According to Philippines Agribusiness Report Q3 2011 from Business Monitor International (BMI), domestic consumption in the Philippines is forecast to improve in 2011 as the country recovers from 2010's weather issues and food price inflation remains low by recent standards. However, government programmes to encourage production of items like rice and sugar should see the country's involvement in global imports – aside from expected imports of all livestock products - to remain relatively subdued.

Over the long term, BMI expects production to increase across the livestock sector. However, infrastructure concerns and low yields will impact the government's food self-sufficiency plans. The sugar sector is a good example: it was found that more than 75 per cent of the total number of sugar farms had less than five hectares of crop land, with consolidation taking place at a slow pace.

Among the key trends highlighted in the report are the growth in milk production growth to 2014/15 at 46 per cent to 23,000 tonnes. Despite this healthy growth rate, the forecast still lags a long way behind the government's ambitious aims for expanding production under the government's National Dairy Development Plan.

Sugar consumption growth to 2015 is forecast to be 11 per cent to 2.39 million tonnes. This will be driven by population growth as well as rising incomes allowing consumers to spend more on high-sugar products such as soft drinks and confectionery.

The growth in poultry production to 2014/15 is forecast to be 13 per cent to 847,000 tonnes. Growth in demand for poultry will be strong over the period but domestic output is not expected to keep up with demand as production is hampered by high costs and poor infrastructure.

Real GDP growth this year is forecast at 5.1 per cent, down from 7.3 per cent in 2010 and predicted to average 5.3 per cent from 2010 until 2015.

Food and beverage price inflation is thought to be 4.2 per cent year-on-year in April 2011 – up from 3.1 per cent year-on-year in April 2010).

Industry developments

According to the BMI report, Philippine officials' forecast for lower sugar production in 2010/11 is in line with its own projection of 1.94 million tonnes for the current season ending August. According to reports, officials recently lowered their December forecast for sugar output in 2010/11 from 1.97 million tonnes to 1.94 million tonnes. This represents a 3.9 per cent year-on-year fall in output due to a smaller area harvested. Stronger sugar stocks and an anticipated fall in domestic demand should limit imports of the sweetener in 2011 and boost export prospects. To be sure, latest data from sugar millers reflected that sugar inventories as of 28 March stood at 146,300 tonnes, a significant 42.1 per cent higher than a year previously.

In 2006, the Philippine government passed the National Biofuels Act. However, the act spurred little or no growth in the local biofuels sector. Indeed, since passing the mandate in 2009 that all petrol must contain at least five per cent bioethanol – increasing to 10 per cent by 2011 – there has been little growth in bioethanol production capacity. In 2010, total local production was estimated at 40 million litres, far short of the required 200 million litres per year needed to meet the E5 mandate and even further from the 400 million litres per year needed for the E10 mandate to be fulfilled. To date, all three domestic bioethanol plants – San Carlos Bioenergy, Leyte Agri Corp and Roxol Bioenergy – have reportedly halted operations since the beginning of 2011. This is because the country's bioethanol requirements have mostly been met with imports since H210.

The National Food Authority of the Philippines has officially lowered its import demand for rice in 2011 to less than one million tonnes, a far cry from the record 2.5 million tonnes shipped into the country in 2010. This is on the back of expectations for a strong harvest in 2010/11, as well as well-supplied government stockpiles. Strong rice export forecasts from Viet Nam have also reinforced BMI's view for rice supplies in Asia to exert downward pressure on high rice prices. Indeed, Q1-11 rice exports are forecast to be between 1.6 million and 1.8 million tonnes, some 11 per cent higher than the same period a year ago. This is in line with BMI's expectations of a bumper Vietnamese rice crop of 25.3 million tonnes in 2010/11, up from 25.0 million tonnes in 2009/10.

Further Reading

-

You can view the full report (fee payable) by clicking here.