A pork crisis averted… for now
The local hog raising industry is in bad shape. From maintaining an inventory of some 13 million hogs back in 2019, the industry’s stocks have plummeted to just 8 million heads as of the beginning of 2021. The industry is going through a bloodbath, literally.
The reason for this is the aggressive spread of the African Swine Fever (ASF). The ASF virus entered our shores in 2019 through smuggled swill feed imported from mainland China. Swill feed is composed of food scraps or food waste that may contain or may have come into contact with meats infected with viruses and other pathogens. In theory, the use of swill feed is illegal, but it is still widely used in the hog raising industry. How container loads of swill feed passed the Bureau of Customs is something Commissioner Rey Guerrero has to answer for.
The spread of ASF has forced hog raisers to kill and dispose of infected hogs by the thousands. It has been the worst crisis the industry has seen in recent memory. Not only has this caused an acute shortage of pork to sustain the country’s needs, it has also caused financial havoc for our hog raisers. As a result of the hog cull, many have declared bankruptcy. Those that are still in business are operating at a loss. The majority are already in the wind-down-close-down stage since there is no relief in sight. Without financial assistance from the government, it is only a matter of time before a large chunk of the industry is decimated.
Unfortunately, there is still no viable vaccine to eliminate ASF. Although veterinary pharmaceuticals are in various stages of testing, vaccine production is still years away. All our hog raisers can do, at this point, is to continue disinfecting their pig pens in the hopes that their animals do not get infected. Without a vaccine, we will just have to wait until the virus dies out on its own. This can take anywhere from one to five years.
As one would expect, ASF has caused a massive shortage in the local pork supply. The acute shortage has put pressure on prices. We already saw prices escalate sharply last year. For instance, the wholesale price of pork bellies was only P220 per kilo, pre-ASF, as compared to P330 per kilo today.
The shortage of pork has left meat processors with no choice but to import their needs. Last year, a total of 256,000 tons of pork were imported, 30% of which came from Spain, 18% came from Canada, 17% from the US, and the rest from various countries in the EU, plus Brazil. All pork imports are subject to 30% duties if they fall under a trade quota privilege and 40% if they do not.
To ease pressure on pork prices and augment the shortage, the Office of the President handed-down Executive Order (EO) 128 on April 7. The EO effectively lowers the tariff rates of pork imports from 30% to 5% for imports within the import quota, and from 40% to 15% for imports outside the import quota. This rate applies from the day the EO takes effect to three months thereafter.
The new tariff rates will become effective as soon as the EO is published in newspapers of nationwide circulation. We expect this to happen some time this week.
Further, pending an official order from the tariff commission, import quotas were also expanded from 54,000 tons to 408,000 tons.
The Philippine Association of Meat Processors, Inc. (PAMPI) welcomes Executive Order 128. With the expansion of meat quotas and lowering of tariff rates, food processors can now import their requirements and pass them on to consumers at lower prices.
But as expected, hog raisers cried foul, claiming that a flood of imports will eat into their market. This is a fallacy. The truth of the matter is that even with tariff protection, the hog raising industry was already unable to meet local demand. And now that ASF threatens the viability of hog raising, new investments to expand capacities are few and far between.
Executive Order 128 was a timely and correct move since it arrests the steady rise of pork prices and obverts a food shortage. On this count, we congratulate the Office of the President for its decisive action.
With the proverbial fire extinguished, Malacañang must now focus on containing the spread of the ASF virus and help the hog raising industry recover.
The transport of live animals is the principal cause for the rapid spread of the virus. Since 60% of all our hog raisers are micro and small enterprises without their own slaughter or cold storage facilities, they have no choice but to transfer them, by truck, to hog consolidators or the nearest slaughterhouse. The practice exposes infected hogs not only to other animals but to the general public.
This is a practice that must be controlled. Since the transfer of hogs cannot be avoided at this time, the Department of Agriculture must impose the strictest hygiene and disinfection protocols (the protocols exist but many exceptions are made). Trucks with live animals that traverse national highways must be subject to inspection by the Philippine National Police.
For the long term, the Department of Agriculture (DA) must invest in common use slaughter houses in strategic areas around the country. There are just too few of them. It must also establish a logistics cold chain that is accessible to small hog raisers. And when a virus outbreak occurs again, the DA must act decisively to impose zoning and quarantine protocols on infected animal farms. It did not act quick enough in 2019.
As for the recovery of the industry, small hog raisers must be consolidated into cooperatives or encouraged to merge. Further, a financial lifeline and/or fiscal incentives must be granted to existing hog raisers so as to discourage them from ceasing operations altogether.
We dodged a food crisis with EO 128. Let us hope that DA does not relax and prepares for the next viral spread which is sure to come.
Andrew J. Masigan is an economist
Twitter @aj_masigan
