This project studied the relative competitiveness of the four poultry subsectors, how they are likely to be affected by international trade agreements and how smallholder production could be improved in anticipation of further trade liberalisation. To achieve this the project surveyed production and marketing systems of the poultry industry, identifying constraints to, and opportunities for, improving the performance of smallholder poultry production.
The Philippine poultry industry meets about 95 per cent of local demand for chicken and duck products and is steadily expanding. There are four main subsectors of the industry - broiler chickens, layer chickens, native chickens and ducks. The commercial (broiler and layer) chicken farms are large-scale, highly advanced, geographically concentrated and integrated, with efficient marketing. Native chickens and ducks, on the other hand, are produced mainly through a large number of geographically diverse, small-scale, backyard enterprises, and marketing tends to be much less efficient. However, native chickens and ducks have a competitive advantage because of strong consumer preferences for their freshness and taste.
As trade liberalisation continues, the Philippine poultry industry is likely to face increasing competition from overseas and from other rival products. To survive and grow, the industry must be able to compete in the global market. The impacts of trade liberalisation are likely to vary between different subsectors, but are expected to have a greater effect on smallholders because of their size and relative inefficiency.
The official starting date for the Project was 1 January 2002 in the original project document. However, the payment for the first 6 months was not received by the UPLB until the last week of April 2002. A research associate was recruited and work began in mid-May as soon as the funds were available. In effect, the project has been delayed for almost 6 months. The delay had affected the timetable of planned project activities. Therefore, the progress report provided here covers the project activities for 1 January 2002 - 30 June 30 2002 stated in the original project document. They include: hiring of staff and purchase of equipment in start up; and overview of production, marketing and government policy of the Philippine poultry industry; drafting and pre-testing of farm survey instruments; and collection of secondary data on production, consumption, trade and prices in relation to research activities. These activities have been performed satisfactorily according to the project document and the revised timetable. During the review period, the team members also undertook several farm visits and took part in conference and industry-sponsored field days and events to collect data and reference materials, as well as raise the profile of the project. The details are provided below.
Recruitment of personnel
A University Research Associate, Ms Maria Luz Malabayabas, was recruited at UPLB, who began her employment on 14 May 2002.
Purchase of equipment
Three units of laptop computers were purchased; two for UPLB and one for UNE.
Activity 1. Overview of the Philippine poultry industry
In the overview, production and marketing systems and government policy pertaining to the Philippine poultry industry were documented. All the four sub-sectors, ducks, native chickens, broiler chickens and layer type chickens, were considered. The discussion of production systems focuses on breeding, feeding, flock health, farm management, and constraints and issues. The review of the marketing systems focuses on demand, prices and marketing channels, as well as key marketing issues. The review of government policy focuses on livestock and poultry development plans and programs in recent years, marketing and trade policies, and free trade agreements, as well as their impact on the poultry industry. A draft document, which was prepared by the team members at UPLB, is currently being revised by Dr Chang.
Activity 2. Survey instrument
A draft survey questionnaire was developed after several revisions. The survey questionnaire was pre-tested on November 25-26, 2002 at Santa Barbara, Pangasinan at the 1st Regional Duck Festival. The feedback obtained from the pre-testing was used to further refine the survey form. Fieldwork is planned to start in April 2003.
Activity 3. Project advisory committee meeting
The first consultative meeting with the project advisory committee was held on 5 November 2002 at PCARRD Headquarter, Los Banos, Laguna. The following presentations were made by the project staff: Overview of the project by Dr. Christie Chang, Project Leader, UNE; Production issues by Dr. Angel L. Lambio, Project Leader, UPLB; and Marketing issues by Dr. Roberto S Ranola, Jr., Principal Investigator, UPLB. Many issues were raised and useful comments were received. The meeting highlighted the interest in the project from industry and government. There is the expectation that the outcomes of the project will provide much needed answers to some of the problems facing the poultry industry. Copies of the minutes of the 1st Consultative Meeting of the Project have been provided to all Committee members for comments.
In attendance to this meeting were committee members:
Dr. Edwin S. Villar, Director of the Livestock Research Division of PCARRD;
Mr. Gregorio A. San Diego, President of the United Broiler Raisers Association;
Mr Felix G. Valenzuela, Deputy Executive Director of the Livestock Development Council; and
Dr. Cecilio R. Arboleda, Professor of the Institute of Animal Science, College of Agriculture, UPLB.
Project staff present at the meeting were: Dr Chang, Dr Lambio, Dr Ronola, Dr. Dagaas, Ms de Castro and Ms Malabayabas. Also present was Ms Cecilia Honrado, ACIAR Program Manager in the Philippines. Dr. Jose Q. Molina, Jr., Director of the Bureau of Animal Industry, who is also a committee member, was not able to attend.
Activity 4. Field trip
Several visits to duck and native chicken raisers, balutan operators, local government units, Livestock Development Council and Bureau of Agricultural Statistics were made to collect information and gather data and reference materials. Team members also took part in the Egg Show organised by the Philippine Egg Board In Manila in September 2002, where Dr Lambio gave a presentation on “Increasing productivity of egg-type Mallard ducks. On 25-26 November 2002, team members participated in the 1st Regional Duck Festival in Santa Barbara, Pangasinan. The survey form was pre-tested with a number of duck raisers there.
Activity 5. Conference
All the team members attended the 39th National and 20th Visayas Chapter Scientific Seminar and Animal Convention of the Philippine Society of Animal Science, held in Cebu City in October 2002. Two conference papers, originating from the project, were presented (see Publications below). One of the papers, entitled “Market prospects of duck egg and by-products” which was prepared and presented by Ms De Castro, was awarded the best paper in the Social, Economics and Development Category. Dr Daggas also received the best paper award for her paper on Japanese quails in the Production and Waste Management Category.
Objective 1: Overview of the Philippine poultry production
The draft document of the ‘Overview of the Philippine poultry industry’ has undergone several revisions as new data and more information become available.
Objective 2: Collection and analysis of farm survey data
Survey questionnaires were administered in six provinces identified as project sites, Quezon, Pampanga, Iloilo, Nueva Ecija, and Batangas. A total of 248 native chicken raisers (in Quezon, Iloilo, Batangas) and 245 duck raisers (in Quezon, Pampanga, and Nueva Ecija) were interviewed with staff of the Provincial Veterinary Offices and Local Government Units particularly the Livestock Inspectors and Agricultural Technicians acting as guides and enumerators. Half-day trainings were conducted in each of the project sites to ensure a good understanding of the objectives of the project and the type of data/information to be collected. The project staff acted as facilitators in these training sessions.
During the survey, the project staff also collected relevant secondary information as well as coordinated the conduct of the data collection. After the survey the questionnaires were edited and data encoded. Microsoft Access database software, was used for data entry and retrieval. The project team contracted the Bureau of Agricultural Statistics to include a one-page questionnaire in their National Poultry and Livestock Survey. The survey was conducted in August 2003. A total of 4,015 questionnaires were administered by the Bureau, with this data still being edited and encoded.
Objective 3: Marketing analysis
To date, 14 native chicken and 7 duck traders have been interviewed to learn more about the marketing system for ducks and native chickens. Later, interviews of key players in the industry will be undertaken to get a better understanding of the important issues facing the industry.
Objective 4: Comparative analysis
International competitiveness of the Philippine poultry industry against the world standards is being reviewed based on exiting literature. Productivity analysis of the duck and native chicken farms will begin as soon as the coding of the survey data is completed.
Significant progress has been made in the past year in terms of activities and outputs prescribed in the project document. Major activities undertaken include: updating statistics in the industry overview report, editing and analysing farm survey data, conducting marketing research, and presenting research outputs at various venues. Six presentations, including four conference papers and two invited speeches, were made and two working papers were published. Research findings from the two working papers and preliminary analysis of the farm survey data are summarised below.
Cross-sector comparisons of poultry production in the Philippine
The study compared the commercial and backyard poultry sectors and identified key issues facing the two sectors. It was found that the poultry industry worldwide has enjoyed a strong demand growth because its relatively low cost and healthiness. The outlook is also positive for the Philippine given its current low level of per capita consumption and anticipated growth in population and household incomes. However, some of the future demand increase in poultry consumption is likely to be met by cheaper imports. And, like many other poultry sectors in the world, the Philippine poultry industry faces increasing consumer concerns over food safety, product quality and animal welfare, as well as environmental impact associated with intensive poultry production. There is also increasing global competition due to trade liberalisation. In addition, the Philippine commercial poultry sector was found to be relatively uncompetitive because of higher input costs, below-par on-farm productivity, and an inefficient marketing system, while the key issues facing the backyard poultry sector were variable product quality and inconsistent supply as a result of high degree of farm diversity and production seasonally.
The study also found that trade liberalisation is likely to affect both the commercial and the backyard sectors, although to varying degrees. For continuing growth, the Philippine poultry industry as a whole must pursue improvements in production and marketing efficiency and the government must provide an environment that is conducive to investment and productivity improvements. More direct government involvement appears to be desirable, especially in areas such as product grading and standard setting, collection and dissemination of market information, and improving roads and other marketing infrastructure.
The Philippine duck industry: issues and research needs
The study provided an overview of the duck industry and identified key policy issues and areas for further research. The main finding was that in the short to medium term, demand for duck products, including balut, may increase with income and population growth, but in the longer term it will decline as economy develops further. This proposition is based on overseas experiences and demand trends in the Philippines. That is, per capita consumption of duck eggs has either been in decline in traditional duck-producing countries as a result of economic development and changing lifestyles and consumption patterns, while domestic statistics show that demand for duck eggs has been stagnating in the past decade. Together, they suggested a possible decline in future demand for duck eggs, which was identified in this study to be the most significant threat facing the Philippine duck sector in the longer term.
A second threat facing the Philippine duck sector is foreign competition. Given its current industry structure (i.e. less developed and fragmented), the Philippine duck sector does appear to be vulnerable even though currently imports account for only a small proportion of total supply. Whether or not the Philippine duck sector can withstand the test of trade liberalisation will depend on its ability to address the key issue of an inefficient marketing system, which has been identified in past studies and in this paper. The inefficient marketing system is a result of a fragmented industry structure, the absence of official product standards and inadequate marketing infrastructure. Although the increasing trend in the commercialisation of duck production may help improve production and marketing efficiency due to economies of scale, smallholders are likely to be adversely affected by such developments in terms of reduced market access and farm prices.
Based on these findings, two main policy recommendations were put forward: (1) more research is needed to identify production and marketing issues facing the smallholders and to understand future consumer demand for duck products; and (2) official product standards and reliable market information are needed to correct market failures and improve marketing efficiency.
Farm survey of duck producers
Two hundred and thirty four duck egg producers in Iloiilo, Nueva Ecija, Pampanga and Queszon provinces were surveyed. Farmers were asked about their demograhic and farm characteristics, their income sources and problems encountered in the production and marketing of duck eggs, as well as their awareness of, and participation in, farm organisations and government programs. Preliminary results are as follows:
84% of the respondents were involved in rice/crop farming or duck farming
53% of the respondents were part-time farmers and 47% were full-time
Average age of the respondents was 44 years old
Average number of years in duck business were 9 years
Average income from egg production per production cycle was 157,000 Pesos
14% of the respondents were classified as backyard (1-99 birds), 35% as small commercial (100-499 birds), 21% as medium commercial (500-999 birds) and 29% as large commercial ( 1000)
69% were specialised in egg production alone, 11% were in RTLP production alone and the remaining 20% had mixed operation
62% of the respondents were raising ducks as a source of income and 30% were in it because it was profitable
92% of the respondents were sole proprietorship, 5% in partnership and 3% in contract farming
37% of the respondents also raised other poultry, 38% also raised pigs, 18% also raised other livestock
76 of the respondents said they would expand their duck operation while 24% said they wouldn’t; lack of capital was sited as the main reason for not expanding while good source of income was cited as the main reason for expansion
In terms of management, 44% of the respondents used vitamins; 24 used antibiotics; 2% used vaccines; 39% used disinfectants; and 85% practised culling
22% of the respondents claimed to have encountered health problems with the flock; 53% had problems with feeding (high cost and lack of feeds); 17% had problems in replacing stock; 54% had laying problems (low productivity)
75% of the respondents said that it was buyers (viajeros, balutans, retailer) who provided price information and determined prices
66% of the respondents used their own capital while 28% had borrowed from outside; the main sources of capital came from relatives and informal sources (63%) and traders/suppliers (20%); only 15% borrowed from the banks
16% of the respondents were aware of some government programs; only 8% had participated in them
25% of the respondents received extension services; the major sources of technical assistance were government, NGOs, farmers organisations and commercial feed companies
Areas that required outside assistance included: technical support, supply of inputs; provision of credit and market information; and marketing of outputs.
As the project is coming to a close, all the planned activities, which include an overview of the Philippine poultry industry, farm survey, market analysis, and comparative studies, have been completed and will be refernced in the annual report due shortly. Therefore, the focus of research team in the past year has been on completing research papers and preparing the final report. In addition, two conference papers were presented, three working papers were published, and three manuscripts were submitted to refereed journals for review. Concluding remarks of the three working papers are provided below as part of the progress summary. The details of the working papers can be found on http://www.une.edu.au/febl/GSARE.
Overview of the world broiler industry: implications for the Philippines
Global production, consumption, and trade of poultry meat have grown faster than that of any other meats in recent decades and growth is expected to continue because it is cheaper, more versatile, and give more health benefits, than do other meats. Among the poultry products, broiler meat is the cheapest and most popular with consumers the world over. The high level of contract farming and vertical integration, which are key features of the world’s most efficient broiler producers, have resulted in improved production and marketing efficiencies in the broiler industry and increasing number of value-added products at lower costs.
The United States, Brazil, Thailand, and EU are the world’s major exporters of broiler meat while Russia, Japan, and China are major importers, reflecting the differences in resource endowment and industry competitiveness. From the review, it is apparent that in the past, global competition was based more on cost. However, in future, competitiveness will be determined increasingly by meeting diverse consumer demand through new product development, value-adding, and improved efficiency in the supply chain, as evident in the development path of the most efficient broiler industries in the United States Brazil, and Thailand. In spite of its many advantages and the positive market outlook, the world broiler industry faces increasing challenges from increasing consumer power and increased government regulations. Meeting these challenges will require continuing innovation on production methods that are both economical and ethical. The broiler industries in the developing countries, such as the Philippines, may not be confronted with pressure from consumers to the same degree at the moment because consumers are more concerned with prices and quality. However, over time, consumers will become more demanding and more aware of safety and animal welfare issues that are occurring in the more affluent and industrialised countries.
The future outlook is positive for the Philippine broiler industry because the demand for its products can be expected to grow, given the current low level of per capita consumption and the anticipated growth in population and household income. However, given that the Philippine broiler sector is relatively uncompetitive because of higher input costs, below-par on-farm productivity, and inefficient marketing system, the threat of foreign competition is real and imminent. To compete, the Philippine broiler industry must ensure production and marketing efficiency and the government must provide an environment that is conducive to productivity improvement.
Duck marketing in the Philippines: issues and opportunities
Ducks have traditionally played a prominent role in Philippine history and culture. However, it appears that as the economy develops, this traditional sector is facing an increasing threat from other competing products, especially commercial chickens and other meats both in the domestic market and from overseas. The other potential threat to the Philippine duck sector is the changing lifestyles and consumption patterns of the consuming public. Domestic statistics have shown that per capita duck consumption has been stagnating in recent years. The future prospects for the Philippine duck sector depend crucially on its ability to compete effectively with rival products in price and quality.
Several issues in duck marketing in the Philippines are identified in this paper, including high prices, inconsistent product quality, limited distribution channels, and insufficient product information. Higher prices are attributed to higher costs of production at the farm level and an inefficient marketing system. Higher cost of production is, in turn, a result of diseconomies of scale and lower productivity typically associated with smallholder production. An inefficient marketing system increases prices because marketing services are either inadequately provided or provided at high cost. Because duck production provides rural households with supplementary income and cheap protein sources and the processing sector generates jobs, it will be important for both the government and the private sector to address these issues and provide necessary support to facilitate the development and expansion of the duck sector.
To ensure the long term prosperity for the Philippine duck sector, several recommendations are made, including developing grading systems for duck eggs and replacement stocks to improve market transparency and to discourage fraudulent behaviour; providing necessary training and financing to qualified farmers; implementing orderly marketing to alleviate seasonal variations and fluctuating prices; improving product distribution to increase product availability; and investing in market research and new product development. The fact that the duck sector contributes substantially to the economy but has so far received little attention from policymakers means that, with necessary support, there is potential for significant productivity improvements to benefit the Philippine duck sector and the many segments of the economy that it helps sustain.
Profiling the Philippine duck farmers: results from a farm survey
Two hundred and five duck egg producers in Iloilo, Nueva Ecija, Pampanga and Quezon provinces were surveyed in 2003. Farmers were asked about their socio-demograhic and farm characteristics, their income sources and problems encountered in the production and marketing of duck eggs, as well as their awareness of, and participation in, farmers organisations and government programs. The main findings are that duck farmers in the Philippines generally faced serious problems on both production and marketing fronts. On the production front, they lacked technical know-how and access to capital and extension services, and on the marketing front, they lacked market information. One policy implication is that training of, and the provision of extension services to, well-targeted duck farmer groups can help remove production constraints and improve productivity. Extension may best be done through existing farmers organizations and church groups. Secondly, the emphasis on egg and balut production means that the future prospects of the industry depend heavily on the future demand for balut and the ability of the duck sector to compete with other products in terms of price and product quality. This, in turn, means that better understanding of the market demand, and improving marketing, for balut is as important as removing technical constraints in production.
Main conclusions from the research were:
The demand outlook facing the Philippine commercial poultry sector (broilers and layers) is positive, due to production efficiency in industrialised poultry production and the anticipated income and population growth in the country. However, the Philippine poultry industry is still considered inefficient relative to the world’s best practices. This means that the commercial sector is facing increasing threat from imports as the world’s major poultry producers continue to promote their products through new and improved products and aggressive marketing strategies. To compete, the commercial sector must upgrade production technologies, reduce input costs, and improve marketing efficiency.
The small backyard poultry sector (ducks and native chickens) relative to the commercial sector (broilers and layers) is facing serious constraints in production and marketing, due to market imperfections that include the lack of market information and technical know-how and the lack of access to credit, extension, and other key inputs. Bio-security concerns, highlighted by recent avian influenza outbreaks worldwide (including many other Asian countries) may impose further constraints on the backyard sector.
The future of the native chicken sector appears to be uncertain. On the one hand, its products are preferred by consumers for their freshness and unique taste. On the other hand, it is uncompetitive in price and lacks consistency of quality and supply. More resources must be made available to the smallholders to help them remove the constraints in production and take advantage of the favourable demand conditions.
The duck sector appears to be profitable - particularly for large, commercial operators; also the demand for ‘balut’ (a fertilized duck egg with a nearly-developed embryo inside that is boiled and eaten in the shell) and other duck egg products may grow in the near future along with population and income growth. However, this demand may not be sustainable in the medium- to long-term, due to likely changes in consumption patterns as a result of economic development and urbanisation.