Seeds of Future Reversal

Encouraging people to invest in agribusiness can be more meaningful if they can be provided with some basic facts.
The domestic broiler industry has undergone a complete circle of starting from loose small farms into the entry of feedmilling companies, becoming integrators by supplying the day-old chicks, feeds, and going into contract growing, and into chicken dressing plants, and retail and institutional selling. And now, except for one or two integrators, the industry is being dominated by small regional players outsourcing their requirements from other small industry players.
Over the years, the likes of Robina Farms, Gen. Milling Corporation, Vitarich Corporation, RFM Corporation, had either completely been out of the industry, or had scaled down their operations that they are no longer their old self and having very little or negligible influence in the industry.
Robina Farms, which pioneered into a truly integrated operations, from day old broiler chick to dressed chicken sold in supermarkets, and to barbecued chicken sold by company owned stores, is no longer active in the industry. Vitarich went the same way, to include a start up operations on chicken food business.
Of the old integrators, it is only San Miguel (who absorbed Purefoods’ chicken operation by way of corporate merger) that has survived this change. And is joined in the industry by upcoming Bounty Agri-Ventures which is also into integrating the whole production cycle.
Added to this is the recent news from the livestok sector that a big meat integrator is also shedding off its piggery operations and opting to get their requirements from the open market or independent piggery farms.
This brings to mind a big piggery farm in Iloilo who also ventured into an integrated piggery operations, complete with state-of-the-art equipment, but had to scale down their operations as the cash flow was not there to sustain its big scale program. And there was another one being established in the Bicol area but was put on hold for some business reasons.
The move from being an integrated operations into small scale player operations is primarily an economic decision. This of course is influenced by the purchasing power of the ultimate consumer. It is a measurement of the cost of delivering the goods to the table versus what the consumer can afford to buy. Apparently, the small players are in a better position to do so as big integrators had fallen on the wayside and unable to prove their competitiveness.
Under a normal economic model, an integrated operations can operate at lesser cost and can deliver products more efficiently.
The chopping off of a continuous operations done in different locations will result into inefficiencies in the system as additional cost will be incurred as products are moved from one place to another. While we can guess reasons behind such a “disintegration” of the industry, our agri-bureaucrats should be able to identify the real reasons for such. Nearby countries are showing success in integrated operations with Thailand leading the way, making strong inroads in the export markets. Far-away Brazil chicken exports are of the same category.
A simplistic reason why the integrators cannot compete is because their overhead expenses had grown so big. This is an off-the-cuff remark that cannot bring light to the situation. Or that the broiler industry is no longer an attractive investment area that a shift to other businesses was made.
What precipitated this shift from fully integrated operations to a situation similar to what we had twenty years ago?
Is it a shift that can sustain dressed chicken supply in the market? Or we can simply import when the domestic supply runs out?
For this reason, domestic dressed chicken (or any other edible food, for that matter) products are always threatened by imports from other countries. And that, inspite of our being an avian-flu free country, we have not been able to fully exploit this as our chicken exports has not exhibited a substantial increase over the years. To a great extent, we have been limited into exports of value-added or specialized chicken products and not on the whole chicken carcass.
The same can be said of our livestock (piggery) operations.
Our inability to export pork products has always been justified by reason that we are a “foot and mouth disease” country and such, efforts to exports should not be on the top priority agenda. Fighting and eradicating the disease is the priority thing and we have been into it all these years, making very little headway.
But then, one should look at the competitiveness of the piggery sector against the world. Given our cost structure, our ability to export pork on a commercial basis is in question as imports can, at any time, out-price our domestic production.
The big domestic pork market, protected by import restrictions, has provided the life support for the local piggery farms. And that their survival is on the line whenever opening of markets to imports are on the table for discussion. This is where our competitiveness shall be put to test. We should be able get a real view of the broiler industry, or any other sector similarly situated to measure ourselves against the world.
A benchmarking study is an alternative course of action to give us a direction to take. Encouraging people to invest in agribusiness can be more meaningful if they can be provided with some basic facts which is too expensive for them to generate. This will also enable our agri-planners the elbow room to move in making their “grand agri-plans” workable over the years.
A true maxim in agriculture (and in life) is that we reap what we sow.
Are we now planting the seed of fortune reversal to come in some future time?