Brewing corn crisis

Published October 7, 2021, 6:08 AM

by J. Albert Gamboa

The government’s economic team should intervene in bringing down corn tariffs to address a looming supply gap of this grain used by the country’s pork, chicken, and egg growers. Local corn production is not enough for the livestock industry, which is why importation is necessary.

Currently yellow corn carries a 5% tariff only if sourced from ASEAN countries. Otherwise, it is slapped with tariffs of 35-50% depending on the agreed minimum volume. With no available supply in the ASEAN region, Filipino feed millers have turned to the world’s biggest corn exporters such as the US and Brazil. Unfortunately, Brazil is still reeling from a drought that has cut production by almost one-fourth.

With the supply situation for yellow corn going berserk, prices too have been inching up to levels not seen since a decade ago. But applying the 35% tariff for imports outside ASEAN would have an immediate effect of raising feed mix prices as well as the cost of locally grown pork and chicken. This could be mitigated by temporarily suspending the non-ASEAN tariffs on yellow corn until the supply situation normalizes.

Represented by the Philippine Maize Federation Inc. or PhilMaize, corn farmers trust the local feed millers who buy their produce rather than go through the hassles of opening import requests and bringing out their purchases from customs bonded warehouses.

For its part, the Department of Agriculture (DA) organized a task force last July to review the existing corn tariff structure in anticipation of a forthcoming tight supply situation in the world market and a corresponding increase in prices.

The DA got this correctly since yellow corn is now in high demand globally, what with China gobbling just about everything it can lay its hands on. China’s domestic corn production cannot keep up with demand now that it has managed to control the spread of the African swine fever (ASF) which decimated its pig farms in 2019 and 2020.

A successful hog repopulation program combined with stricter biosecurity controls and the almost depleted corn inventories have been exacerbated by a surge in economic activity after effectively managing the spread of COVID-19 among the 1.4 billion Chinese population.

We need to protect Filipino pork and chicken growers who are also facing competition from imported livestock. Like in China, our hog farms were affected adversely by the ASF outbreak and it’s only now when the industry is slowly getting back in business. It would be a death blow to them if this brewing global corn crisis results in costlier feed inputs.

Most Filipinos are meat lovers who prefer locally grown fresh cuts to those that come frozen from other countries. Can the government afford to contend with higher prices of chicken and pork in the midst of this pandemic?

 J. Albert Gamboa is a Life Member of the Financial Executives Institute of the Philippines (FINEX). He is the Editor-in-Chief of the quarterly FINEX Digest magazine and the monthly FINEX Focus newsletter. The opinion expressed herein does not necessarily reflect the views of these institutions and the Manila Bulletin.

 
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