The Year of the Rooster may not be so lucky for the local poultry sector, with its fortune clouded this year by unstable and unpredictable market demand-and-supply situation.
Poultry producers, such as those belonging to the United Broilers Raisers Association (Ubra), are cautious on the growth of the local sector, as volatile farm-gate prices and the current oversupply production are seen to persist throughout the year with the continuous influx of new players in the industry.
“The current picture of the industry right now is that there’s a tremendous competition in the level of the farm, while there’s lesser competition as you draw closer to the consumer,” Ubra President Elias Jose M. Inciong told the BusinessMirror.
“The primary problem today is the local overproduction [aspect], while the imports and smuggling are just aggravating circumstances. Unlike before, it was the other way around,” he added.
Over the past three months, data show that the locally produced chicken has overwhelmed the volume purchased abroad in the country’s dressed-chicken inventory.
‘Speculative’ growers
Latest report from the National Meat Inspection Service (NMIS) showed the country’s chicken inventory as of January 2 has gone down by 37.59 percent to 24,238.49 metric tons (MT), from a soaring 38,842.05 MT inventory level a month ago.
However, the current chicken inventory is more than half, or 68.47 percent higher than the 14,387.06 MT level recorded a year ago.
Local poultry production comprised most of the current inventory volume reaching 15,160.96 MT. The figure is 45.69 percent lower than the overwhelming 27,913.88 MT locally produced chicken in last month’s inventory. However, it was more than double of the 6,505.69 MT locally produced chicken in the country’s inventory a year ago.
Inciong explained that “speculative” poultry growers were the reason behind the further spike in the volume of locally produced chicken in the country’s inventory before the holiday season last year.
Speculative growers are suppliers selling their chickens in bulk based on the current market outlook, particularly on anticipated price increase.
“There are a lot of speculative small and medium growers in the industry at the moment. Even new players have that kind of attitude, especially during holidays, such as last Christmas and New Year,” Inciong said.
Due to the current oversupply of chicken in the local market, farm-gate price have been on a downward trend. Inciong said farm-gate prices went as much as P80 per kilogram in mid-December, however, it sharply declined back below the P60-mark after Christmas.
Price volatility
“Right now things are volatile. There are weeks wherein the price are down and there are times it’s high,” Inciong said, adding that, as of this writing, current farm-gate prices of chicken average at P80 per kg.
“That’s why a lot of growers are nervous at the moment to load their volume,” Inciong added.
The Ubra chief noted that based on historical patterns, farm-gate prices every first quarter of the year are expected to go down due to shift in priorities of households, particularly families focusing on educational needs and expenses.
The latest data from the Philippine Statistics Authority (PSA) showed that the farm-gate price for broiler meat dropped to P75.12 per kg last September, from P80.07 recorded in August 2016.
PSA data also showed that the average farm-gate price of broiler meat in January to September 2016 was P84.99/kg. During the nine-month period, broiler meat recorded its highest farm-gate price in July, hitting P91.91/kg, according to the PSA.
However, in the PSA’s latest report on the Performance of Philippine Agriculture, it noted that average farm-gate price of chicken in 2016 was at P89.27 per kg.
“Prices in the poultry subsector declined by an average of 5.22 percent. Price of chicken contracted by 9.26 percent as a result of expansion in production,” the PSA said.
Despite the unstable farm-gate price of chicken, the commodity’s price in the retail level has not gone down below the range of P130 to P140, based on the data from the Department of Agriculture.
Inciong said a breakeven range for the poultry sector would be P65 to P75 farm-gate price, while a favorable range would be around P68 to P80.
‘Twice 7’
The local poultry sector, which accounted for 15.03 percent of the total agricultural output, grew by 1.39 percent in 2016 year-on-year.
“This was the result of the ‘twice 7’ harvesting practice of chicken farms as encouraged by high demand. Production increases in the newly opened broiler farms from San Miguel Corp. [SMC] and Bounty Fresh were noted in Western Visayas,” the PSA said.
“In Eastern Visayas there were reports of increased number of contract growers, as well as the opening of a new dressing plant in the region,” the PSA added.
The poultry sector was valued at 123.473 billion in 2016, compared to 121.776 billion in 2015. The chicken industry alone was valued at P94.508 billion in 2016, higher than 2015’s P93.736-billion market value.
The volume of chicken produced in 2016 expanded a little to 1.67 million metric tons (MMT), from 1.66 MMT recorded volume in 2015.
Production target
Inciong noted that production for broiler chicken this year could reach as much as 1.4 billion heads, without taking into account mortality rate and other external forces coming into play.
He attributed the growth on the influx of new players and growing demand for chicken on the back of expansions of supermarkets and fast-food chains in the country.
He added that based on Ubra’s data, the country’s broiler production in 2016 reached 1.2 billion heads.
The entry of new players in the industry, continuous growth of the fast-food sector and expansion of supermarket chains have changed not only the local poultry production capacity, but market trends as well.
“Unlike before, wherein it’s either a big-size chicken that is for the wet market and small-size ones for the supermarket, you now have different weight requirements due to market segmentation,” Inciong said.
“And unlike before, wherein the big ones are more expensive than the small ones, the price right now is dictated by the volume of supply,” he added.
The market segmentation, Inciong said, may also push growers to downgrade their production, downsizing the sizes of their chickens to cater to specific markets.
“Like in Central Luzon, it has become a light birds market. They are now supplying smaller chickens weighing around 1.25 kg to 1.3 kg,” he said.
The government bared its plan to hike poultry production by 3 percent to 4 percent annually starting this year until President Duterte steps down from office, according to the draft chapter of the Philippine Development Plan 2017 to 2022.