filipino market, the number of supermarkets and grocery outlet has been increasing, particularly in the urban centers of the country.  This trend is expected to continue as the urban population continues to expand.  This is cause to project increased consumption of prepared and preserved, as well as processed meat products in the coming years, and local meat processors appear to be positioning themselves accordingly.

 

The Philippine Association of Meat Processors (PAMPI) reportedly has said that at least one third of its 30 million kilograms of meat imports (worth $51 million) may be sourced from Brazil and other Latin American countries if more of their meat plants and abattoirs are accredited by the National Meat Inspection Commission (NMIC).  PAMPI believes that the South American beef suppliers may be able to replace the 30 percent of PAMPI's meat requirement, which it lost from Europe when it experienced an outbreak of BSE two years ago.  Local meat processors are reportedly projecting a growth of 15 percent this year with gross sales of about P46 billion. 

 

San Miguel Corporation (SMC), the largest food and beverage conglomerate in the Philippines, has announced that it will undertake an over-all strategy of developing an integrated market approach for poultry, meats and branded processed products.  SMC, reportedly intends to gradually shift from its dependence on commodity type products such as poultry and basic meats by further developing its branded value-added meats portfolio.  Expansion into other branded products variants and extensions is also being studied as another source of future growth.  SMC's basic meats business ended 2002 with total sales volume growing by 7 percent.  Beef and pork grew by 25 percent and 8 percent, respectively. 

 

Policy

 

In September 2002, the Philippines notified the WTO of its intention to require accreditation by 3rd party auditors of all plants exporting meat, poultry and dairy products to the Philippines.  Memorandum Order Number 7 (MO 7) was supposed to ensure compliance with "internationally recognized standards in Hazard Analysis and Critical Control Point (HACCP) program."  The measure was to take effect April 1, 2003 and would have adversely affected over $55 million worth of US exports to the Philippines.  Protests against MO 7, both bilaterally and at the SPS Committee in Geneva in November 2002 resulted in the postponement of the implementation of MO 7.  The proposed regulation is currently under review by the DA.

 

Perhaps the most significant development relative to agricultural policy is the replacement of then DA Secretary, Leonardo Q. Montemayor with Luis P. Lorenzo Jr.  on November 30, 2002 (refer to RP 2079).  Early in office, Mr. Lorenzo announced he would work for continued protection of sensitive agricultural products, such as rice, sugar, corn, poultry and pork.  He has likewise expressed his intention of providing local farmers with government support to enhance their competitiveness in a liberalized trade environment, and part of that support includes keeping tariff rates for major local commodities at current levels. 

 

Currently, the DA is contemplating imposing a special safeguard duty for pork products as a result of the clamor of the livestock industry for more protection from the alleged onslaught of illegal pork entering the market.  Local swine producers have been lobbying for additional protection. BAS data show a decline of only 2.5 percent for both retail and farmgate price of pork in 2002.

 

Several livestock import bans were imposed under the new DA administration although most of them were lifted after scientific investigation indicated that the necessary corrective measures were in place.  These include:

 

1. A temporary ban on the entry of Australian beef after receiving a report that a heifer from Victoria, Australia had died of Anthrax.  The DA subsequently lifted the import restriction after receiving a report from the Australian government outlining efforts to contain the anthrax.

 

2. In response to reports of Dioxin contamination in March 2003, the DA banned all imports of feed, milk and milk products, eggs, meat and meat products from Germany and the Netherlands.  The ban was lifted after two weeks after receiving assurances that adequate measures were being undertaken to contain the contamination in those countries.

 

3. On May 2003, the DA prohibited the importation of live cattle, sheep and goats and their meat and meat products from Canada in response to a confirmed case of BSE in that country.  The ban was subsequently lifted in August 2003.

 

4. The DA likewise lifted the temporary ban on the importation of pork and pork products and by-products from the Republic of Korea after a report from the Office Internationale des Epizooties (OIE) declaring Korea as a FMD-free country in May 2003.  The Bureau of Animal Industry has found the risk of contamination from importing pork, pork products and by-products from the ROK to be negligible.

 

PSD Table
Country Philippines
Commodity Meat, Beef and Veal

(1000 MT CWE)(1000 HEAD)

Market Year Begin 2002 Revised 2003 Estimate 2004 Forecast
USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New]
01/2002 01/2003 01/2004
Slaughter (Reference) 1225 1150 1275 1237 0 1250
Beginning Stocks 28 28 10 0 5 0
Production 220 220 230 230 0 235
Intra EC Imports 0 0 0 0 0 0
Other Imports 115 115 130 120 0 125
TOTAL Imports 115 115 130 120 0 125
TOTAL SUPPLY 363 363 370 350 5 360
Intra EC Exports 0 0 0 0 0 0
Other Exports 0 0 0 0 0 0
TOTAL Exports 0 0 0 0 0 0
Human Dom. Consumption 330 330 345 340 0 350
Other Use, Losses 23 33 20 10 0 10
TOTAL Dom. Consumption 353 363 365 350 0 360
Ending Stocks 10 0 5 0 0 0
TOTAL DISTRIBUTION 363 363 370 350 0 360
Calendar Yr. Imp. from U.S. 2 2 0 2 0 2
Calendar Yr. Exp. to U.S. 0 0 0 0 0 0

 

PSD Table
Country Philippines
Commodity Animal Numbers, Swine

(1000 HEAD)

Market Year Begin 2002 Revised 2003 Estimate 2004 Forecast
USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New]
01/2002 01/2003 01/2004
TOTAL Beginning Stocks 11816 11816 12218 12218 12345 12620
Sow Beginning Stocks 1950 1950 1975 2000 0 2075
Production (Pig Crop) 21500 21500 21725 22000 0 22550
Intra EC Imports 0 0 0 0 0 0
Other Imports 2 2 2 2 0 2
TOTAL Imports 2 2 2 2 0 2
TOTAL SUPPLY 33318 33318 33945 34220 12345 35172
Intra EC Exports 0 0 0 0 0 0
Other Exports 0 0 0 0 0 0
TOTAL Exports 0 0 0 0 0 0
Sow Slaughter 0 0 0 0 0 0
OTHER SLAUGHTER 19500 19500 20000 20000 0 20750
Total Slaughter 19500 19500 20000 20000 0 20750
Loss 1600 1600 1600 1600 0 1622
Ending Inventories 12218 12218 12345 12620 0 12800
TOTAL DISTRIBUTION 33318 33318 33945 34220 0 35172
Calendar Yr. Imp. from U.S. 0 0 0 0 0 0
Calendar Yr. Exp. to U.S. 0 0 0 0 0 0

 

PSD Table
Country Philippines
Commodity Meat, Swine

(1000 MT CWE)(1000 HEAD)

Market Year Begin 2002 Revised 2003 Estimate 2004 Forecast
USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New] USDA Official [Old] Post Estimate [New]
01/2002 01/2003 01/2004
Slaughter (Reference) 19500 19500 20000 21000 0 21500
Beginning Stocks 11 11 11 0 11 0
Production 1095 1095 1120 1145 0 1175
Intra EC Imports 0 0 0 0 0 0
Other Imports 10 10 10 10 0 10
TOTAL Imports 10 10 10 10 0 10
TOTAL SUPPLY 1116 1116 1141 1155 11 1185
Intra EC Exports 0 0 0 0 0 0
Other Exports 0 0 0 0 0 0
TOTAL Exports 0 0 0 0 0 0
Human Dom. Consumption 1075 1116 1100 1155 0 1185
Other Use, Losses 30 0 30 0 0 0
TOTAL Dom. Consumption 1105 1116 1130 1155 0 1185
Ending Stocks 11 0 11 0 0 0
TOTAL DISTRIBUTION 1116 1116 1141 1155 0 1185
Calendar Yr. Imp. from U.S. 0 0 0 0 0 0
Calendar Yr. Exp. to U.S. 0 0 0 0 0 0

Source: USDA