Strategic Agribusiness Development PlanFindings of Livestock Situation Report

A Collaborative Project of the Department of Agriculture

and Japan International Cooperation Agency

Presented at Davao Region Stakeholders Consultative Workshop

Apo View Hotel, Davao CityJune 10, 2009

By Elmer R. Esplana & Lary Nel B. AbaoSADP Team Members

Bureau of Animal Industryelmer.esplana@gmail.com

Outline of Presentation 1. Objectives of the Presentation2. Situational Report 2. Strategic Agribusiness Systems Issues and

Constraints- Input Supply Subsystem- Production Subsystem- Processing Subsystem- Marketing Subsystem- Support and Extension Support Subsystem

3. Policy Implications and Recommendations

Objectives of the PresentationThe objectives of this presentation include: 1) to give strategic agribusiness system issues and constraints, policy implications and recommendations, as a component of the livestock sector in the Strategic Agribusiness Development Plan, and 2) to validate and solicit regional and local inputs, suggestions and comments from the participants of the stakeholders consultation meetings, as to the relevance of the findings and recommendations at regional and local level.

Top 20 with highest Hog and Chicken Inventory, 2008 and Average Growth Rate Per Year

from 1998-2008

Source of Basic Data: DA-BAS

Top 20 with highest Cattle and Carabao Inventory, 2008 and Average Growth Rate Per Year

from 1998-2008

Source of Basic Data: DA-BAS

Top 20 with highest Goat and Duck Inventory, 2008 and Average Growth Rate Per Year

from 1998-2008

Source of Basic Data: DA-BAS

The regional ranking in terms of capabilities with processing facilities include NCR (1), Region III & IV-A (2), Region VII (3), Region XI (4)

and Regions I, X, XII (5).

NMIS Accredited Slaughterhouses, Dressing Plants, and Meat Processing Plants, As of November 2007.

Source of Basic Data: DA-NMIS

Of the 23 meat cutting plants 22 are “AA” and one is “A” Of the 47 accredited cold storage facilities, 6 are “AAA”, 41 are “AA.”

NMIS Accredited Meat Cutting Plants and Cold Storages, as of November 2007

Source of Basic Data: DA-NMIS

Marketing Channel* of Live Animal, Meat and Meat Products in the Philippines

*Revised based on BAI’s model

Distribution Channel of Hog Production

Source: Interviews with industry players,Esplana, Elmer, 2008

Live Meat and Processed Pork

Note: dotted line (---) represents the flow of dressiweight or carcass weight of pork passing in the slaughtering process.

Local and International Market

The local producers as generally distributing their product in the domestic market with small initially started export market in the DOC PS breeders, processed and semi-processed pork and chicken, “balut” and salted eggs.The share in the export market is very small which needs to further strengthen, given the initially established markets.

Strategic Agribusiness Systems Issues and Constraints

Input Supply Subsystem1. Genetic improvement and instability of feed ingredients supply and their

quality.2. For cattle and carabao, there is no sufficient breeding animals. The

diffusion rate of artificial insemination is still low at four percent. 3. For goats, duck and cattle, the genetics is still a problem, particularly the

backyard raisers.4. High tariff of imported materials (corn and soya bean, etc.).5. Corn supply, in terms of quality and quantity, is still a problem for the

livestock and poultry industry producers.6. There is high cost of feed ingredients (corn, feed wheat, soya bean meal,

etc.) which contribute in the pricing of livestock and poultry products.7. Need to develop a low cost alternative inputs to feed production.

Strategic Agribusiness Systems Issues and Constraints (cont)

Production Subsystem1. Low production and negative effect of animal diseases on the production

and productivity.2. For cattle, the production is still low compared to perceived demand. 3. There is a disease problem like hemorrhagic septicemia for both cattle

and carabao; PRRS, TGE, and cholera for hogs; diarrhea for goats; and new castle disease for poultry.

4. For carabao, the production is low which is not sufficient to meet the local demand.

5. There are emerging diseases and late response of BAI on the problem of producers.

6. Inadequate imported good genetic material for dairy buffaloes and dairy cattle and ducks for meat and egg production.

Strategic Agribusiness Systems Issues and Constraints (cont)

Processing Subsystem1. Need to develop meat processing infrastructure and

improvement of capabilities.2. For hogs, there is lack of integrated slaughterhouses facilities

in some producing areas, especially in Pampanga, Batangas, Rizal province and Cagayan de Oro.

3. For goat, there is no slaughterhouse facility, hence, slaughtering is done at the backyard.

4. For chicken, there is no integrated dressing plants in some producing areas, especially in Batangas and Rizal.

5. Meat processors are paying in longer terms to meat producers and traders.

Strategic Agribusiness Systems Issues and Constraints (cont)

Marketing Subsystem1. Poor market infrastructure development, limited market access and

market matching activities. 2. There are some livestock “oksyon” markets in selected provinces which

need to rehabilitated.3. There is a need to establish stockyards to key cities in the Philippines like

Batangas City, Iloilo City and General Santos City.4. There is a need to establish regional/city/municipal weighing scale center

for hogs in producing areas. 5. There is a need to improve the marketing/business intelligence and

replicate best practices from the national to regional to local government level.

6. There is a need to improve the marketing research and socio-economic and impact evaluation researches done by the government from supply-driven to demand-driven approach.

Strategic Agribusiness Systems Issues and Constraints (cont)

Support and Extension Support Subsystem1. There is a need to develop support and extension services and improve

the implementation and enforcement of quality standard and food safety policies.

2. There is a need to establish an animal diagnostic/modern feed/drug assay laboratory in General Santos City and Iloilo City to support hog export initiatives (for traceability and exports purposes).

3. There is a need to establish a meat laboratory in Iloilo (for traceability and export purposes).

4. No extension support for supply chain management.5. Lack of early warning system/ forecasting tools for eggs, duck, goat,

cattle, and carabao production.

Strategic Agribusiness Systems Issues and Constraints (cont)

Support and Extension Support Subsystem6. There is a need for the enforcement of traceability system for the

export market of meat and processed products.7. There are only few beneficiaries of government loans which are religiously

paying their loan particularly the ACEF. There are tendencies that government-managed loans are sometimes perceived by the beneficiaries as dole-out.

8. There is need to develop loan program facility that is accessible to farmers but with improved level of accountability for the other borrowers to also avail the benefits of the loan opportunity co-equal with other borrowers.

Policy Implications and Recommendations

The new entrant/investor should develop their own firm/company’sbusiness model for their agribusiness chain.

The livestock sector should be able to attain a sustainedcompetitiveness (both local and international level) and profitability,given the dynamic trade regime.

Cases could possibly be studied that include the integrated operationfor the hogs, broiler and cattle in the case of San Miguel Corporation(group of companies) and Bounty Fresh Foods (group of companies)for the broiler and partly in hogs, and other successful business modelswithin the different industries.

For the private sector

Policy Implications and Recommendations (cont)

Improvements in the meat processing facilities and processing support infrastructure (weighting scale center, cold storage facilities, meat cutting plants)

Identifying integrated meat processing zone in the Visayas and Mindanao area (Iloilo, Cagayan de Oro and Davao) that would target the export market potentials of the meat products.

Exploring the potential of investing for either backward or forward integration, along the different segment of the supply chain through the existing stakeholders in the industry to support employment generation.

For the cooperative type of structure, the model of LIMCOMA and SIDC are the two good examples for the feeds-hog-processing-retailing model to benchmark by other cooperatives.

For the private sector

Policy Implications and Recommendations (cont)

Continue to develop productivity enhancement programs that would support to improve the competitiveness and profitability of the livestock and poultry industry.Improvement in the budgeting process for the different projects/programs, monitoring of projects and programs at the national, regional and local level.Development of cluster models for the different livestock and poultry industries. There is a need for more collaborative projects/partnership between the different levels in the government (national, regional, local), the private sector and associations using a clustering approach. Documentation of more best practices along the supply chain.Pursue more researches along the supply chain that are market-driven and customer-focused.

For the government

Policy Implications and Recommendations (cont)

Establishment of grades and standards for livestock and poultry and meat products for local and international markets. The government should further intervene to improve the genetics of goat, cattle, buffalo and duck industries, particularly at the backyard level. Further improve the participatory governance with other stakeholders in the livestock and poultry subsectors, such as the carabao, dairy, goat and duck industries and allied industries. Improve and develop loan program which are accessible to farmers but with higher level of accountability to borrowers for sustainability purposes.

For the government

Policy Implications and Recommendations (cont)

Developing training system and modules for the DA-ATI that would support in enhancing entrepreneurial skills and supply chain management for the new investors in the livestock agribusiness sector. Government (DA-NMIS) should support in upgrading “AA” accredited slaughterhouses, dressing plants and meat processing plants to become “AAA” accreditation via loan facility of ACEF or government bank and financial institution, to contribute in increasing the export market of local meat and meat products.Government should support in developing more meat cutting plants and cold storages in strategic producing areas in the different regions.

For the government

Policy Implications and Recommendations (cont)

Further strengthen the advocacy for the improvement of different industries in the livestock sector.Support and participation in the development of strategic program/project for the industry competitiveness.Participation in the research, development and extension activities along with the private sector and government (DA livestock agencies, academe and other research institutions).Support in the implementation of good agriculture practice, good manufacturing practice, food safety standards and traceability system in the livestock and poultry agribusiness supply chain.

For the industry associations/NGOs

Thank you for Listening