As-delivered Opening Remarks
Acting Socioeconomic Planning Secretary Karl Kendrick Chua
Senate Committee of the Whole Hearing on Pork Importation
April 15, 2021 (10:00 AM)
Mr. [Senate] President, senators, colleagues in government, stakeholders, good morning.
Thank you for inviting NEDA to this hearing to present our position on this urgent measure that will help ensure that pork supply is adequate and affordable, especially during this pandemic.
In summary, every Filipino who eats pork, most especially the poor, cannot afford both an income loss due to the COVID-19 pandemic, and higher food prices due to the ASF.
The government’s priority is to foremost boost domestic production and use importation only as the last resort. In fact, the Department of Agriculture has allocated billions to support hog raisers.
However, after almost two years since ASF started, the data clearly shows that we cannot meet the total demand for pork only through domestic support. This strategy is not enough and has led to a spike in prices this year. If not addressed, this could lead to more malnutrition and higher poverty.
Hence, NEDA supports the temporary increase in the minimum access volume or MAV coupled with lower tariffs to help fill the deficit, reduce food prices, and ensure our food supply is adequate and affordable.
Mr. [Senate] President, please allow me now to present the details.
Pork supply and demand situation
The country currently has a huge supply deficit in pork. The Philippine Statistics Authority (PSA) Swine Situation Report as of February 8, 2021 shows that the country’s swine inventory decreased by 3 million heads or 24 percent from 2020 to 2021. This significant drop is caused by the African Swine Fever outbreak which affected almost all regions of the country.
Our projected carcass pork deficit for 2021 is around 477,000 metric tons. This is the difference between domestic production of carcass of around 1.2 million metric tons and the demand of around 1.67 million metric tons, based on a 15-kilograms per person per year consumption. On the other hand, total demand is estimated at 1.67 million metric tons in 2021.
High prices of pork and its contribution to inflation rate
The large supply deficit has led to a rapid spike in the retail price of pork. In March 2021, Philippine pork prices averaged 288 pesos per kilo or 36 percent higher and reached as high as 327 pesos per kilo in NCR, or 59 percent higher. Before the supply shock, pork prices were relatively stable at around 224 pesos per kilo.
The spike in retail price pushed meat inflation from 2.9 percent in September 2020 to 19.6 percent on average in the first quarter of 2021. While the overall inflation in March 2021 decelerated to 4.5 percent on account of slower inflation for other food items, the meat inflation increased to 20.9 percent and was the top contributor to overall inflation of 1.4 percentage points.
The contribution of meat to overall inflation has even exceeded that of rice during the height of the 2018 inflation spike, where rice contribution to inflation peaked at a lower, but still high 1-percentage point.
When we addressed rice inflation with the Rice Tariffication Law, rice ceased to be the main contributor of inflation and fell within the target range of the Bangko Sentral ng Pilipinas (BSP). In March 2021, rice inflation was just 0.9 percent and contributed only 0.1 percentage points to inflation.
Similarly, if we augment our hog supply with imports, we could see a decline in full year inflation by around 0.4 percentage points, or from 4.2 percent down to 3.8 percent. This would fall within the central bank’s target of 2 to 4 percent.
Lowering inflation by ensuring adequate supply of pork is very crucial to some 95 million Filipinos who rely on pork for their regular diet amid this pandemic.
Increasing the MAV for pork to fill the deficit
On the other hand, the proposal to increase the MAV for pork from 54,000 to around 404,000 metric tons by the Department of Agriculture is consistent with the supply deficit estimated by NEDA. The temporary increase in pork imports will not “kill” the local hog industry, as imports would potentially account for up to 22.8 percent of total consumption.
Also, as mentioned by some experts, imports will not flood our markets since ASF has also affected hog production of many countries.
In addition, the limited cold chain facility in the country serves as a physical barrier to huge importation since the total capacity is only estimated at around 268,000 metric tons, allocated for pork, given the requirements of other commodities. Hence, we think the 404,000 plus metric tons proposed for importation will only gradually enter the country as needed, instead of being imported at the same time, contrary to industry concerns.
Reducing tariff rates to lower and stabilize domestic prices
Finally, the tariff rate for pork also needs to be low enough to help reduce and stabilize retail prices. Before the spike in pork price, the normal price of lean pork was around 224 pesos per kilo. If we want retail prices to revert to this level, we also need to lower the tariff rate to complement the increase in the MAV, for a temporary period.
At 30 to 40 percent tariff, the landed cost of imported pork, based on the prevailing prices by the Food and Agriculture Organization or FAO, is estimated to range between 252 and 267 pesos per kilo. This is way above the normal price of 224 pesos per kilo. Importing at this cost would not lead to lower retail prices, which the people badly need now.
On the other hand, if we lower the tariff rate temporarily to 5 to 10 percent, that would lead to lower landed cost of around 215 to 222 pesos per kilo, closer to the pork retail price. Compared to the high end of the pork price ceiling of 350 pesos per kilo in March and April 2021, the lower tariff rates of 5 to 10 percent can translate to lower retail prices by 128 to 135 pesos per kilo.
This is exactly what we experienced when we passed the Rice Tariffication Law and was implemented. Before the Rice Tariffication Law, the retail price of rice was around 46 pesos per kilo. When rice imports started to come in, rice prices fell and reached 37 pesos per kilo. We also saw improved productivity last year and increased variety and quality of rice.
To conclude, Mr. [Senate] President, we need to help domestic producers recover from ASF. We also need to help 95 million consumers of pork by reducing tariff and increasing the MAV temporarily to help fill the deficit, reduce food prices, and ensure our food supply is adequate and affordable so that we can prevent higher malnutrition and poverty.
We hope, Mr. [Senate] President, this information helps clarify some of the issues raised against the President’s decision to lower the tariffs on pork and to propose the increase in the MAV.
Maraming salamat po.
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