Government should listen to industry experts in crafting policy reforms.
Government should listen to industry experts in crafting policy reforms.
Aside from rice farmers and millers, the local chicken industry also bore the brunt of a series of government interventions last year geared to arrest runaway inflation. The Department of Trade and Industry asked industry players to lower farm gate prices of poultry products then, only to be surprised when the Department of Agriculture lifted the special safeguard duty on the importation of mechanically deboned meat.
The result was thus doubly disastrous for local producers as farm gate prices of chicken in some areas reached a low of P38 and P90 per kilo in some public markets. These numbers, as they fall way below the local cost-to-produce, understandably dealt local farmers with huge losses, unable to compete with the deluge of imports.
Months into something so unsustainable, it is little wonder then the local chicken industry is practically pushed to the brink of collapse. According to data from the National Meat Inspection Service, dressed chicken inventory is at 33,655 metric tons, up almost 50 percent. More than half, or almost 20,000 MT were imported while the remaining 13,748 MT were locally produced.
In the same way then that the implementation of the rice tariffication law led to the closure of many local rice millers, the unabated deluge of imports in the local market is threatening to strangle the local poultry industry due to tough competition.
United Broiler Raisers Association president Elias Inciong warned that small and medium scale producers might be pushed to just import to align with what seems to be the government priority. “We’ve tried for decades to convince the government that imports do not benefit the consumers, but they do not believe us,” he said.
The irony is that while farm gate price is now at P80 per kilogram from as high as P114 per kilo in June, retail prices have not followed suit, reaching between P150 and P170 per kilo even amid fluctuations. If the virtual deregulation of the industry had not brought the kind of relief it was envisioned to, something is clearly amiss.
Inciong explained: “There is a notion that importation benefits the consumers, but it doesn’t. It is our position from the beginning that importation of poultry products and most agricultural products have not benefitted the consumers, especially the ordinary ones.”
Whatever additional profit traders amass, they don’t pass it on the consumers, which was the entire point of the government intervention. Worse, it forces local producers out of business as they continue to bleed from massive losses. The status quo has no regulations in place for traders, the only sector that stands to benefit from the lowered tariff for chicken.
“The priority will be the importers and that’s the reality of things,” Inciong said. “Whether or not the consumers benefit, whether or not the producers are harmed, we are irrelevant. It is just a matter of revenue generation for the government.”
Far from an industry-specific crisis, the predicament of the local poultry industry has some dire overarching consequences. For starters, some 8.3-million jobs depend on the industry, and so its collapse will impact millions of Filipino households.
It can also spiral into a serious national security concern that affects a major food resource of the country. The price competition between domestic and imported chicken might lead to the lowering of the price of domestic chicken just to compete. Unable to do so, the next to be compromised might be domestic production.
Declining market share of domestic production and therefore declining profits for the industry can set off a domino effect—reaching even local farmers of corn and rice and small to medium scale feed millers.
For instance, the adjacent feed milling industry will necessarily have to adjust to whatever state the local poultry industry finds itself in. While it can be expected to continue to support local farmers, they should be aided properly to ensure quality harvests that can pass the quality requirements for feed ingredients.
An added complication is that the local feed millers also have to compete with other industries buying locally sourced corn, whereas traders mostly but the local harvest and sell it to feed millers at a higher price. As corn constitutes about half of the total cost of feed, lowering its cost will redound to the cost of chicken production.
Just how low should the cost of corn be in order to help make locally produced chicken competitive with imported chicken? For perspective, to produce a dressed chicken at P100 per kilo, the cost of corn should level at P11.25 per kilo. Currently, this is pegged at around P17 per kilo while imported buying is around P16.50.
This means that to ensure a fairly competitive price of chicken, the price of corn should range between P11.25 to P15.35 per kilo in Luzon and between P13.40 and P17.75 per kilo in Mindanao.
Clearly, helping keep the local poultry industry afloat is a complex but also necessary undertaking. Government should listen to industry experts in crafting policy reforms that will guarantee food production that is at par with demand. Steps may include lowering the cost of inputs, such as corn and other feed ingredients, in addition to the possibility of subsidies on corn farming to meet this goal.
More broadly, the government can also take steps to curb the appeal of importing by regulating traders and their so far untethered margins. That the sector benefits from something that is demonstrably unsustainable for most should be discouraged. Finally, it is high time to review the tariff implementation for chicken, still to guard against the collapse of an already beleaguered industry.
