December 23, 2024

 

If Philippines' poultry meat production increases, what happens to farmgate prices?

Chicken meat production in the Philippines is expected to rise to 1.63 million metric tonnes (MMT) next year for read-to-cook products, according to the US Department of Agriculture's Foreign Agricultural Service (USDA-FAS) office in Manila in its October 3 update.

 

The amount is up by about 4% year-on-year. This growth was attributed to falling feed costs, fewer areas with highly pathogenic avian influenza (HPAI) cases, and the continuing impact of African swine fever (ASF) on pork production. 

 

Meanwhile, however, poultry raisers in the Philippines are still experiencing losses, with the farmgate price of chicken falling to ₱98 (US$1.72) per kilogramme, The Philippine Star reported on October 8. But retail cost stayed at ₱230 (US$4.04) per kilogramme — the figure marks an astounding disparity with the farmgate price at a difference of 134.69%.

 

The widening gap between farmgate and retail prices has been a bugbear with the domestic poultry sector which fears that imports could further undercut the prices of local chicken meat.

 

And increased chicken production may mean lower profitability for Philippine chicken farmers.

 

Writing for the PCAARRD's Industry Strategic Science and Technology Programs website in late July and citing data from the Philippine Statistic Authority (PSA), Clarizel Joy Jamille Gomez noted that while the country's chicken production reached 506,277.23 metric tonnes (MT) in Q1 2024 — a 7.67% increase from 470,207.84 MT in the same period of 2023 — this had come at the expense of both the farmgate and retail prices of chicken meat. According to Gomez, farmgate prices of chicken broilers dropped "by 8.23%, from ₱137.43 (US$ 2.45) per kilogramme in Q1 2023 to ₱126.12 (US$ 2.25) per kg in Q1 2024, while retail prices of whole dressed chicken fell by 4.51%, from ₱209.31 (US$3.74) per kg in 2023 to ₱199.86 (US$3.57) per kg in 2024".

 

Based on those figures, the farmgate chicken price plunged from ₱126.12 in Q1 this year to ₱98 (US$1.72) per kilogramme reported on October 8 — a significant 22.30% drop. 

 

On the other hand, rising production does not always translate to bad news for Philippine poultry farmers in terms of farmgate prices — that is if demand comes into play.

 

As the PSA reported on August 21, chicken production volume rose from 506,277 MT in Q1 2024 to 520,476 MT in Q2 2024, a 2.8% jump. In that same period of Q1-Q2 (or H1 2024), rising demand for chicken meat ensured that production was kept in tandem with consumer trends, "despite the increase in supply," as Gomez pointed out (August 30). In H1, the backyard farmgate price of chicken meat per kilogramme rose from ₱133.61 (US$ 2.39) per kilogramme in January to ₱158.94 (US$2.84) per kg in June.

 

Breaking farmgate price figures into the months of H1, prices were at ₱133.61 (January), ₱139.84 (February), ₱139.54 (March), ₱145.66 (April), ₱154.31 (May) and ₱158.94 (June), reflecting a generally rising trend through the period (on average, increases between the months were approximately 3.55%).

 

Indeed, if demand spells a boon for farmgate chicken prices in the Philippines, it can also be their bane as well. As United Broiler Raisers Association (UBRA) chairman emeritus Gregorio San Diego lamented in a recent interview, people do not have enough money to buy chicken meat, leading to low demand. He also (seemingly) questioned if ASF's impact on the local swine sector is really helping to shift food demand to chicken.

 

It leaves one to wonder if next year's projected rise in chicken meat production can sustain the profitability of Philippine chicken farmers.

 

Furthermore, while USDA-FAS Manila expects lower feed costs by 2025, the price of corn rose by 23% to US$1.08-1.80 in the period of May 1 to September 5 this year, based on a comparison of the Department of Agriculture's Bantay Presyo data. Given how much feed costs weigh into overhead production costs, local poultry farmers have urged the DA to focus on solutions that can cut prices of critical agricultural inputs.

 

USDA-FAS Manila also sees chicken meat imports growing "slightly, reaching 480,000 MT". A rise in imports may rouse concerns of oversupply (causing a potential hit on farmgate prices), but "as demand continues to outpace domestic supply", according to FAS Manila, chicken production may enjoy some increase in farmgate prices.

 

Moreover, FAS Manila anticipates next year's consumption of chicken meat (for ready-to-cook meat) at 2.11 MMT due to "economic and population growth, slower inflation, and the prevalence of ASF". Local poultry producers could see an uptrend in farmgate prices as witnessed in the first half of 2024.

- EFL AG DATA