What’s up, pork? (Part One)

March 19, 2021

by Rosario Guzman

It’s been a year of useless militarist lockdown. And we are not exactly back to square one when government is reviving certain protocols to deal with the recent COVID surge. We are actually far worse off. For one, while still suffering from inefficient government response to the pandemic and losses of jobs and incomes, we are now facing soaring food prices.

Again, the Duterte government is proposing importation without careful consideration. A year of unscientific and irrational responses – that has been more fatal than the plague itself.

Unthinking response to rising prices

Food inflation reached 6.6% in January 2021, the highest in 26 months and the fastest January inflation in the last 12 years. It accelerated further to an unprecedented 7.0% in February.

Meat and vegetables, by their weight in the average market basket and their respective inflation rates, contributed the most to food inflation. Meat prices rose by 20.7% and vegetables by 16.7% in February 2021, the fastest in the last 10 years.

Under controversy is the phenomenal rise in pork prices, for instance by Php170 per kilo of liempo (belly), or a phenomenal jump of 73.9%% from prices on end-2019. Hog raisers attribute this to the African swine fever (ASF) that hit the country in September 2019. But as knee-jerk neoliberal reaction, the Duterte government has quickly floated pork importation to abate price increases.

Malacañang has also issued a not so well-thought-out order of setting a price ceiling on pork as well as chicken for 60 days, the underlying assumption being there is price manipulation by traders. But instead of bringing out supply, meat traders have retaliated with a ‘pork holiday’ protest by not selling pork starting on the first day of the order’s effectivity.

Apparently, the price ceiling has only been to the detriment of hog raisers and market vendors who would be forced to sell at a loss. Therefore, it is not mainly a problem of ‘price gouging’ by unscrupulous traders as government claims, although this remains a feature of Philippine agriculture. There is a deeper supply problem that causes steep price increases.

But the Department of Agriculture (DA) has maintained that there is sufficient pork supply and that traders are manipulating prices. To make a point, the agency is even proposing to give transport assistance to hog raisers from Mindanao, the Visayas and parts of Luzon to bring ASF-free pork to Metro Manila.

Yet, the resounding policy of the economic managers, which the DA echoes, is still increasing pork importation. The DA is just awaiting the president’s signature on increasing the minimum access volume (MAV) of pork imports and lowering tariff.

But not just yet, the DA may have forgotten, the proposal has to go through Congress while it is in session.

Will importation address the dilemma of the impoverished consumers? Both consumers and local producers are even warier now, as what the Duterte government has done to rice comes to mind – there is no counter measure that could strengthen domestic hog production.

Worst-ever production decline

The Philippine Statistics Authority (PSA) reports a 24.1% decline in swine inventory as of January 2021, compared to its level in the same period last year. It is the worst-ever decline and inventory level of 9.72 million heads. From 2010 to 2019, the annual average inventory was at 12.32 million heads.

Population in backyard farms, which account for 71% of hogs raised, decreased by 13.3%, while population in commercial farms dropped by 41.8 percent.

Hog production by liveweight noticeably started to decline in the last quarter of 2019 – by 9.8% from 662.7 thousand metric tons (MT) in the same period in 2018 to 597.5 thousand MT in 2019. This only got worse in the same period in 2020 – hog production fell by 13.8% to only 515 thousand MT. The annual total figures show the worsening trend – hog production decreased by 1% to 2.3 million MT in the whole of 2019, an occurrence that was never seen since 2008, and then by another 6.7% in 2020 to only 2.1 million MT.

Hardest-hit is Central Luzon, which has been the country’s consistent top producer but now producing 23% less. It is followed by Calabarzon, the second top producer but with production dropping 12% in 2020. The Bicol region, although not among the top producers but by proximity to the ASF-infected regions, also saw its hog production go down by 10 percent. The third and fourth top producers, Northern Mindanao and Central Visayas registered 5% and 0% growth, respectively. The DA is relying now on these regions to deliver pork to Metro Manila.

The international trading and market research firm, Gira, reports that the Philippines’ net pig meat production by carcass weight equivalent (CWE) has started to decline in 2019 and is estimated to go down further by 21% in 2020, to 1.3 million tons CWE. The country’s pork imports have also dropped from a peak of 332,000 tons CWE in 2018 to only 152,000 tons CWE in 2020.

Gira thus calculates that the apparent consumption has decreased from a peak of 18.3 kilos per capita in 2018 to only 13.5 kilos in 2020, even as the Philippine population increased by 2 million over that period.

From all of this and with soaring pork prices, the Duterte government makes an argument for importation. But that is precisely the kind of proposed solution that is not looking at the problem.

Since ASF outbreak started in China and spread to other countries in the region, (we are in fact one of the last countries to report ASF), pork trade volumes have dropped dramatically and driven up global prices. This may be seen precisely from our very own shrunken importation from 2018 to 2020. Why then depend on a narrowing global meat market when the government can very well focus on making local production recover and come out stronger?

A plague called government neglect

The main reason for this misguided policy is government’s staunch adherence to neoliberalism. The most obvious indication is how the Duterte administration has relegated local agricultural production to the bottom of its priorities.

Agriculture’s 2021 budget of Php110.2 billion is merely 2.2% of the national budget. This has diminished further from the 2019 share of 2.7%, already the ‘largest’ under Duterte. Including budget for agrarian reform, the Duterte administration has only allocated an annual average of 3.5% of the national budgets in 2017-2020, the lowest in 21 years, and still got smaller at 3.2% in 2021.

It is too stark not to mention that the budget for defense is 1.44 times larger than the budgets for agriculture and agrarian reform.

Meanwhile, only 46% or about Php50.3 billion of the agriculture budget goes to what may be understood as direct production support. This amount even includes the Php1.8-billion Agricultural Competitiveness Enhancement Fund (ACEF) and the newly created Php10-billion Rice Competitiveness Enhancement Fund (RCEF). Chunks of these funds are in the form of credit to farmers and fisherfolk.

The ACEF and RCEF are the duties collected from the importation of agricultural products under the MAV mechanism and from the historic ‘tarrification’ of rice under the Duterte presidency. In short, these are approximately what is left with the Philippine government after adhering to imports liberalization under the Agreement on Agriculture (AOA) of the World Trade Organization (WTO). What is even more ironic is that the amount, which hardly may be considered compensation for the vast erosion of domestic agricultural production over the decades, comes back to the direct producers as loans.

This liberalized scenario provides the overall context of what the hog industry is currently facing – the agonizing lack of government production support. The DA proclaims to be operating in the paradigm of food security and resiliency, but the major programs towards this end amount to only Php25.1 billion this year or only 43% of the DA’s budget. The National Livestock Program is appropriated a paltry Php1.2 billion.

Also, for some baffling reason, the Duterte administration has reduced the budget of the National Meat Inspection Service (NMIS), an agency crucial in the development of the livestock and meat industry, from Php480.6 million in 2019 when ASF hit the country to only Php413.4 million in 2020, and a reluctant increase to Php427.9 million this year.

This intentional diminution of agriculture would incapacitate the DA in handling natural emergencies in agriculture, including animal diseases such as ASF. (Read Part Two)