The country’s feed millers asked the government to review the tariff structure on yellow corn to prevent a steeper rise in the cost of producing meat and poultry products and help ease the elevated food inflation.
Philippine Association of Feed Millers Inc. made the call as prices of both local and imported feed corn were hitting record highs, triggering an escalation in the price of animal feeds and the cost of producing meat, poultry products and fish, all of which would eventually have to be passed on to the end-consumers.
Tariffs are supposed to protect local corn growers, but with the significant supply gap, feed millers need to import more corn to supply the requirements of livestock growers. The country’s yellow corn importation is now more than what is locally available and has a more significant impact on consumer foods.
With the current tariff structure, imported corn from non-ASEAN countries is bloating the Philippines’ import costs to unrealistic levels. This situation is aggravated by the tight demand for corn in the world market that has caused prices to escalate.
The country has a three-tiered tariff structure on corn: 5 percent for those from ASEAN-member countries, 35 percent for supply falling under the country’s minimum access volume commitment under the World Trade Organization and 50 percent for imports over MAV.
At 50 percent tariff, feed corn imports could lead to landed costs as high P30.10 a kilo.
If local corn were available, the price today would only be at P21 to P23 a kilo. Last year, before this global corn supply and pricing crisis hit, local corn averaged only at P15.79 a kilo.
The existing scarcity of corn allocated for export by ASEAN members, plus the globally elevated prices, is likely to stay until 2022, according to the US Department of Agriculture, which keeps a tight tab on grain supply and movements across countries. The US is a major exporter of corn.
Other ASEAN members, like Vietnam, already subjected to a review their tariffs on corn to support their livestock industry, not only to ensure stability of consumer prices of pork and poultry products, but also to support their livestock export industries.
Local feed millers want the country to adopt similar measures and shield Filipino consumers and corn-dependent domestic industries from the adverse impact of the rising world market prices of corn.
The Philippines cannot rely solely on the supply from its ASEAN peers as they are also heavy users of corn. Yellow corn accounts for 40 to 60 percent of the feed formulation, while feeds account for 60 to 70 percent of the cost of producing meat and poultry products.
According to its computations, a P1 increase in the price of feed corn per kilo would translate into a 3-percent rise in the cost of producing a kilo of broiler feeds, which in turn could result in a 1-percent rise in the cost of growing a broiler chicken.
A 3-percent increase in the cost to produce a kilo of layer feeds could jack up by 2 percent the cost of producing an egg, and a 2-percent increase in the cost of producing a kilo of hog feeds could increase by 2 percent the cost of growing a hog. All these will result in higher prices of pork, chicken and eggs.
Corn is also a key input in various industries. Aside from feed manufacturing, yellow corn is used in the manufacture of snacks, oil and bio fuels.
Other countries, particularly the US, have been increasing their corn use for the production of ethanol, contributing to the current tightness and volatility in the global corn market.
PAFMI believes that, long-term, the country should pave the way for reliable and consistent local corn supplies. The yellow corn value chain could be a major contributor to the country’s economy, while giving corn farmers better earnings.