By Kyle Aristophere T. Atienza, Reporter
FOOD TERMINAL, Inc.’s (FTI) limited resources could limit its ability to execute its direct-sourcing program to influence pork prices, analysts said.
The FTI is intervening in the pork market by buying hogs directly from farms and delivering them to slaughterhouses. It later distributes the meat to retailers who agree to charge consumers prices that reflect the lack of middlemen in the supply chain.
The program “will fail given limited resources in the hands of FTI, the number of employees it has available to engage in procurement, selling, and pricing of meat to be bought,” former Agriculture Undersecretary Fermin D. Adriano said via Viber.
The FTI is also overseeing the government’s P20-per-kilo rice program.
The National Food Authority sells its rice at P33 per kilo, leaving the FTI and its partner local government units splitting the P13 subsidy for the rice that will be sold to the vulnerable segments of the population at P20.
The Office of the President has given the FTI a P5-billion budget for the rice program to help pay for the subsidy and the logistics costs.
Agriculture Secretary Francisco Tiu Laurel, Jr. last week told reporters that the FTI has the funding to carry out the direct-sourcing scheme for pork, without incurring losses.
However, he said the Department of Agriculture (DA) is seeking P500 million as “standby” funding to allow for the rollout to be conducted at scale. The goal is to procure 150,000 metric tons of hogs by year’ end.
“Why not just allow big groceries and supermarkets to import and sell at lower prices?” Mr. Adriano said.
Retailers participating in the direct-sourcing scheme will be allowed to charge a margin of P30-P50 per kilo.
In this manner, the FTI seek to influence pork prices by forcing parts of the supply chain, including non-participating retailers, to match its pricing.
Jose Enrique A. Africa of think tank Ibon Foundation said while the effort to intervene in the market should be part of a broader program to bring down commodity prices, the FTI may not be able to influence the pork market at scale.
“The initiative to reduce pork prices with direct sourcing to influence pricing by middlemen could be a small part of the solution, but only if the FTI has sufficient resources to influence the pork market,” he said via Facebook Messenger.
“However, the minuscule P500-million budget proposed procures just a fraction of 1% of total pork demand and cannot lower prices across the country or over an extended period,” he added.
“The risk of inefficiencies and leakages rises the weaker is institutional capacity and the poorer is oversight,” he added.
The FTI’s Taguig property remains on the list of government assets being considered for privatization, with the 24-hectare site valued at P58 billion.
Ayala Land, Inc. (ALI), in a disclosure to the bourse in March, confirmed that it had “inquired with the Department of Finance of their future plans on the remaining 24-hectare FTI property in Taguig City.”
“However, we wish to clarify that this was an exploratory discussion with no firm agreements or commitments,” ALI said. The company had bought part of the FTI site for P24.3 billion in 2012.
Mr. Africa, meanwhile, said the pilot test of the direct-sourcing program with Thai group CP Foods indicates that “it will be big producers, including big foreign producers, that will benefit from the scheme and not small Filipino hog-raisers.”
Mr. Laurel said last week the expansion of the direct-sourcing program complements the restoration of the maximum suggested retail price (MSRP) for pork either by the end of July or early August.
The MSRP — imposed in March at P350 per kilo for pork leg/ham and shoulder, P380 for pork belly, and P300 for fresh carcasses — will remain unchanged when the program resumes.
Hog producers had lobbied for the lifting of the price cap, citing the continuing impact of African Swine Fever (ASF) on production.
Compliance with the MSRP was below 5% as of May 2, just before the price caps were paused.
“It must be made clear that the first pork MSRP imposition failed because of low compliance at the middle of the value chain,” SINAG Executive Director Jayson H. Cainglet said via Viber.
“Buying more hogs at the farm level and supplying slaughtered pigs to retailers is an admission that the problem of high pork prices emanates from the huge gap of farmgate prices to retail prices,” he added.
Government intervention should not come at the cost “of further lowering farmgate prices.”
“Hog raisers have complied despite the difficulties of low farmgate price, especially backyard raisers, who have had to deal with the high cost of biosecurity measures, or the losses when farms are hit by ASF,” he said.
Mr. Cainglet said under a pork MSRP, backyard raisers and small commercial farms bear the brunt of the resulting weakening of the farmgate price as they sell only a few days every four months.
On the other hand, large commercial farms have the capacity to sell live hogs daily, he noted.
“Viajeros and retailers have assured profits daily. They also do not face the risk of exposure that hog raisers face on a daily basis if pigs succumb to animal diseases or the culling of the whole farm if ASF is found,” Mr. Cainglet said.
Mr. Cainglet said despite increasing imports, which are equivalent to 50-55% of pork consumption, retail prices remain high.
“The threat to import more pork, similar to the case of rice prices last year, will never (result in) lower pork prices.”
“Only the importers will benefit, and the hog industry will struggle even more.”
In a market inspection carried out by the DA and the Department of Trade and Industry in Muntinlupa on Thursday, pork belly was found to be selling for P450-P490 per kilo.
Hog production in the first quarter declined 3.7% year on year to 403.79 thousand MT on a liveweight basis. The decline narrowed from the 4.3% contraction posted a year earlier.