Economic Incentives and Comparative Advantage in the Livestock Industry

Philippine Institute for Development Studies Working Paper 83-07 ./

_l%_IC INCENTIVES AND CO_m_TIVE ADVANTAGE IN THE _ INDUSTRY* by L.S.

Caban,bb_a

PlOS Library

ECONOMIC INCENTIVESAND COMPARATY_E ADVANTAGE

IN THE LIVESTOCK

L. So C_anil_a

C-overnme_t intervention become

an impertant

Philippines.

part

The desire

in the face of demand population

INDUSTRY*

_

in the livestock

of aBricultural

resulting

has led to more government

As in other industries, forms which

ÂŁnterventions

puts

in the domestic

and border

alter

of protection

are afforded

and, some consumer

relative

market

(world) prices.

groups

broadly

intervention

in the products

in=ome

and

in the industry.

Nas taken several

_s tariff and non-tariff.

prices

of inputs and out-

and put a wedge Consequently,

be_ÂŁween domestic

different

to firms within are protected

has

in livestock

from increasing

intervention

can be classified

These

policy making

for self-suffiefency

growth

industry

degrees

and across

while

others

industries, are

penalized.

Revised version of the paper presented at the Workshop on The Impact of E_onomic Policies on Agricultural Development sponsored jointly by the Philippine Institute of Development Studies (PIDS) and The Philippine Council for Agriculture and Resources Research and Development (PCARRD) on Mareh 25-26, i983, Tagaytay City.

Also a condensed form of the author's Ph.D. dissertation with the same title, done at the UPLB, May 1983. **

5

_

Ass_tant _ro_essor, Department of Economics, Oollege of Bevelopment Economics and Management (CDEM), University of the Philippines at Los Ba_os, College, Laguna_

The ment

existence

intervention

policies in in

of

the

When

The

private

sector

to determine livestock of

This

paper

impact

government

The of 15 Most

livestock

Philippine

of

this

to come

cattle

and

raised

as work

lln

present that

intervention

the

other

sectors.

production,

Thus,

it

addi-

is necessary

_ntervention

system

promotes

relatively

efficient

in

are

the

three

industry,

parts.

the

and

The

analyzes

third

part

discusses

livestock

production

The

Livestock

lndust_

gross

from

value

four

although

animals

rather

statistical

poultry is distinguished stock includes poultry.

from

(GVA)

species

carabaos than

in

the

I contributes

added

animal

briefly

part

the

industry

first

second

in

livestock

carabaos_

official

of

policies,

advantage

percent

on

sector.

is composed

the

comparative

effects

these

development

from

to

this

not

goyern_

resources.

describes of

resulting

in livestock

the

or

to agricultural

is high

activities

domestic

conflicting

of whether

pervasive

or not

production

use

has

flow

whether

question

structure

profitability will

sometimes

favorabie

incentive

resources

and

the

effects

livestock

tional

the

raises

produce

general.

numerous

are

source

publications livestock.

Philippines.

an

average

in agriculture,

namely at

the

poultry,

present

hogs,

primarily

of meat.

._articular!y For

this

study,

NEDA's) live-

3

The amimals,.particularly carabaos]

the ruminants

are raised predom_nantly

of the commercial and pouitry) phenomenon

sector

has Been

which

seem

that technology

easilN

across

not.

Cattle

raising

tions favoring land-man which

the temperate

ratio presents

areas where for cattle generally

raised

is relatively

are provided

with

Asian

LDC's

in hogs and poultry while

cattle

is

on environmental

to higher

condi-

the declining

inventories

of cattle

only in sparsely

cost of land

for growing

low.

In contrast,

housing

scale

hogs

anywhere

facilities

is due is

technolo_yin

Furthermore_

This

raising

economically

in commercial

proper

(e.g. hogs

tbe early seventies.

countries_

the opportunity

be raised

since

dependent

a barrier

But _rowth

in the non-ruminants

countries

is highly

are at present

farms.

to be true also in most

to the observation transferred

in 5ackyard

specially

significant

(e.g., cattle and

populated

pasture

grass

and poult_

can

as long as they

and a steady

supply

of

feed concentrates, Meat

production

2_5 percen_ previous

years

the number !mpor=ant

per year

of animals

has been

growing

in the seventies

(.see Figure

slaughtered

Hogs

supply and poultry

at an average

compared

i) has been

in this development

in hogs and poultry. meat

which

in the

due to the growth both

is the commercial

supplies

to I percent

and the weight

contribute

rate of

around

around

in

of animals. sector particularly

60 percent

15 percent.

of the total

Thogsm_ MT 850 8O0 75O 700 6,50 600 55O 50O 450 40O

Pork

350 500 250 200 _50 I00 50

__L_L__L---L--J-_ 55 56 57 58 59 60 6!

62 63 64 65 66 67 68 69 70 71 7'2 73 74 75 YeO_

Fig. |. Trendsin rneotproduction_1956-e0.

76 77 78

The ruminants

_re

a minor

be true also in the future. ion in poultry, system will animals

source

Commercial

which has become

continue

are known

sion efficiency

of meat

to serve

hogs

is also hi@her

and broiler

predominantly

as the major

to reproduce

and this will

much

faster

product-

a contract

sources

growing

of meat,

and their

than ruminants.

likely

These

feed conver-

It is worth

noting

however,

that since raising hogs and chickens necessitates the use 2 of lar@e amounts of feeds, increased domestic production or increased

importation

of foodstuffs

will

be needed.

if the coun=ry foreign

exchange

production_ produce

we have

meat.

the production which

appears

forei_

resources

particularly

other land.

to import

corn, soybean

imports,which

are needed

starting

we may end up This

in the seven-

of foodstuffs

have grown

have been kept

to

for the use of

foodstuffs.

imports

notably

relatively

at low levels

(see

2).

2 Feeds cost can 8o as high as 70 percent of production (See Labadan, 1976).

to

feed grains,

Otherwise_

and fish meal,

domestic

to be allocated

food crops

in the Philippines

meal,

which

no_ably

these

to save

and promoting

have

ingredients

with

exchange

imports

the feedscuffs

the value of the country's

than meat

Figure

feed

competes

to 5e the case

ties when yellow

to produce

of more

resources

usins more

meat

In other words

inevitably

domestic

more

by preventing

wants

of the total

cost

8O 75 7O 65

_

FeedIngredients

60

........

Meot Products

55 50 45 40 35 50 25

_5 I05

_,f,_,,_s

*'''=

60 6_ 62 65 64 65 66 67 68 69 70 71 72 73 74 75 76 77 7'8 79 80 Yeor Fig. 2. Trendsin valueof feed in(3redier_ts _d meo! productsimported1960-80.

Except durin@

for the'substantial

the early post-war

the mid-sixties, of supply and eUs. been

Marketing

the total

imports

of fresh, beef dropped beef

imports

tr_audously

averaged

for pork,

chicken

increase

meat

during

beef however_

during

to more

or three

for livestock

and the sixaveraged

than 90 percent

times

the same period.

to conserve

the average

imports

It is then evident

products

put pressure

of

volume

But even this has

when

foreign

have

the National

of corned beef

in the mid-seventies

income growth will

livestock

imports

is equivalent

efforts

in demand

corned

days of =he fifties

only 130MT per year.

the government's

capita

than one percent

quantities

of canned

in

I0 percent

(NAMARCO>

This

some token amounts less than

i@55 and 1969,

per year.

meat and eggs

been

in si_ificant

Between

7pOOOMT

have generally

and less

Corporation

of poultry

and again

Canned meat s particularly

imported

ties,

years

imports

for beef

imports

exchangep

of corned that due to the expected

due to population

to the expansion

and per

of domestic

production.

An_sis

Since livestock one of the major low and stable

of OovernmentPolieies

products

concerns

consumer

this_ the government

are Considered

of the government

prices

intervened

of these

essential has been

products.

in both output

goods,

to maintain

To achieve

and inputs markets.

Tariff

policy

has.can

foreign

competitors

to make

the price

used

to protect

and various of inputs,

In this section,

other programs

especially

the effects

analyzed.

Composed

policies

that affect

output

policies

that affect

the price

Policies

that Affect

Output Price

a)

producers were

feeds_

instituted

low.

of gover_iment policies

of two parts,

from

are

the first part deals with

price

and the second deals with

of inputs.

Trade Policy

Both tariff

duties

and quantitative

used in the past to regulate stock products ban

domestic

into andout

on the importation

res_rictious

the flow of live animals of the country

of egSs

but except

in 1951 and live hogs

1976, _rade on livestock

products

have bee n regulated

=hrough

not only

provide

tariff.

Tariffs

but also price protection raisin@ however,

domestic

above border

has been historically

the other animal Starting in Customs

price

to domestic

more

government

livestock

price.

and livefor the export

in

mostly revenues

producers

Tariff

favorable

have been

,by

protection

to poul_ry

than

(the Tariff

and

species.

1957 when

Republic

Laws of the Philippines)

was 70 percent, for poultry

meat

was

Act

1937

approved_

and i00 per_e_t

the _ariff

rate

for eggs while

other

forms of meat were

poultry

was subject

animals

of the other

and goats) were The high

During

to 15 percent

to a 60 percent species

tariff

(i.e., horses,

duty.

rate,

Live

while young

bovine,

pigs,

sheep

t_free.

tariff

of preventing

subject

for poultry_

_he inflow

the mid sixties

threat of Danish

served

of cheap

poultry

for example_

chicken

that in Ehe succeeding

meat

there

flooding

revisions

as an effective

means

products

from abroad.

has been

a constant

the domestic

of the tariff

_arket

codes

so

tariff

for

tariff rates

for

3 poultry

remained

high- _

In the 1972 revision poultry

meat

and eggs remained

respectively percent,

but tariffs

Duties

on live poultry live animals

(75 percent %100 percent.

declined

on other

forms

to 50 percent

to I0 percent.

particularly

for other Tax-free

canned

corned

meat)

imports

and 100 percent,

of meat declined

likewise

there was a siEnificant meat,

code,

at 70 percent

on live animals

increased

this revision on processed

of the tariff

changed.

while

change

on other

be noted

that

in the tariff

beef.

the _ariff

of corned

The tariff

tariffs

It will

to I0

beef,

From

in

duty

15 percent p

duty increased which

to

started

3people in the poultry sector in batting for the retention of high tariff rates claim that the entry of cheap Danish chicken in 1964 has caused them a lot of trouble (See Baladad, A., 1979).

i0

upon

the creati6n

of the NationalMarketing

in 1955 also stopped. form a protection

Although

for beef

Another Although

will

share part

to the tariff

remained

favorable

and eggs

of this

the absence

of poultry

policies

market,

products

decline

to poultry.

to only

tariff structure

of other

in the domestic

industry,

a

commer-

a greater

code was instituted

(by 1982) will

Pork and beef are now subject cation

was directly

of this through

this time there was a general

(by 1981),

(N_MARCO)

as raw materials.

amendment

the structure meat

this development

to the local meat processing

cial cattle producers demand

Corporation

relative

in tariff Imports

5 percent

that negate observe

rates,

of poultry

face a 50 percent

in livestock

we will

in 1980.

duty.

products

tariff.

The impliis that in

its impact on prices

that domestic

prices

to 5order

price

will be higher

through

fiat,

has been

than

pork and beef.

Price Control

Direct primarily products.

price

to maintain

Thus,

a stable

If effective,

impact of tariffs .

intervention

consumer

it should

on domestic

prices

of pork, but not beef,

counteract

of livestock part of the

prices.

in View of _he c0ncer_

local consumer,

price

used

of poultry are subject

_or the meat

benefit

of the

and eggs and some cuts

to price

control.

ii

Government

authorized

this is enforced Most

recently,

of livestock centers

products

periodic

prices.

ineffective

by tariff

stores

However,

relative

of retail

undertook

stores.

and other

distribution of the

to the total market

on domestic

and

distribution

the smallness

in depressing

policy

to the public

_nspection

likewise

in rolling

of these centers

particularly

are announced

the government

price control

renders

the upward pressure

price

of livestock

products,

poultry.

Periodic mostly

through

at controlled

operation

exerted

prices

reports

located

the meat sold tend to show

indfcate

that

in Metro-Manila in the area

that farmers

these distribution

handle

less than one percent

(ithe BAI Report, prefer

centers

to sell

1979).

Studies

their produce

of also

to middle4

men

than to government

procurement-distribution

centers.

Other Policies

There

exist other

the industry. for example

have

These

prosrams

price

as better

mean lower

ments

Research

policies

and extension

important

could

that have

have

technology

effects

on

significant (higher

!ong-r_

programs

efficiency)

on

of the government

technology long-run

effects

in livestock. repercussions

would

on

ultimately

cos_ of production.

4L_ited capacity to absorb supply and strict grading are some of the reasons cited (Zam_ra, G., ]982).

requir,

12

Unfortunately, is very little in domestic logy

research

technology

transfer

value of output and 0.035

takings

in poultry

ante of the local

middlemen. devoted

marketing

of policy

ing system

makers.

Because

to the regulation

(GMTFM)

Garcia, contrary

to other of the

to 0.07 for pork

1981).

Genetic

of research

under-

in the perform-

to that in the U.S.

aspect

much effort

The

known

and Livestock However,

that has caught

It is a popular

establishment

as the Greater

of the Food Terminal Manila

to what

most

men are essential.

people

Terminal

Markets

studies

show that middlemen

1973).

think,

of

of the middlemen

Auction

N._

'

in the past has been

Food

(LAM's) are moves

role in the marketin s of livestock

M., 1981; Deomampo,

the

idea that the market-

to the involvement

of the activities

system.

along this line. play a major

technoto note

0_40 percent

the improvement

due primarily

of this_

(FTI), previously

Market

relative

component

relative

is another

is inefficient

in the marketing Inc.

stock

direct

1980),

Livestock attention

_venson,

possible

poultry

attention

there

Improvements

it is important

in 1980 compared

an important

and this has made

through

represented

and carabeef

has been

(see Arboleda_

Nonetheless,

got more

co,mmdities,

on livestock.

been primarily

expenditures

for beef

improvemen_

have

in poultry

Research

agricultural

expenditure

from abroad.

that research species.

like in most

(Dagaas_

still C. and

This may be because,

the services

of the middle-

13

Impact of Policies" on Output

To quantify output prices, meat,

the net impact

the nominal

eggs, pork

by which

price

One commonly

used measure

unit value

(CIF).

import

unit values cannot

domes_ically_ output

the average reasons,

are the import unit

Its geographical

NPR =

imports

is the country's the Philippines _

compriee

prices

a very

•Moreover_

that is traded

used in valuin s

for poultry

and pork,

for beef.

tion that it imports

pb = border

price

however,

ofHongkong

the rate

price.

quality .of meat

border

values

The choice of Hongkong

5

NPRs measure

of the border

be used since

affecting

(NPRs) 5 for chicken

of the to_al domestic: supply°

For these

and of the U.S.

policies

the border

For livestock,

proportion

do not represent

rates

calculated.

deviates from

import

ports

of government

protection

and beef were

domestic

insignificant

Price

import price

substantial

is based

quantities

location

relative

i) x

(i00) where:

on' the observa-

of livestock

to international

products.

supply

points

pd (p_price.

pd = domestic

price

and

im-

14

is comparable

to_ the Philippines,

are found to be very

similar

Korea and Singapore_ were used

to other

For beef,

since its imports

and its import unit values

U,S,

consist

countries

like South

import unit values mainly

of low qumllty

beef. 6 Estimates using direct Immediately During

of NPR for the livestock

price comparison apparent

the period

to broiler

production

16 percent

afforded

9 percent

Except

are the high

covering

received

was 62 percent

protection and zero 7

afforded

derived

in Table I.

coefficients

1960-80,

for the case of beef,

tariff protection

are shown

industry

for poultry.

the rate of protection on average,

layers

but pork and beef were protection

rates,

these are consistent

to these enterprises

respectively. with

t_e

across

time.

Protection in the early

rates

sixties.

for chicken Government

and pork were notably policy,

particularly

high tariff

6 Despite the precautions undertaken in choosing what is thought to be the most appropriate border price, there may still be problems O_ eomparatlbility particularly in beef since traded 5eel comprise a wide range of different _ualities.

7 The low NPR for beef is hard to explain especially because we may have price comparability problem_ Note however that recent data (1981) show high NPR for beef -- 60 percent, making its average NPR to the 6 percent,very close to the tariff rate.

15

Table

I.

NPR for pork,

beef,

1960-64

1965-69

1970-74

1975-80

Pork

16

50

20

-2

9

Beef

I0

-4

-32

17

0

Chicken

50

122

50

57

62

Eggs

23

47

13

ll

16

Source:

policy, This

Average

Derived

from Appendix

has allowed

domestic

Table

price

sector.

techniques

Lastly,

of production

and eggs,

i,

integrated

it is also

1960-1980.

1960-1980

to be well above

seams to have been a necessary

poultry

chicken

type of the

in the sixties

such as the contract

border prices.

that new

growing

s=heme

evolved.

Towards

the seventies

rates declined

(Figures

in egBs and pork. government

policies

stock products poultry

3 and 4), there

with

affect

been no change

domestic

improvements

domestic

part of the protection

protection

trend was more consistent

has generally

this period,

together

the eighties, This

that snrongly

during

technology

to have made

Since

and into

price

of live-

in hogs and

competition

afforded

in

by tariff

appear redundant.

16

Price

22

BEEF

20 18 - _ 16

_ _

l--

DomestiC Price

.....

Border Price

14

12

,o

I

,iV

-J

w

8 6

e

4

Z

/""

0

60

I 70

65

1 75

8O

Price 16

!0 --

( 1

,

_

"

l l

_

l

_

_

_

12 -

po

_

l

1

l

'

14 --

./

/_

4 _

l

55

6O

I

1

I

-65

70

l

.....

75

80

(Year) Fig. 3. Trendsin domestic and border prices {P'/kq.}, pork, t959 - 1980,

beef

17

16

14 12 -

,

@//O<E/VMEAT " DomesticPrice

I0 -

--------=

Border Price

"

/ / __r".

8-

/

/"%,.,-"" n

q._#"

0

,

i , 60

,i 65

L 70

i 75

80

I ........

75

80

Price

14

EGGS

'째t

12

8-

4 --

-|

_

, ----_m._Imkm

1.

60

55

_._

nn

_

S mm inill_

_

J 65

gj

I. 70

.

(Year) Fig.

4. Trends

in domestic

and

and eggs, 1959-80,

border I)rice$

(t>/kg,)

chicken mea_

18

Better organizational with better example,

made higher

performance

in broiler notes

breeds

tachnology_

tests

kilo liveweight only six weeks. to produce

As a result,

the same weight

The samephenomenon now takes only to 8 kgs.

increased.

meat

compared years

of feeds

that generally,

years

back.

efficiency

that

in the US while

below.

Technical

_

experts

it in

only 2 kilos to 8 kilos

of feeds

of feeds

a dozen

It

eggs compared

It is interesting

than

production

attribute

to grow one

to attain

in domestic

in egg production broiler

(1980)

in egg production.

to produce

tive to that in the US is much higher Efficiency

Arboleda

ago.

was experienced

2 kilos

together

In 1975 for

than 14 weeks

it now takes

several

of feeds several

production.

possible.

it is now common

a kilo of chicken

to attain

however,

has

growing,

show that feed efficiency

it used to take more of broiler,

contract

efficiency

in poultry

and egg production

that while

e,g._

to note

egg production

in domestic

broiler

is only 2 percent performance

this phenomenon

rela-

below

is 20 percent

to environmental

8 factors. comparison,

This

is consistent

for eggs

rates for eggs.

with

the luwerNPR,

than in chicken Stronger

8Some claim that broiler lower than the yearly average

meat

competition

based

despite among

on price

_he higher

tariff

the more

grows much faster at around 75째F temperature in Khe Philippines.

19

efficient of eggs

egg producers relative

The same 5e very

to border

certain

about

position

to neighboring However, which,

but latest

withthe

it possible

countries

developments

domestic

price.

This

competitive

the exportation

of live hogs

during

thisperiod.

a ban on hog exports,

domestic

price

it is not clear when show that commercial

in the export market

It will

seventies,

5order

imposed

has driven

3).

price

in the countryts

like Hongkong

years

(Figure

again ventured potential

the early

of the improvement

for several

Policies

closely

in 1976, the government

world price

in the NPR foK beef.

that during

on hogs making

down domestic

to be true for pork but we cannot

the trend

of pork moved very

is an indication

also driven

price.

thing appears

he noted for example, price

may have

below

the

the 5an was lifted hog producers

-- evidence

have

of the inherent

of this sector.

Affecting

Protection

on the price

of the government's production

Input Prices

influence

in the country.

the input markets

of livestock

on the structure

The government

in an effort

to make

able and at the same time maintain Since feeds,

as pointed

products

of livestock

also intervenes

domestic

production

a stable consumer

out earlier,

cent of the total cost of livestock

is just part

comprise production

as much

price

in profitlevel.

as 70 per-

particularly

in

20

the commercial of altering also

tries

low

sector,

intervention

the price to make

interest

of feeds

other

forms of incentives

under

(IPP)

of the Board of Investment

credit

from

the problems

inherent

recognized industry ments

(see David,

on fixed capital)

the major cussion

expenditure

sector

to cheap

for long

will

Plan

in the

Barangay).

credit

the bulk

programs

But apart now well

of the loans

term investments

cost which

production°

focus mainly

to the

(e.g., invest-

than for Operating

item in livestock

in this section

various

are essentially

(e.g., Bakahang

rather

through

through

(BOl_.

C., Ig82)

has been mainly

The government

the investment _Priorities

for the backyard

of supervised

in the form

low primarily

and secondarily

form

been

in the market.

the cost of capital

credit policy

Programs

has mainly

is

The dis -_

on policies

affecting

feeds.

Trade

Policies

Under tariff like of

the old Tariff

on prepared

animal

flour meal, meat

cereals

and Customs

(RA No. 1937),

feeds was 40 percent.

and bone meal,

and leguminous

Code

planÂŁs

were

the

Ingredients

fish meal and by-products subject

to I0 percent

tariff.

In the 1972 revision feeds

was increased

essentially

remained

of the tariff

to 50 percent unchanged.

code_

the duty on mixed

but the tariffs Also

in the

on ingredients

seventies

impor-

21

rations

and distribution

soybean

meal

became

and wheat

The

the National

tariff rates

price of feeds. its marketing or further

And,

increas2

earlier,

the domestic

price.

This will

fishmeal,

meat

price wedge

from which under

Food

since

corn

price

that may arise

Authority.

on the domestic

ingredients

tax-free,

and soybean meal may dampen on its pricing

as has already

tax.

lower

tax would

than the border

of the implicit

It will

tariffs

also counteract

from NFA's marketing

policy.

been noted

The export

4 percent

the impact

and 5one meal.

Grains

pressure

depending

exports

at least

cushion

hran is derived,

the National

to a 4 percent

price

corn,

Authorityl.

on yelllow

domestic

like yellow

wheat

the N_A imports

and molasses

are subject

ingredients

will put an upward

monopoly

Copra meal

yellow

grain,

a governmentmonopoly

(now called

make

of-vital

on

whatever

monopoly

on

corn and soybean meal.

Price Control

In addition

to the trade policies

price of domestically on mixed

feed ingredients,

feeds and feed ingredients_

their by-products prices

produced

were

for different

instituted.

types

that tend to lower

of_mixed

price

the

controls

particularly

feed grains

Note however,

that ceiling

feeds

are based

and

on the cost

9Note that in our succeeding analysis, the 5order price of yellow corn and soyDean meal (CIF] were adjusted upwards By 5 percent to account for NFA's additional costs of handling from thm boat to the pier.

23

analysis,

we took

alternative

the 33 percent

(a lower

limit),

do not enjoy any effective tariffs

paid

prpducers

ingredients

2 shows

protection,

price

areâ&#x20AC;˘passed

the individual

to note

meal

have

respectively,

on these ingredients

feeds,

IT rates

that soybean

for the different IT for mixed

and yellow

implicit

Apparently,

has imposed

that feed-millers

on to the livestock

the average

under _IFA's control

59 and 17 percent

assume

and as an

i.e., EPR = O, and implicSt

for mixed

used in estimating

is interesting ingredients

we simply

on feed ingredients

as a higher

Table

as the â&#x20AC;˘upper limit

a penalty

feeds.

corn,

tariff

It

the

rates

NFA's pricing to the users

feed

of policy

of these

ingredients.

Table

2 also shows

a summary

for layer mash, broiler_ash mixtures

were

and piggery proportion They

used

produced

since

of total mixed

also represent

that

aBd layer mash ingredients

[which are subject

On the other hand, there is more

it appears

reliance

comprise

volume

for these

explained

These

tariff

the biggest

of mixed

feeds

groups of animals. rates

for broiler

by the greater

to high

use of importable

IT s) in poultry

that in the hog feeds

on indigenous

feed

in each type of enterprise.

of the total

implicit

of the IT

for layer_ broiler,

they normally

intended

the higher is largely

the feeds

feeds used

the bulk

by feed millers

Note

and hog grower mash.

to represent

enterprises

of our estimates

_aterials.

feeds.

formulation,

As an example,

24

Table

2.

Implici_ feeds.

tariff

rates

for feed ingredients., and mixed

FEEDSTUFF

IMPLICIT TARIFF

%

Feed Ingredients (A)

Tradables Yellow

(B)

Mixed

corn

17a

Soybean meal Meat meal Fish meal Vitamins

59 a 24 b 245 275.

Copra meal Molasses

-4 c -4 c

Non-Tradables Corn bran

0

Corn germ meal Corn grits Ipil-ipil leaf meal Pollard Rice bran Salts

0 O. 0 0 0 0

Feeds 1 Broiler mash Layer mash Cattle feeds

23 .

20 17

HO_ grower mash .....

_c _

7

•

•

? ,H!

abased

on price

bBased

on legal rates.

CExport

•

•

comparison,

tax rate.

IFor computational

Very

'

Average

close

details

;

_

-

J!

of 1979-1981

to IT using

see Cabanilla,

price

i

"

prices.

comparison.

L,S. 1983¢

25

corn _ran and ric_ bran were

combined,. 5otR,_b¥_products

milling

industry,

percent

of the total weight

to only _ percent pointed

must_e

_or hogs

in layer

on the prices

products.

_

Effective

Protection

To synthesize output rates

companies

in hog grower

feeds in ig75 in 5roller

that the lower

se.r_e of pork

to around

to offset

implicit

40

compared

mash.

It

tariff

rates

the lower '

and 5eef relative

to pbultry

Rate

the impact

of government

policies

affecting

and input prices, we estimated the effective protection 10 (EPEs) for poultry, hogs and cattle.

Note first that for

broiler, Th_s

feeds

_y PAFMI

and 5 percent

out however_

and cattle

protection

ut£1£zed

of the local

only the EPR for an integrated

is 5ecause,

is thsught

the total protection

to be shared by

and the broiler

grower,

operation for broiler

the hatchery

particularly

operator,

under

is presented. production feed miller

the contract

growinE

scheme.

i0 Also known

as protection

on value

added EPR is shm_n

as:

Vd EPR =

(-__) M

- i) x

(i00)

where: EPR = effective protection on the jth activity; _d=. value added in domestic price_ V 5' = value added in 5order price.

26

Our estimate_ tariffs

are shown

for feeds derived

and the 33 percent upper limits_

to those limits. /hat truely reflected between

indicate

the high

broiler

production

of the very

is feeds.

Moreover,

It appears

efficient

corresponding

sure that the EPRs on feeds

are

fall half-way

meat,

existence,

because

Cost

most

of

of which_

the NPK for

compared

to the

serving

to primary

as

factors

high.

hand,

are not as well

by the protection

and in fact the sustained is one indication

units.

Domestic

is primarily

to continue

returns

for

as an average

gap between

production

that they are penalized

producing

protection

production.

in broiler

on the other

however,

This

is a wider

had to be artificially

hogs production

the

as high

in broiler

IT for inputs

For broiler

continued

provides

from 70 to 80 percent,

there

HoEs and cattle

Their

added

source of chicken

of production

limit

and cattle.

enjoys

protection.

inputs range

and average

for hogs

in particular,

effective

other species.

a lower

these would

is high effective

protection

small value

intermediate

to make

of price policy

At best

that there

and negative

the main

the effect

and Power

the implicit

and low estimates.

poultry

of 200 percent

Because

EPR estimates

is an attempt

in our estimates.

It appears

output

by Medalla

two Separate

This

3.

in this study provide

derived

we made

in Table

favored.

system. srowth

that they are

in

27

Table

3.

Effective protection rates _percent) for poultry, hogs and cattle.

ENTERPEISEI

EFFECTZVE.PR_ECTION Project

_ish,,, B_oiler

Survey

(1980)

._ow ....

(Integrated)

Larse Small

241 278

155 228

Layer

D_

19 12

7 (-)9

Hogs 17 15

(1979)

L_

251

209

-

(-)7

15

Large Small

Survey

._Rh

18 Large Small

_-%TE2,,_

_-)29

(-)20 (-)29

-

-

Cattle3 (-)16

-

-

(s)

3

(-) .3

-

-

x,anch ._) (s)

(-)6 ?

(-) 7 6

=

-

Feedlot

(A)

IBackyard farms were feedstuffs in these farms

(-)11

not included because the use is vet7 small.

EPs are very

of traded close to NPRs.

2The high estimates correspond to the conservative ITs for feeds i.e. broiler _ash =23 percent; layer mash = 20 percent and hog mash - 7 percent. The low estimates correspond to the 33 percent IT for all types of feeds.

5There are two estimates for cattle.

(A) refers to EPR when NPR for beef 18 assumed zero and (B), when NPR is I0 percent.

28

Comparati__xv _ AdVap_age PrOduction

The high protection favorable

business

ing investments It must

whether

rate to poultry

environment

from various

he noted, however,

and social

profitability

another way, efficient

of private

For

farms, which

survey

projects

Bulacan,

data,

of

protecting

production.

Put

is socially

to swine

from here

involving

concreted

profitability

and cattle

swine and poultry,

personally

of Laguna,

The other

to as

and poultry

and Batangss

by _,the author

Rizal,

data set on

on, shall be referred

62 sample hogs

the

one set of data

in the provinces

Laguna,

is followed

used for this purpose

(DBP_ provided

and P_anga.

taken from Metro Manila,= Bulacan, small survey

Data

commercial

Bank of the Philippines

Cavite,

relative

cost estimates.

of 118 of their financed

commercial

exchange

private

the issue

to continue

such as poultry

analysis

come from three sources.

Batangas,

between

activities.

resource

Development

tackling

beneficial

attract-

the big feedmillers.

is wPuether or not poultry

foreign

In this section, by domestic

notably

necessitates

a more

entrepreneurs

that the divergence

the question

or other production

project

groups,

endeavors

in saving

has created

for private

or not it is socially

import substituting

in _iVestock

farms,

came from a

in 198Q.

29

Farms

in

this

farms

in

an

This

attempt

farms

are

commercial

of

Agricultural

baekyard

aro_md our

Metro

past.

nature

may

present

other

our

in

samples derived

do from

where case

were by

the studies

also

the

a nationwide

the

limited of

problems

management

this

technology.

two

ranch

concentration

at

on

gathered

Bureau

survey

of

UPLB respect

not

also the

of

samples

samples

in provinces

coefficients surveys

preclude

the

number

on representativeness

input-output

farm

experts

in

that

Manila

numbers,

implications

out

the

Data

large

used.

_he

with

of

Private

pointed

However,

data

in

and

production

a cattle

(BAEcon)

and

Technical

these

and

farms

samples.

consistent

in

be

growers.

were

small

distinctions

farms,

farms

into

in 5roller

cattle

backyard

livestock

commercial

some

contract

Economics

It should of

all

For

categorized

important

feedlot

undertaken.

were

to make

is potentially

large of

data/set

find

serious

limitations the

following

appear

conducted no

usefulness

of to be

in

the

problems

posed of

by

the

the

analysis,

Profitability

The differences

analysis in

category,

This

commercial

and

of

private

techniques was

done

backyard.

of by

profitability production classifying

And,

within

is highlighted within the

the

each

sample

commercial

by

=he

animal farms

into

sector,

farms

3O

were

divided

into s_all

layer farms usually buy commercially

and large.

mix their

mixed

where

the chicks and mixed

not snco_mon separate

Commercial

In 5ro_ler growers.

feeds

for independent

cost of production

operation

in the farm is also

Thus,

for broiler

and integrated

inputs

in commercial

farms

and hogs.

proportion

of the cost of feeds which

is highly pricing

This

comprise

in poultry

government

farms

we have

operation.

Farms

Cost of intermediate

ability

commercial

Integrated

farms.

hogs and

prQduction , most of

are produced

among large broiler

estimates

commercial

feeds w_uile small

feeds.

the large farms are contract

Large

is aafnly

dependent

(_ables 4 and 51 particularly

due to the relatively implies

on the price on

policy

feeds

the bulk of the total

high

that private

of feeds.

iS important

profit-

Consequently,

to the_producers

of these animals.

For broiler, the independent inputs

note

the differences

and inte@rated

is on the average

independent

type whereas

60 to around production

of prz_maz,yinputs

This

and mixing

under

of the value

is because of feeds

the integrated

of the added cost of feed_

i_ Sigher

type,

of output

in the

it ranges

from

the value

added

in the

is now a part of the cost

operation.

The proportion

in the integrated

the parent

between

Cost of intermediate

in the integrated

of cost of feeds however,

chicks,

operation.

80 percent

68 percent.

of chicks

in the cost structure

system because

stock that produces

the

Table

4.

Private

coats and returns

in co_ercial

Large

poultry

production. I

' BR Independent Small DBP pesos per kg.

ILER Large

Integrated Small pesos per kg.

DBP

Costs 2 I.

Intermediate

Inputs

Feeds MVS

2.

(.80)

9..41 (.82)

7.5_7 (.81)

7,47

(.67)

8.3__55 (.73)

6.70

5.97 (.53) ,44

6.95 (.61) .30

4.90 (.53) .22

6.73 (.60) .46

7.80 (.68) .32

6.17 (째66) .24

Water & electricity Others (fuel & oil, office supplies) Chicks

2.48

(.22)

2.12

(.19)

.05 2.32 (.25)

Primary

2.22

(.20)

2.00

(.18)

1.67

Inputs _

Labor Depreciation Interest: Fixed Capital Operating Capital 3.

9.00

Taxes

& Other Fees

.11

.04

.05

(.[9)

.19

.12

.12

.09 -

.10 -

.05 -

3.71

(.33)

3.06

(.27)

2.56

.22 .20

.18 .23

.13 .18

.33 .32

.31 .48

.23 .29

.30 .28

.29 .35

.55 .06

,49 .34

.53 .40

.72 .I0

.05

-

-

.05

-

-

(.72)

(.28)

Total Output: Quantity (kgs) Total Value (I_)Value/Unit output /unit output

No_es:

28,921 2,370 324,767 27,047 Ii.2_ 11.41 1.17 (.i0) 0.95

(.08)

ITaken f_m cabaniila, L_ S., 1983, 2Numbers within parenthesis are proportions

19,.576 28,921 i_,401 324,767 9.27 11.22 .74 (.08) 2.23 (.20)

; "_ "" of costs to value

2,370 27,047 11.41 1.35

of output.

19,576 181,401 9.27 (.12) 1.21 (.13)

Table

4.

continued I

|

'

LAYER ITEm,S Large

Small pesos

DBP

per egg

Costs I.

2.

Intermediate

Inputs

.330

(.55)

.496

(.72)

.489

¢.78)

Feeds Mrs

.319 .002

(.53)

.482 .0).0

(.70)

.451 .009

(.71)

Water b electricity Others (fuel & oil office supplies) Ch icks

.004

.001

.003

.005 _

.003 -

.003 .023

Primary

.271_

Inputs

Total

.197

(.28)

.141

Labor

.034

.014

.010

Depreciation Interest:

.029

.039

.029

.070 ,005

.079 .006

Fixed Capital Operating Capital 3.

(.45)

Taxes

& Other

Fees

-

(.ii)

-

(.22) (.05)

.066 (,i0) .006 ,-

Output : Quantity (pc_ Total Value (P) Value/unit output /unit output

5,180. 999 3,054,163 .60 .133

463,479 324,191 (.22)

.69 .059 (.08)

432,616 272,287 .63 .03 (,05)

t_

Table

5.

Private

costs

and returns

in commercial

Large

H O G S Small

ITEMS

hogs and cattle

DBP pesos per head

production. I

O A T T L E Feedlot Ranch

Costs 2 i.

Intermediate

Inputs

Feeds MVS Repairs Water & Electricity Fuel & Oil Fertilizers Others

2.

(e.g. Office Supplies)

Primary

Inputs

Labor Depreciation Interest: Fixed Capital Operating Capital 3.

Taxes

678.57

662.24 (.75) 6.80 3.11 4.20 2.08 .... .14 203.41

731.43

(.33)

220.00 24.45 18.12

80.69 12.29

(.09)119.70 12.44

3.55

(.77)

708.07 (.74) 13.15 9.25 .96

40.26 12.46

Total Output Quantity (heads) 3,143 Total Value (_) 2,773,774 Value/Unit Output 882 Returns/Unit Output 54.06 Notes:

(.77)

468.07

(.76)

2t464.18

(.67)

b34.14

(.35)

438.32 12.00 7.33 9.41

(.71)

1,399o54 17.53 45.36 7.01 147.71

(.38)

124.14 323.40 47.20 99.57 38.55

(.07) (.18_

1.01 (.23)

145.66 4.45 15.08

(.13)

84.57 5.64

-

195 185,527 950 (.06) 45.28

ITaken from Cabamilla, L,-S_, 1983.

2Nos. within parenthesis are proportions

(.24)

(.14)

847.03

(.23)

1.28

1,236.33

(.33)

1,184.59

(.65)

91.95 149.74

(.04)

306.55 107.54

(.17) (.06)

322.61 103.03

(.09) (.03)

403.30 57.02

(.22)

.59

98 60,203 614 (.05) 35.92

of costs

(.04)

-

3,423 12,669,100 3,701 (.06) 56g

to value

-

2,350 4,274,020 1,819 (.15) 310

of output.

(.17)

34

Profit

per u_it output

than the independent ways

re_lect

hatchery

farms by around

the profits

operator.

in our independent

in the integrated

6Q percent,

that accrue

paid By the integrator expect

an increased

future

as the farmers

also

enterprise

which in "_ some and the

that profit per kg.

is close to the fixed

to the contract

shift

is higher

to the feedmiller

It will be noted broiler

farms

to contract

grower. _rowing

are less exposed

However,

fee

we may

scheme in _he

to risk

in this system

ii of production.

Qur figures profit among

for the co_ercial

per unit of egg among the small

difference

farms.

in the feed

In the projecc

survey,

feeds while majority feeds.

Apparently,

feeds.

I_ addition,

layer

large

farms

Tbe reason

all the large

the farms

the price per eg_ is lower

among

is twice

the small sample

farms

that

as much as those

and large farms.

farms

costs by mixing

_s also assured. large

mix their own

huy the cemmercially.ÂŁ_ixed

can reduce

feed quality

indicate

for this is the significan t

cost between

of the small

farms

farms which

their

Thus,

own

although

is due to volume

12 deliveries_

net returns

are still much

higher.

liln 1976, some contracts specify tkat in case of abnormal mortality, the grower's sharz in the loss is only _i.0,0 per bird (UP to 4 weeks of age) and _2o00 per bird (5-8 weeks of age). l_s_ of the sm_ll therefore price received

farms cater directly is a little higher_

to retail

atores

35

Ne_

returns

among

DiP

sample

farms

egg.

It

s_ould

5e

low-_

3 centavos

survey

covered

only

5 months

on

hot

humid

months

the

less

and

5 shows _the

cattle.

farms

It will

represent

produce as

both

of

noted

production the

number

farms their

5e

noted

different

year

which

when

to he very

however

that

happened

the

costs

and

returns

first

that

small

production (marketable

(for

to

sale

of weanlings

Small

private

finishers

weanlings

sell

of

appear

laying

the

to fall flock

are

productive.

TaBle

and

per

the

on

small

fs more

_he

other

animals

as

hand

the

rarely

ffnishers.

for

large

slaughter)

sell

Gf

the

as well

finishers

case

usually

instances

weanlings째

is

hogs

hog

farms

In most

number

This

commercial

Large

operators).

than

and

systems. animals

for

sold.

Usually in

the

our

they

sample

farm_ The

large

to produce he

raised

produce do not

as

have farms

weight

of

large

farms,

The sale

to

animals

and

these

feed

85 kgs.

unit

despite profft

output the is

survey

sale

Breeding

per

tBat

for

for

around

ever,

our

finishers.

weanlings

cost

iu

weanl_n_s

large

feed

farms

to

maintain hackyard

small

animals Because fs hfgher

lower

price

20 percent

on

the

farms.

that

of

buy

they

this, among

per higher

and

other

In some

they

till

animals

operators

farms

other so

breeding

price small

head

of

than

hand, cases,

weanlings reach

to rarely

they

from

marketable

per

unit

farms. output

small

also

and

Note among

farms.

howthe This

36

profit

difference

can be looked

at as

the risk of maintainin K a larse

stock

addition

to scale economies

Another on capital

difference

cost.

between

Although

amon E large farm& buildings

their fixed

is lower

among the large

explanation

Commercial lot operation

in pasture while

while

lands.

ranches

are the sources differences structure

between

Intermediate percent

in a ranch_

of the total

normally

farms

Cattle

efficient

cost

per unit of output

per head.

takes

is

notin E that

raise

of which

primarily

as well.

In fact,

operators.

cost in feedlot

compared

to graze for meat they These

cost and return

in our figures is feeds,

are raised

are allowed

cattle

for the feedlot

and ranch

two forms -- feed-

in feedlot

why we ohser%'e a contrasting

most

There

out, fell on a period

the animals

as 5reedin 8 farms

feedlot

inputs,

investments

demand.

ranching.

of yearlings

explain

Capital

been pointed

producton

Feedlot

serve

is

sophisticated

to this hut ft is worth

and cattle

in confinement

capital

tha_ they are more

show a low profit

rate and siack cattle

farms.

and large hog farms

total

investment.

in

farms.

as had already

of low production

the small

- - they have more

capital

The DBP data on boss

the DBP survey

5y the large

it appears

fn usin_

for assu_in E

of breedin s animals

in general,

is higher

and equipment,

no apparent

enjoyed

premium

in Table

comprise

around

5.

67

to only 35 percent

37

in cattle ranch.

Oh the other

total cost in cattle

ranch

Our case feedlot

ranches

reach marketable

weight

consist

agrÂŁbusiness

mainly

amounts

with

of soybean

slaughter. of output per output

â&#x20AC;˘a yearling when

higher

till they

fed to the of the

in addition

feedto some

until ft becomes

of i_s yearlings

the area who in turn feed

they reach marketable

of its output

the difference

in feedlot

risk assumed

the

weight.

are sold for meat

in the value per unit Note

also that the profit

operation,

by the feedlot marketable.

dies than when

l_is

farmer

accounts

in raising

The farmer

loses more

it dies at an earlier

age.

Farms

The costs and returns a per peso worth absence

200 kgs.

are supplied bY

sells most

the two case farms.

is much

the yearlings

Backyard

until

This explains

for the higher

hand

farmers _n

than 50 percent

_etween

and energy

on the other

_n their backyards less

around

from the plantation

corn and its hy_products,

to rural 5ank_assisted

Slightly

weighing

The roughage

of waste matter

of the

inputs_

them in confinement

of 400 kgs,

protein

proportion

meal.

The case ranch

cattle

is on primary

and feed

firm, while

ing the animals

the major

farm buys yearlings

from neiEhBorÂŁng

animals

hand_

of output

of information

for _ackyard (Table 6_.

on output

farms are expressed This is because

quantity

from

on

of the

the survey

conducted

38

Table 6.

Cost and'returns; output).

ITEMS

hackyard

livestock

farms

_eso

of

Poultry

Hogs

Cattle

.079

.251

.169

_eeds

.079

.243

.168

M_IS

.002

.002

,001

.921

â&#x20AC;˘.749 ,,.,

. 83

LaBor

.192

.541

.270

Residual

.72g

.208

.560

Costs i.

intermediate Inputs

2.

Primary

Source:

Inputs

Cabanilla,

5y the Bureau

L. S., 1983.

of Agricultural

that the set of prices the project make

cial farms,

in the BAEcon

and DBP surveys

our numbers

Economics

since

in the 5ackyard

cost and returns

(BAEcon).

survey

is different

it was gathered farms

comparable

are expressed

Note however from

in 1976.

To

to the commer-

per peso worth

of out-

put.

Two things

are clear

to the commercial amonE 5ackyard cost which

farms,

farms.

is as much

from Table

6.

First,

the cost of primary

This

is Because

as 70 percent

in contrast

input

is large

the proportion

among

commercial

of feeds farms,

is

39

very small. higher

Second,

ÂŁt appears

among backyard

farms.

of the value of output commercial

The system

native

farms

chicken)

However,

production

units.

type where

the

ranges

feeding

from

the higher

use of purchased

production

Marketing

=ate

farms

would

ul_imately

among

continue

offers

farm waste.

now heine

used among

is not

aspect

included

folk.

an opportunity

in the

unorganized livestock

farms. farms

of the farming

Backyard

to he important

necessitate is a limit

the small,

to be an /mportant

_urthermore,

there

out that hackyard

and eggs for the rural

livestock

inputs

of production

fs low.

since

materials

in the rural areas in the future,

meat,

(in the case purchased

systems

these

cost, which

But it is worth pointing

will

refuse

cannot 5e taken as an

foodstuff

feeding

is also higher

continue

(_he case of the

Because

5ackyard

among

_ncreased

to the home,produced

kitchen

material_

profit

backyard

these farms.

t_e scavenger

tend to be high,.

feed efficiency

cabarao)

the

are subs_stedce

expanding

will

percent

in general,

in favor of promoting

analysis

20_70 among

to a system where

are low, net returns

because

to be

to 5_22 percent

to fend for themselves

_s the main

argument

5etweeu

appears

compared

of feeding

are allowed

of hoes)

It ranges

rate

farms.

_ackyard

animals

that profit

livestock

sources

Furthermore,

for a 5otter

system _e.g.,

Of farm power, backyard

utilization

of

4_

Domestic

Resource

_ost

The DRC 13estimates of estimates

are presented.

tion, allocates actually

inputs

occurred.

all potentially estimates stock

The historical

broiler

compared

an indication layer,

mates are compared

in broiler

resources

used in broiler

exchange

rate.

production

treats the twe

of t_e live-. presupposes

come from their present all potentially

production.

rate,

than

it becomes

value

is higher

is

the DEC esti-

does not possess

The social

for

This

is less efficient

exchange

production way,

activities.

In fact, when

at present

Put another

expansions

in the high DRCs

production

to the shadow

advantage

as they

Conceptually,

assumption,

production.

that the country

alloca-

assumption,

allocation

will

from the numbers

that broiler

source

imported.'

to the other

hogs and cattle

apparent

production

are assumed

What is revealing

source

Two sets

sources

traded

the future

in the fully traded

inputs

and foreign

the fully

on

7 and 8.

the historical

input_ as foreign.

for expanding

while

tradable

The other,

implication_

industry.

sources

One,

in Tables

to domestic

tradable

have

that inputs

are shown

comparative

of domestic

than the shadow

the "own-exchange"

rate of

13DRC measures the opportunity cost in terms of total domestic resources of producing _aving) a net marginal unit of foreign exchange.

Table

7.

Domestic

resource

cost estimates

in poultry.

D R C PRODUCTION

Commercial A.

'B.

CATEGORY

DBP/BAEcon Survey I

12a

12

Project Survey

Traded DBP/BAEco_ Survey

Ful!_

Historical Project Survey

DI_/'BAEco_ Survey _

1.35

1.35

Project Survey

Traded DBP/BAEcpn Survey_

Broiler 18a

17 _

2

1.9

Large

12

17

I.35

1.9

Small

13

20

1.46

2.2

Integrated

Backyard

Fully

Project Survey

Independent

Commercial

DRC'/SER

Historical

ii a

ii

16 a

16

i, 24

1,24

i, 8

Large

II

15

i. 24

I. 7

Small

ii

17

1.24

i. 9

Layer

7a

7

7a

.7

"79

.79

.79

Large

8

8

.90

,90

Small

7

7

.79

.79

Poultry

I0

iData on backyard

I. 13

.79

I. 13

farms are from BAEcon.

aMean DRC coefficient Source:

I0

i, 24

Cabmnilla,

of large and small L. S., 1983.

farms. _.

Table

_.

8.

,. -=

Domestic

]

resource

estimates

....

, ,

in

'

r

,

D PRODUCTION

CATEGORY Project Survey

Commercial

Hogs

Historical DBP/BAEcon Survey

cattle.

.....

_ ......

_ w

_

C

_.

DRC

Fully Project Survey

Traded.

DBP/BAEcon Survey

Historical Project DBP/BAEcon Survy Survey

•

'

,,,

.

Fully Traded Project DBP/BAEcon Surv__ey ___ S__urvey _

6a

6

.79

.67

.73

Large

7

-

6

-

.79

-

.67

-

Small

7

-

7

-

.79

-

.79

-

.9

.9

Hogs

8

8

.67"-

Cattle

Feedlot High

7

-

b

-

.79

-

b

-

Low

6

-

b

-

.67

-

b

-

High

7

-

b

-

.79

-

b

Low

6

-

b"

-

.67

-

b

-

High

-

8

-

b

-

.9

-

b

Low

-

7

-

b

-

.79

-

b

Ranch.

BackyardCattle

_ata

on

backyard

farms

are

from

BAEcono

aMean DRC coefficient

of large

bTb,e DRC coefficients

are the same as un er the historical

_ource:

Caban£!la,

and small

L, S., 1983,

farms. source

allocation.

1 •

/SER

6

Comercial

B.

R

,

and

7a

Backyard

A.

_, .

hogs

43

broiler

is higher,than

Thus, broiler same

the shadow

is not efficient

price

of foreign

in saving which

exchange_

foreigz

exchange.

produces

both meat

is true with hackyard

poultry

Apparently,

of the arts in brQiler

The and

eggs. the state

had not yet reached

the level

that

is comparable

at the time our data was collected farms,

Our evidence

experts

as noted

broiler

in the country

production,

earlier,

its present

for layer

competitive

On the other hand, are fed with

DRC coefficients efficient

cost_

when

in saving

foreign

The a comparative

by tariff

this sector

enough

in the to attain

time however,

that hogs

the

and cattle,

amount of indigeneous

are more

compared

case째

Egg

production,

it will be noted

a significant

low opportunity

afforded

Given

of

that in the U.S.

has enabled

position.

of technical

efficiency

that i= possesses

rates

to broiler

for commercial

an interesting

indicate

to egg production

same thing may happen

with

far below

presents

to those abroad

the observation

that the technical

The high protection

early fifties

which

to confirm

is still

in contrast,

DRC coefficients advantage.

tends

--1979-1981

production

efficient

than broilers.

to the SER indicate

exchange.

feedstuff Their

that they are

44

Summary

As

income

products the

will

country

each

and

important importation

which

mean

Expansion

of

of

resources.

expansion which

of

aÂŁ present Because

country both

has

of had

foodstuffs

in the

future.

geared

along

an extremely

production

already the to

chronic tackle_

and In

these

lines.

limited

efficient

utilization

Our

analysis

and

cathie

during

products

were

of

shows

these

that the

much

of

government

use

of

the

use

feedstuffs

content. problem

the

more

likely have

country be

are

that

the

produGtion

policies

it would

policies

for

more

the

since

base,

choice

been possesses

necessary

moves

of

;owards

to a more

resources.

NPRs

post-ward higher

commodities.

domestic is

exchange

so because

exchange

products

the

foreign

competition

import

--r

economy.

increased

require

a high

domestic

more

particularly

However,

resource

or not

the

expansion

past

whole

entail

demands

importation

importable

foreign

livestock fact,

the of

livestock

growing

to

would

have

this

inoxease

would

is more

for

or

use

heightening

production

whether

poultry

entail in other

This

determine

hogs

would

demand

meet

production

thus

animal

To

repercussions

domestic

resources

Comments

increase,

rise.

a sacrifice

domestic these

to

expand

Increased may

Concluding

population

continue

could

having

and

for years

than

poultry --

prices

were

domestic at

the

higher

than-

prices

of

border

compared

45

to hogs

and cattle.

for these products in promoting

ion rate. negative

which

domestic

Likewise, in poultry,

This

indicates

particularly On the other This

policy

hand,

is true in cattle

broilers,

for the private and other related

decade.

production

whether

or not to allow

stock to continue

infant poultry

effective

protect-

suffering

from

NPR for output was

rate for inputs,

while

the

production

and parti-

a favorable

investment

opportunity

This has attracted

investments

in hatchery

In fact this has resulted broiler

production however,

in saving

show that broiler resources.

for hogs and cattle,

by the protection foreign

exchange.

system,

protection

show

One important

arises' from this observation

the present

in the

in the last

in the use of domestic

the DRC estimates

issue that inevitably

It appears

broiler,

that are penalized

that they are efficient

high

has resulted

in poultry

is still inefficient

the enterprises

of tariff policy

and hogs were

of the DRC analysis

On the other hand,

policy

given

of commercial

The results

structure

and hogs.

enterprises_

rapid development

in

tariff

has Created

sector.

enjoying

cattle

is because

The high protection cularly

the importance

in the input market,

broiler,

much highe r than the implicit opposite

with the tariff

production.

government

EPRs.

is consistent

structure

is in live-

in the future.

that the high industry

tariff walls

has produced

better

meant

to protect

results

the

in eggs than

46

in broiler enabled

product_ono

The protection

the egg producing

position.

This

sector

reach

seem not yet true

is need

for more vigorous

efforts

broiler

production.

could

genetic

improvement

conditions develop

indigenous

be achieved

Therefore, efficiency

there in

further

adaptable

not to mention Through

has

competitive

through

strains more

materials,

in egg production

to local

the need

these

to

efforts

in organizational

technology_

can very well be duplicated

in

production.

Furthermore

it is worth

could very wellbe

feed ingredients

Philippines

that must

which,

(e.g., yellow succeeds

especially effective

change

for hogs

hog production

protection, rate likewise

in the world

afforded

indicate market.

in

the fact that it uses Here,

the disadvantage

the source

and the

does not have

however,

to pay

if the government

program.

and cattle

in =he use of domestic

truewith

developments

for example

corn production

The low DRC estimates are efficient

by

cost between

This may

in its present

_hat the disadvantage

be imported.

Thailand,

corn).

noting

explained

lies in the added =ransport

compete

to improve

improvements

by policy

its present

in broiler.

feed quality_

feeding

further

the efficiency

broiler

to develop

and better

together with

broiler

This

afforded

show that they

resources. which,

This

despite

it_ continues

that domestic

is

the negative

to grow.

hog producers

Latest can

47

In general comparative through

therefore,

advantage.

the feed milling

the livestock

Its linkage

industry

to the manufacturing

and drug/chemical

industries

that it should not be left out in the process development.

The industry

income generating

endeavor

can effectively in the rural

time provide

protein-rich

foods

particularly

in the urban areas.

possesses

a

sector

implies

of economic

serve as an important

areas,

for the growing

and at the same population

BIBLIOGRAPHY

Arboleda, C. (1980).

Genetic Improvement of the Chicken and the Development of the Philippine Poultry Industry.

Paper presented at the PSAS-UPLB-NRCP Lecture Series: A Tribute to Dr. Francisco Fronda.

Aviquetero, E. st. al. (1976).

Income and Food Consumption (Summary of 17 Economic Surveys), Special Studies Division, Ministry of Agriculture.

Baladad, A. (1979).

News Vol. 20, No. 12.

and views,

Better

Poultry

and Livestock,

Balassa, B. (1955).

Tariff Protection in Industrialized An Evaluation, JPE, Vol. 23, p. 573-94.

Bautista, R., J. H. Power and Associates tion: Policies in the Philippines. of DevelopmenÂŁ Studies OPIDS).

Bruno, M. (1972).

Clarification

Countries:

(1979).

Industrial PromoPhilippine Institute

Domestic Resource Cost and Effective and Synthesis, JPE, 80 (i).

Cabanilla, L. S. (1983).

Economic incentives vantage in the Livestock Industry, Ph.D. College, Laguna.

Protection:

and ComparativeAddissertation, UPLB

David, C. (1982). Economic Policies and Agricultural Incentives.

Paper presented at the first session of the Leonides S. Virata round table on development policies, Manila, October 6, 1982.

Deomampo, N. and T. B. Punzalan (1973). and Margins of Hog Farms° Journal and Development, Vol. Ill, No. 2.

Marketing Practices Costs of Agricultural Economics

Evenson, R. E., P. Waggeoner, and P. Bloom, (1981).

"Agricultural Research Progress in the Philippines,'!

Unpublished paper, Economic Growth Center, Yale University.

Gapuz, R. (1977).

Poultry Management in the Philippines. edition, Philippine Education Co., Manila.

Revised

49

Integrated Agricultural Production and _arketing Project (IAPMP), 1980.

'Fne corn-feed livestock industry: A framework for policy

analysis,

Ministry

of Agriculture,

Quezon

City.

Labadan, M. (1976).

"The Feed Processing Industry , in Livestock Production in Asian Context of Agricultural Dive_si fication, Asian Productivity Organization (APO).

Lopez, P. (1980).

Production, Utilization and Trade of Feed Stuffs in the Philippine, Unpublished paper, Department of Animal Science, University of the Philippines, Los BaEos. Medalla, E. and J. Power (1979).

Estimating Implicit Tariffs and Nominal Rates of Protection, Special Paper No. 2, in Bautista R. and J, Power, Industrial Promotion.

Policies in the Philippines.

NEDA,

The Philippine

Food

Balance

Sheet

(various

issues_.

Appendix

Table

i.

Domestic (NPR) of

wholesale pork beef,

" Domestic Price

/kg.

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 Notes:

Border Price

'

Domestic NPR Price

P/kg.

_

1.97 2.02 2.11 2.31 2.46 2.54 2.81 3.04 3,20 3.24 3.72 4.69 4.27 5.34 8.04 7.61 8.48 9.62 9.73 14.20 15.50

1.79 1.82 1.86 1.72 2.11 1,83 1.87 1.95 1.95 2.26 2.07 3,39 3.62 4.69 7.89 7.99 10.21 11.40 11.62 12.21 12,80

10 Ii 13 34 17 39 50 56 64 43 21 38 18 14 2 -5 -17 -16 -16 16 21

Sources

of data:

price, border poultry and

'EF â&#x20AC;˘ Border Price

P/_/kg.

2.81 2.83 2.83 2.93 3.01 3.01 3.00 3.51 3.51 3.51 3.66 4.69 6.34 6,35 9.46 11.02 11.31 11.47 "11,79 19.85 22.66

Border

and nominal 1960-1981.

protection

"-" O TRY" .Domestic NPR Price

Z 2.66 6 2.56 11 2.55 ii 2.66 10 2.73 10 2.89 4 3.28 -8 3.51 0 3.63 -3 4.02 -13 6.55 -44 7.49 -37 8.44 -25 11.63 -45 10.34 -8 7.63"44 9.62 18 9.32 23 12.65 -7 18.28 9 18.04 25

Price:

price eggs,

FAO Trade

Border Price

rates

E S' NPR

Domestic Price

P/k_.

_/kg.

_/kg.

Z

2.85* 2.93* 2.83* 3.25 _ 3.75* 6.07 4.27 4.32 4.46 4.85 5.38 5.64 5.52 6.74 8.49 9,70 9.55 ii.41 12.06 13.51 14.94

2.17 2.03 2.09 2.19 1.91 1,99 2.07 1.99 1.83 2.03 3.07 3.14 3.62 5.17 6.19 6.48 7.77 7.25 7.55 7.77 8.44

31 44 35 48 96 104 106 117 144 139 75 80 52 30 37 50 23 57 60 74 77

2.14 2.25 2.20 2.51 2.66 2,83 2.90 2.87 2.90 2.86 3.75 5.12 5.28 5.15 ,7.02 7.06 8.02 8.84 8.55 9.54 11.33

Border Price

_/kg.

1,61 1.93 2.09 2.16 t.76 1,87 1.87 1.91 1.83 2.30 3.36 3.58 4.02 4.96 7.28 7.85 8,10 8.95 8.58 7.62 7.33

hTR

Z 33 16 5 16 51 51 55 50 58 24 12 43 3!

4 -4 -i0 -i -2 0 25 55

Yearbook

Border price of pork, poultry and eggs are imports unit values of Hongkong, and U.S, import unit values for beef. gn converting border values to pesos, the official exchange rates were used.

Domestic Price: Central Bank of the PhilipPines.

Converted from price of chicken liveweight.

_a