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.

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).

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.

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.