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Growing Inventory Leads to Producer Price Cuts

by 5m Editor
28 April 2010, at 7:57am

PHILIPPINES - Large stocks of frozen poultry meat are causing a drop in farm-gate prices to farmers.

The large inventory of frozen chicken in the country's cold-storage facilities is starting to hurt local poultry raisers as farm-gate prices are now on the decline, according to the United Broiler Raisers Association (Ubra).

Business Mirror of the Philippines reports Ubra president, Gregorio F. San Diego Jr., saying that to date, the total inventory of frozen-chicken products in local cold-storage facilities stands at 8,663 tonnes. This is almost triple the 3,077 tonnes registered in the same period last year.

"This inventory already includes frozen chicken imported within and outside of the Minimum Access Volume [MAV] scheme," said Mr San Diego in a telephone interview.

MAV refers to the quantity of an agricultural product that may be imported in a year at the in-quota tariff rate committed by the Philippines to the World Trade Organization.

The MAV for chicken products is set at 23,400 tonnes annually. Imported chicken products are slapped a uniform tariff of 40 per cent for volumes imported within MAV and outside MAV.

Ubra noted that of the current inventory of frozen chicken, local producers accounted for 3,744 tonnes, while imports accounted for 4,919 tonnes.

The excessive inventory of frozen chicken, coupled with weak consumer demand for the produce, has caused farm-gate prices to decline to an average of 66 pesos (PHP) per kilo, from about PHP75 78 per kilo during the same period last year, according to Business Mirror.

Mr San Diego noted that the current farm-gate price is lower than the cost of production at PHP70 per kilo. Poultry raisers usually incur a huge cost on feeds, which make up 50 to 60 per cent of total production cost.

"A number of poultry raisers has decided to stop production in the meantime because they are already incurring losses," he said.

The Ubra chief, however, could not give an estimate as to the magnitude of the losses incurred by poultry raisers.

For the rest of 2010, the industry has projected broiler production to grow by about 20 per cent to 630 million birds. Mr San Diego, however, could not say yet whether this level of production is still achievable this year.

Business Mirror tried to reach officials from the Department of Agriculture, but they were unavailable for comment.