Required Report - public distribution

**Date:** 9/1/2006

**GAIN Report Number:** RP6040

RP6040

**Philippines**

**Poultry and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Emiko Purdy

FAS Manila

**Prepared by:**

Pia Abuel-Ang

**Report Highlights:**

In 2005, Philippine chicken production declined by about 1.31 percent
due to weak consumer demand for chicken meat by all market segments and
a high carryover stocks in cold storage at the end of 2004. While
broiler production contracted during the first half of 2006, it is still
expected to expand marginally due to anticipated positive interventions
by the broiler industry during the second half of the year.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Manila \[RP1\]

\[RP\]

**Production**

Total chicken inventory as of January 1, 2006 was estimated at 134.3
million birds lower than the previous year's level of 136 million.
Broiler inventory was estimated at 36 million birds, 11 percent lower
than the previous year. About 2/3 of Philippine broiler stocks are
concentrated in Central Luzon (33.2%) and CALABARZON
Cavite-Laguna-Batangas (28.2%).

According to the Bureau of Agricultural Statistics (BAS), the country's
volume of chicken production registered a decrease of 1.31 percent live
weight equivalent (LWE) in 2005 as evidenced by the lower volume of
broilers in commercial farms and the drop in the number of dressed
chicken during the second half of 2005.

+-----------+---------+---------+---------+-------------+------------+
| [^1       |         |         |         |             |            |
| ]**HICKEN |         |         |         |             |            |
| P         |         |         |         |             |            |
| RODUCTION |         |         |         |             |            |
| **[^2]**, |         |         |         |             |            |
| 2002-04** |         |         |         |             |            |
|           |         |         |         |             |            |
| **(TMT,   |         |         |         |             |            |
| Live      |         |         |         |             |            |
| Weight    |         |         |         |             |            |
| Equi      |         |         |         |             |            |
| valent)** |         |         |         |             |            |
+-----------+---------+---------+---------+-------------+------------+
|           | 2003    | 2004    | 2005    | 2004/03     | 2005/04    |
|           |         |         |         |             |            |
|           |         |         |         | \% change   | \% change  |
+-----------+---------+---------+---------+-------------+------------+
| Jan-Mar   | 303.74  | 311.56  | 332.54  | 2.6%        | 6.73       |
+-----------+---------+---------+---------+-------------+------------+
| Apr-Jun   | 229.17  | 226.47  | 228.14  | -1.2%       | 0.74       |
+-----------+---------+---------+---------+-------------+------------+
| Jul-Sep   | 269.16  | 283.33  | 265.00  | 5.3%        | (6.47)     |
+-----------+---------+---------+---------+-------------+------------+
| Oct-Nov   | 386.68  | 410.43  | 389.99  | 6.1%        | (4.98)     |
+-----------+---------+---------+---------+-------------+------------+
| Total     | 1188.75 | 1231.79 | 1215.67 | 3.6%        | (1.31)     |
+-----------+---------+---------+---------+-------------+------------+

> Source: Bureau of Agricultural Statistics

BAS estimates that broilers account for about 62 percent of total
chicken produced in the Philippines last year. Native or village chicken
production is at 13 percent while poultry meat from culled layers is
estimated at 2 percent. The rest is comprised of other chicken such as
roosters.

> ![](media/image2.wmf)

Source: Bureau of Agricultural Statistics

Broiler production contracted last year mainly as a result of weak local
demand for chicken meat by all market segments and a high carryover
stocks in cold storage at the end of 2004. To bring down stocks to
normal levels, several integrators cutback their production during the
1^st^ quarter of last year.

According to BAS, chicken meat production contracted during the first
half of 2006, however, broiler production is still expected to expand
marginally this year due to the anticipated positive interventions by
the broiler industry during the second half of this year. The relatively
stable farmgate and retail prices enjoyed throughout the first half of
2006, the annual seasonal peak in chicken demand during the Christmas
holidays, as well as improved prospects for export with the lifting of
the Japanese ban on Philippine poultry are all expected to positively
contribute to poultry output during the second semester.

Industry sources believe that despite improved prospects for exports,
the expansion of the poultry industry is hampered by a lack of
investment in new poultry farm operations due to the high risks involved
(i.e., long payback period for investments, high capital costs for
tunnel ventilated broiler grow out houses, the continued threat of Avian
Influenza, difficulty in obtaining financing, price volatility and
severe weather conditions). Therefore, while production is forecast to
increase incrementally over the next two years, production in the near
term is not likely to achieve the significant growth rates of the 90s.

**Farmgate Prices:** In 2005, the average farmgate price of broilers in
commercial farms was P63.50/kg (\$1.15/kg) or 5.3 percent higher than
the previous year's average price of P60.30/kg (\$1.08/kg). The highest
farmgate price at P65.68/kg (\$1.19/kg) was recorded during the month of
June while the lowest price of P58.35/kg (\$1.06/kg) was noted in
January. Farmgate prices have remained relatively stable throughout the
first half of 2006.

+---------------------------+-------------+-------------+------------+
| ###                       |             |             |            |
| ### Farmgate Prices Table |             |             |            |
+---------------------------+-------------+-------------+------------+
| **Country**               | Philippines |             |            |
+---------------------------+-------------+-------------+------------+
| **Commodity**             | Poultry,    |             |            |
|                           | Meat,       |             |            |
|                           | Broiler     |             |            |
+---------------------------+-------------+-------------+------------+
| Prices in                 | Pesos       | Per uom     | Kilogram   |
+---------------------------+-------------+-------------+------------+
| Year                      | 2004[^3]    | 2005        | \% Change  |
+---------------------------+-------------+-------------+------------+
| Jan                       | 63.60       | 58.35       | (8.3)      |
+---------------------------+-------------+-------------+------------+
| Feb                       | 56.11       | 63.76       | 13.6       |
+---------------------------+-------------+-------------+------------+
| Mar                       | 50.43       | 60.06       | 19.1       |
+---------------------------+-------------+-------------+------------+
| Apr                       | 59.40       | 63.25       | 6.5        |
+---------------------------+-------------+-------------+------------+
| May                       | 60.88       | 64.16       | 5.4        |
+---------------------------+-------------+-------------+------------+
| Jun                       | 56.64       | 65.68       | 16.0       |
+---------------------------+-------------+-------------+------------+
| Jul                       | 64.06       | 64.75       | 1.1        |
+---------------------------+-------------+-------------+------------+
| Aug                       | 64.41       | 63.75       | (1.0)      |
+---------------------------+-------------+-------------+------------+
| Sep                       | 61.04       | 62.46       | 2.3        |
+---------------------------+-------------+-------------+------------+
| Oct                       | 64.18       | 65.69       | 0.8        |
+---------------------------+-------------+-------------+------------+
| Nov                       | 61.48       | 64.74       | 5.3        |
+---------------------------+-------------+-------------+------------+
| Dec                       | 60.45       | 63.41       | 4.9        |
+---------------------------+-------------+-------------+------------+
| Avg.                      | 60.31       | 63.50       | 5.3        |
+---------------------------+-------------+-------------+------------+

Source: Bureau of Agricultural Statistics

According to traders, yellow corn prices remained stable throughout 2005
despite a drop in domestic production due mainly to increased corn
importation. According to the Philippine DA, domestic corn production
this year is projected to exceed 2005 levels due largely to the rising
yields of yellow corn. Despite improved outlook for domestic corn,
imports of yellow corn increased dramatically during the first four
months of 2006.

+--------+---------------------+--------------------------------------+
| **PHIL |                     |                                      |
| IPPINE |                     |                                      |
| CORN   |                     |                                      |
| PROD   |                     |                                      |
| UCTION |                     |                                      |
| AND    |                     |                                      |
| PR     |                     |                                      |
| ICES** |                     |                                      |
+--------+---------------------+--------------------------------------+
| **     | **VOLUME (MMT)**    | **AVG. YELLOW CORN PRICES**          |
| YEAR** |                     |                                      |
|        |                     | **(Pesos/kg)**                       |
+--------+---------------------+--------------------------------------+
| 2002   | 4.3                 | 8.21                                 |
+--------+---------------------+--------------------------------------+
| 2003   | 4.6                 | 8.62                                 |
+--------+---------------------+--------------------------------------+
| 2004   | 5.6                 | 10.35                                |
+--------+---------------------+--------------------------------------+
| 2005   | 5.3                 | 8.99                                 |
+--------+---------------------+--------------------------------------+
| 2006   | 6.0[^4]             | 10.95[^5]                            |
+--------+---------------------+--------------------------------------+

> Source: Philippine Department of Agriculture

Soybean and SBM prices remained relatively stable throughout 2005 and in
2006. Imports increased last year, mainly driven by the rapidly
expanding aquaculture sector and steadily growing hog sector. The
Philippines does not produce any soybeans, and, with the exception of a
few crushing facilities, the country relies almost entirely on imports
for its SBM requirements.

+-------+-------------------+------------------+----------------------+
| **Y   | **SOYBEAN MEAL**  | **SOYBEAN**      | **US Soybean Meal**  |
| EAR** |                   |                  |                      |
|       | **IMPORTS (MT)**  | **IMPORTS (MT)** | **FOB Prices         |
|       |                   |                  | (\$/kg)**            |
+-------+-------------------+------------------+----------------------+
| 2002  | 1,291             | 264              | 0.19                 |
+-------+-------------------+------------------+----------------------+
| 2003  | 1,251             | 289              | 0.19                 |
+-------+-------------------+------------------+----------------------+
| 2004  | 1,160             | 284              | 0.25                 |
+-------+-------------------+------------------+----------------------+
| 2005  | 1,425             | 146              | 0.22                 |
+-------+-------------------+------------------+----------------------+
| 200   | 552               | 55               | 0.21                 |
| 6[^6] |                   |                  |                      |
+-------+-------------------+------------------+----------------------+

> Source: Philippine National Statistics Office

# 

# While prices of soya and corn have remained stable, overall broiler production costs remain relatively high due in part to the industry's import dependent nature (i.e., day-old broiler (DOB) chicks, feed inputs, etc.) and high levels of protection for domestic corn industry. Feeds account for over half of the total cost of producing live broilers and about a third of dressed chicken production cost (BAI).

# 

# In order to address high production costs, integrators have begun to alter their business practices. While some integrators remain fully integrated, others have found it more profitable to halt operations after DOB production and contract out the remaining production stages to independent growers. Simultaneously, some independent producers have found it more profitable to use integrated production methods.

# 

# Consumption

Philippine GDP grew 5.1 percent in 2005, slower than its projected
target of 5.3 to 6.3 percent. The slower growth has been attributed to
weaker farm output and slow export demand. Philippine GNP, however, rose
by 5.7 percent last year, buoyed by remittances from overseas workers,
although still lower than the 6.2 percent GNP growth in 2004.
Surprisingly, the significant increase in overseas remittances (which
have fueled personal consumption in recent years) did not boost personal
consumption to expected levels.

Many analysts have attributed the weak growth in consumption spending to
the prevailing political uncertainty in the country. Average inflation
was in the 7.7 to 7.9 percent range in 2005, and is projected at 8.0 to
8.5 percent this year. This year's GDP growth target is between 5.7 to
6.3 percent, lower than the previous GRP estimate of 6.3 to 7.3 percent.
Some private analysts, however, predict 2006 Philippine GDP growth rate
to be similar as last year's level. Rising consumer and oil prices, as
well as the imposition of new and additional taxes, are expected to
produce shifts in the consumption pattern of the average Filipino.

Per capita consumption of chicken declined in 2005, which reflected the
weak purchasing power of Filipino consumers brought about by rising
consumer prices as well as the imposition of new taxes. In addition,
there is a common perception in the food industry that increased
spending on telecommunications (i.e., cellular phone use), especially in
lower income bracket, may have affected food expenditure patterns.

+------------------------------------+---------------------------------+
| **Philippine Per capita Chicken    |                                 |
| Consumption**                      |                                 |
|                                    |                                 |
| (in kilograms)                     |                                 |
+------------------------------------+---------------------------------+
| 2003                               | 8.00                            |
+------------------------------------+---------------------------------+
| 2004                               | 8.26                            |
+------------------------------------+---------------------------------+
| 2005                               | 7.85                            |
+------------------------------------+---------------------------------+

Source: Bureau of Agricultural Statistics

**Retail Prices:** In 2005, Metro Manila's average retail price for
fully dressed chicken was P99.78/kg (\$1.81/kg), 1.5 percent higher than
last year's average price. The highest retail price at P105.27/kg
(\$1.91/kg) was recorded in June while the lowest price was recorded at
P94.54/kg (\$1.72/kg) in February. Dressed chicken prices are expected
to remain steady throughout 2006.

+---------------------------+-------------+-------------+-------------+
| #                         |             |             |             |
| ##### Retail Prices Table |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Country**               | Philippines |             |             |
+---------------------------+-------------+-------------+-------------+
| **Commodity**             | Poultry,    |             |             |
|                           | Meat,       |             |             |
|                           | Broiler     |             |             |
+---------------------------+-------------+-------------+-------------+
| Prices in                 | Pesos       | per uom     | Kilogram    |
+---------------------------+-------------+-------------+-------------+
| Year                      | 2004        | 2005        | \% Change   |
+---------------------------+-------------+-------------+-------------+
| Jan                       | 113.10      | 96.01       | (15.1)      |
+---------------------------+-------------+-------------+-------------+
| Feb                       | 92.81       | 94.54       | 1.9         |
+---------------------------+-------------+-------------+-------------+
| Mar                       | 85.32       | 97.79       | 14.6        |
+---------------------------+-------------+-------------+-------------+
| Apr                       | 94.03       | 97.58       | 3.8         |
+---------------------------+-------------+-------------+-------------+
| May                       | 105.64      | 101.37      | (4.0)       |
+---------------------------+-------------+-------------+-------------+
| Jun                       | 99.09       | 105.27      | 6.2         |
+---------------------------+-------------+-------------+-------------+
| Jul                       | 98.43       | 104.99      | 6.7         |
+---------------------------+-------------+-------------+-------------+
| Aug                       | 99.72       | 102.33      | 2.6         |
+---------------------------+-------------+-------------+-------------+
| Sep                       | 95.04       | 99.21       | 4.4         |
+---------------------------+-------------+-------------+-------------+
| Oct                       | 94.69       | 99.53       | 5.1         |
+---------------------------+-------------+-------------+-------------+
| Nov                       | 93.94       | 98.17       | 4.5         |
+---------------------------+-------------+-------------+-------------+
| Dec                       | 98.38       | 100.60      | 2.3         |
+---------------------------+-------------+-------------+-------------+
| Avg.                      | 98.27       | 99.78       | 1.5         |
+---------------------------+-------------+-------------+-------------+

> Source: Bureau of Agricultural Statistics

According to industry sources, demand for poultry meat is forecast to
remain quite weak this year but is expected to pick up in the last
quarter due to the traditional Christmas holiday season. Rising oil and
consumer prices will continue to affect purchasing power of Filipino
consumers.

# Trade

Based on data from the National Statistics Office, total chicken meat
imports increased by 26 percent from 21,700 MT in 2004 to 27,400 MT last
year with majority of imports coming from Canada (34 percent), United
States (29 percent), Australia (16 percent) and Brazil (16 percent).

  ------------------------------- ------------- ------------ -------------
  **Import Trade Matrix**                                    

  **Country**                     Philippines                

  **Commodity**                   Poultry,                   
                                  Meat, Broiler              

  Time Period                                   Units:        

  Imports for:                    **2004**                   **2005**

  U.S.                            12907         U.S.         7950

  Others                                        Others       

  Canada                          4871                       9225

  Australia                       1205                       4426

  Brazil                          1753                       4376

  Total for Others                7829                       18027

  Others not Listed               970                        1425

  Grand Total                     21706                      27402
  ------------------------------- ------------- ------------ -------------

Source: GTIS/National Statistics Office

Data from the Bureau of Animal Industry (BAI), which includes fats, skin
and other offals, also shows an increase in total imports. According to
BAI statistics, based on Veterinary Quarantine Clearance (VQC)
certificate issuance, imports of mechanically deboned meat (MDM) of
chicken rose significantly last year. MDM chicken is used primarily in
the manufacture of hotdogs and other processed meat products. Last year,
MDM chicken imports comprised about 44 percent of total imports. Chicken
leg quarters (CLQ), which make up more than half of total chicken
imports, registered a decline in 2005 from the previous year's level
likely as a result of weak consumer demand and the temporary closure of
certain prime export markets.

  --------------- ----------- ----------- ------------ ----------- -----------
  **Chicken Meat                                                   
  Importation                                                      
  2003-2005**                                                      

                  **2003**    **2004**    **2005**     **04/03**   **05/04**

  Chicken Cuts    813.24      2,443.49    1,252.52     200%        -49%

  Chicken Fats    24.44       16.28       28.71        -33%         

  Chicken Leg     13,286.24   17,272.95   14,426.07    30%         -16%
  Quarters                                                         

  MDM             1,427.49    2,983.84    12,282.38    109%        312%

  Whole Chicken   217.63      186.95      \-           -14%        -100%

  Offals          0           24.62       46.50                    89%

  Rind/Skin       0           \-          17.96                     

  Total           15,769.05   22,928.13   28,054.14    45%         22%
  --------------- ----------- ----------- ------------ ----------- -----------

Source: Bureau of Animal Industry

For the first four months of 2006, total chicken meat imports surged
from 4,125 MT for the same time period recorded in 2005 to 5,941 MT
(GTIS/NSO), due mainly to low world market prices of chicken. While
chicken meat prices dropped to an all time low in the world market,
Philippine retail prices remained relatively steady despite the sharp
increase in imports. According to the Minimum Access Volume Secretariat,
about 60 percent of the Minimum Access Volume of 23,490 MT has been
utilized as of July 2006.

In 2004, several Philippine food manufacturing companies began exporting
processed poultry products mainly to Japan and a few other Asian
countries. However, an AI scare in Luzon prompted the Japanese
government to halt all Philippine poultry exports in July 2005.
Philippine poultry exports were later resumed in July of this year,
after complying with all Japanese food safety and animal disease
requirements. Prior to the import restriction, the Philippines exported
to Japan chicken products worth \$5.8M (2,605 MT) from January to July
2005. This included imported U.S. chicken leg quarters that were further
processed in the country. Despite the ban, total Philippine poultry
exports in 2005 reached nearly 4,400 MT, about three times more than the
previous year. With the opening of the Japanese market, exports are
expected to reach or even surpass last year's levels.

# Policy

**Avian Influenza Protection Program:** In 2004, the Office of the
President issued Executive Order No. 280, which defined the powers,
functions and responsibilities of government agencies in response to
Avian Influenza (AI). A National Avian Influenza Taskforce was convened
with the Secretary of Health as the overall Chairman and the Secretary
of Agriculture as the Co-Chair. The Department of Health is tasked to
protect humans from possible infection or transmission of AI, while the
Department of Agriculture is tasked to control the possible entry of
poultry and fowls, and their by-products that are suspected to be
infected with the virus.

In 2005, the GRP established an Avian Influenza Preparedness Plan, which
is a four-staged approach to dealing with AI. Stage 1 is preventing the
introduction of AI into the country from affected countries; Stage 2
deals with counter-measures for an outbreak of AI within the Philippines
from domestic bird flocks; Stage 3 involves measures to prevent
transmission of AI from birds to humans, and; Stage 4 deals with human
to human transmission. DA is responsible for Stages 1 & 2, while the
Department of Health (DOH) is responsible for Stages 3 & 4. The complete
AI Prevention Plan is available at:

http://www.da.gov.ph/BirdFlu/ProtectionProgram/stage1a.html

In 2006, the DA imposed temporary restrictions on the importation of
poultry and poultry products from the following countries as a result of
avian influenza detection: Netherlands (August 2006); Cote d' Ivoire
(May 2006); United Kingdom (April 2006); Afghanistan, Georgia, Hungary,
Iran, Israel, Niger, Slovakia and Sweden (March 2006); Albania,
Cameroon, Denmark, Myanmar (Burma); Serbia, Montenegro Poland and
Switzerland (March 2006); Malaysia, Austria, Bosnia and Herzegovina
(February 2006); France (February 2006); Germany (February 2006),
Bulgaria, Slovenia and Azerbaijan (February 2006); Italy, Greece
(February 2006), India, Egypt (February 2006); Iraq (February 2006); and
Nigeria (February 2006). Majority of all the poultry imported by the
Philippines is sourced from the United States and Canada.

The temporary trade bans on poultry and poultry products from Germany
(August 2006); Malaysia (July 2006) and France (July 2006) were
subsequently lifted following their notification to the OIE confirming
that AI has been completely eradicated.

**Import Policy:** Aside from the FSIS Certificate of Wholesomeness,
which accompanies all meat and poultry shipments from the United States,
the Philippine DA strictly requires all accredited importers to obtain a
Veterinary Quarantine Clearance (VQC) certificate from the Bureau of
Animal Industry (BAI) prior to importation (please see RP 6030 for more
information about Philippine import policies for meat and poultry). In
the past, DA has restricted imports of all poultry outside the MAV by
limiting the issuance of VQCs to holders of Minimum Access Volume (MAV)
licenses. However, the formal imposition of the special safeguard (SSG)
on out-of-quota chicken imports in 2002 has doubled the effective rate
of protection, thus effectively keeping out-of-quota imports out. All
in-quota imports of chicken under MAV, consistent with the WTO AoA, are
exempt from SSG application. However, food processors/exporters located
in Special Economic Zones are now allowed to import chicken meat outside
of MAV, tariff-free, if used as a raw material for processing and then
re-exported.

**Minimum Access Volumes:** Despite an increase in total poultry imports
recorded last year, Minimum Access Volume (MAV) usage for fresh, chilled
and frozen poultry meat declined from 92 percent in 2004 to 72 percent
last year. Increasing imports of CLQ and poultry MDM that were further
processed and re-exported to other Asian markets may have contributed to
the increase in out-of-quota imports. Under Philippine laws, all raw
materials for use by export-processing industries located in Special
Economic Zones are allowed to enter the country duty-free. Moreover,
Mechanically Separated Turkey Meat, which is not subject to SSG (see
section on Import Policy), may be also be imported outside MAV provided
a VQC is issued by the BAI.

Annual MAV utilization of poultry meat for the last three years has
averaged around 86 percent. As of July 2006, the MAV utilization rate
for this year has reached nearly 60 percent largely due to low chicken
prices in the world market during the first quarter of the year. Despite
the leveling off of global poultry prices, 2006 MAV is expected to be
fully utilized due to the minimal growth in chicken production projected
for this year.

+---+----------------------+-------+-----+-------+-----+-------+-----+
| * |                      |       |     |       |     |       |     |
| * |                      |       |     |       |     |       |     |
| M |                      |       |     |       |     |       |     |
| A |                      |       |     |       |     |       |     |
| V |                      |       |     |       |     |       |     |
| U |                      |       |     |       |     |       |     |
| T |                      |       |     |       |     |       |     |
| I |                      |       |     |       |     |       |     |
| L |                      |       |     |       |     |       |     |
| I |                      |       |     |       |     |       |     |
| Z |                      |       |     |       |     |       |     |
| A |                      |       |     |       |     |       |     |
| T |                      |       |     |       |     |       |     |
| I |                      |       |     |       |     |       |     |
| O |                      |       |     |       |     |       |     |
| N |                      |       |     |       |     |       |     |
| R |                      |       |     |       |     |       |     |
| A |                      |       |     |       |     |       |     |
| T |                      |       |     |       |     |       |     |
| E |                      |       |     |       |     |       |     |
| 2 |                      |       |     |       |     |       |     |
| 0 |                      |       |     |       |     |       |     |
| 0 |                      |       |     |       |     |       |     |
| 3 |                      |       |     |       |     |       |     |
| - |                      |       |     |       |     |       |     |
| 0 |                      |       |     |       |     |       |     |
| 5 |                      |       |     |       |     |       |     |
| * |                      |       |     |       |     |       |     |
| * |                      |       |     |       |     |       |     |
+---+----------------------+-------+-----+-------+-----+-------+-----+
| H | Description          | 2003  | P   | 2004  | P   | 2005  | P   |
| S |                      |       | erc |       | erc |       | erc |
|   |                      | MAV   | ent | MAV   | ent | MAV   | ent |
| C |                      | (MT)  |     | (MT)  |     | (MT)  |     |
| o |                      |       | U   |       | U   |       | U   |
| d |                      |       | sed |       | sed |       | sed |
| e |                      |       |     |       |     |       |     |
+---+----------------------+-------+-----+-------+-----+-------+-----+
| 0 | Fresh/ Chilled/      | 2     | 95  | 2     | 92  | 2     | 72  |
| 2 | Frozen Poultry       | 1,923 |     | 2,968 |     | 3,490 |     |
| 0 |                      |       |     |       |     |       |     |
| 7 |                      |       |     |       |     |       |     |
+---+----------------------+-------+-----+-------+-----+-------+-----+

Source: MAV Secretariat

Despite the uniform in and out-of quota duty of 40 percent for most
poultry products, the Philippines continues to maintain a Tariff Rate
Quota (TRQ) for poultry. For 2006, the tariff rate quota has been
established at 23,490 MT, same as last year. Last year, the Philippine
Department of Justice ruled that the Philippines would continue to
maintain final-year MAV levels for all products until such time as a new
WTO agreement is completed.

**Tariff Policy:** The 2006 MFN and Common Effective Preferential Tariff
(CEPT) rates for ASEAN countries for all poultry and poultry products
follow:

  ------------- -------------------- -------------- --------------- -------------- --------------- -----------------
  **2006                                                                                           
  TARIFFS FOR                                                                                      
  POULTRY AND                                                                                      
  POULTRY                                                                                          
  PRODUCTS**                                                                                       

  **HS Code**   **Description**      **MFN**                        **CEPT**                       **Remarks**[^7]

  ** **         ** **                **In-quota**   **Out-quota**   **In-quota**   **Out-quota**    

  **Poultry -                                                                                       
  Fresh,                                                                                           
  Chilled or                                                                                       
  Frozen, Dried                                                                                    
  or Smoked**                                                                                      

  ** **         Of fowls of the                                                                     
                species Gallus                                                                     
                domesticus                                                                         

  0207.11.00    Not cut in pieces,   40             40              40             40              All ASEAN
                fresh or chilled                                                                   

  0207.12.00    Not cut in pieces,   40             40              40             40              All ASEAN
                frozen                                                                             

  0207.13.00    Cuts & offal, fresh  40             40              40             40              All ASEAN
                or chilled                                                                         

  0207.14.00    Cuts & offal, frozen 40             40              40             40              All ASEAN

                Turkey                                                                              

  0207.24.00    Not cut in pieces,   40             40              5              5               All ASEAN
                fresh or chilled                                                                   

  0207.25.00    Not cut in pieces,   30             35              5              5               All ASEAN
                frozen                                                                             

  0207.26.00    Cuts & offal, fresh  40             40              5              5               All ASEAN
                or chilled                                                                         

  0207.27.00    Cuts & offal, frozen                                                               All ASEAN

  0207.27.10    Livers               40             40              40             40              All ASEAN

  0207.27.90    Others               30             40              30             40              All ASEAN
  ------------- -------------------- -------------- --------------- -------------- --------------- -----------------

Source: Tariff and Customs Code of the Philippines

**Marketing**

At present, four major integrators are supplying the bulk of the
Philippine market with poultry and poultry products: San Miguel Foods,
Inc., Tyson Agro-Ventures, Swift Foods, Inc. and Universal Robina
Corporation. These integrators are said to supply about 65 percent of
total demand, while non-integrators and other commercial growers supply
the remaining 35 percent. The integrated poultry operation consists of
the core live bird operations which extends up to the production of
dressed broiler, cut-up chicken meat, up to further processing of
value-added products.

Non-integrated operations are primarily recipients of DOC-broiler for
grow-out. The capacities of commercial grow-out farms range from 24,000
birds to 600,000 birds. These growers market their produce as live birds
through market intermediaries called "viajeros." Commercial growers are
the main market of PS breeders in the country. In terms of broiler
output, nearly all of their produce is channeled mainly to the wet
markets and small retailers primarily throughout Metro Manila and other
nearby cities. Broilers sold in wet markets are dressed in the market
place or dressing areas near the market place (Yanson, 2005)

According to the University of Asia and the Pacific, the Philippine
poultry market is composed of the food service and the household sector,
each with distinct product preferences. The fastfood chains require
volume delivery, mainly marinated parts and is very particular about
product specifications, value, quality and reliability. Hotels,
restaurants and other institutional buyers require whole chickens and
have more variable pricing against the relatively stable prices of
fastfood chains.

Wet markets still provide the majority of daily household requirements,
offering both whole chicken and parts, although households are
increasingly buying from supermarkets and hypermarkets. While the
emerging Philippine retail sector is increasing its role in supplying
fresh and frozen poultry meats to consumers, it is estimated that
currently only about 10 percent is being sold at the supermarket level.
Based on the latest Annual Poverty Indicator Survey (2003, APIS),
refrigeration in Philippine households stands at only 10 percent and
thus fresh meats are cooked soon after purchase.

The Philippine poultry industry is expected to remain highly viable with
value-added chicken products having a large potential for expansion.
There are a number of both imported and domestically produced processed
chicken products now available in the market (i.e., nuggets, hotdogs,
Vienna sausages, marinated chicken, etc.). Additionally, a growing
segment of consumers is turning to alternatives to higher priced red
meats, which may spur demand for chicken and turkey products.

+---------------------+-------+-------+-------+-----+---------+-----+
| **PSD Table**       |       |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+
| **Country**         | **Phi |       |       |     |         |     |
|                     | lippi |       |       |     |         |     |
|                     | nes** |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+
| **Commodity**       | **Pou |       |       |     | (1000   |     |
|                     | ltry, |       |       |     | MT)     |     |
|                     | Meat, |       |       |     |         |     |
|                     | Broi  |       |       |     | (MIL    |     |
|                     | ler** |       |       |     | HEAD)   |     |
+---------------------+-------+-------+-------+-----+---------+-----+
|                     | Re    | 2005  | Est   | 2   | F       | 2   |
|                     | vised |       | imate | 006 | orecast | 007 |
+---------------------+-------+-------+-------+-----+---------+-----+
|                     | Old   | New   | Old   | New | Old     | New |
+---------------------+-------+-------+-------+-----+---------+-----+
| **Market Year       |       | 01    |       | 0   |         | 0   |
| Begin**             |       | /2005 |       | 1/2 |         | 1/2 |
|                     |       |       |       | 006 |         | 007 |
+---------------------+-------+-------+-------+-----+---------+-----+
| Inventory           | 0     | 0     | 0     | 0   | 0       | 0   |
| (Reference)         |       |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+
| Slaughter           | 0     | 0     | 0     | 0   | 0       | 0   |
| (Reference)         |       |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+
| Beginning Stocks    | 4     | 4     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Production          | 647   | 647   | 662   | 651 | 0       | 661 |
+---------------------+-------+-------+-------+-----+---------+-----+
| Whole, Imports      | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Parts, Imports      | 23    | 27    | 24    | 28  | 0       | 28  |
+---------------------+-------+-------+-------+-----+---------+-----+
| Intra EC Imports    | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Other Imports       | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| TOTAL Imports       | 23    | 27    | 24    | 28  | 0       | 28  |
+---------------------+-------+-------+-------+-----+---------+-----+
| **TOTAL SUPPLY**    | **    | **    | **    | *   | **0**   | *   |
|                     | 674** | 678** | 686** | *67 |         | *68 |
|                     |       |       |       | 9** |         | 9** |
+---------------------+-------+-------+-------+-----+---------+-----+
| Whole, Exports      | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Parts, Exports      | 0     | 4     | 0     | 4   | 0       | 6   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Intra EC Exports    | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Other Exports       | 3     | 0     | 4     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| TOTAL Exports       | 0     | 4     | 0     | 4   | 0       | 6   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Human Consumption   | 665   | 665   | 677   | 666 | 0       | 674 |
+---------------------+-------+-------+-------+-----+---------+-----+
| Other Use, Losses   | 9     | 9     | 9     | 9   | 0       | 9   |
+---------------------+-------+-------+-------+-----+---------+-----+
| Total Dom.          | 674   | 674   | 686   | 675 | 0       | 683 |
| Consumption         |       |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+
| TOTAL Use           | 674   | 678   | 686   | 679 | 0       | 689 |
+---------------------+-------+-------+-------+-----+---------+-----+
| Ending Stocks       | 0     | 0     | 0     | 0   | 0       | 0   |
+---------------------+-------+-------+-------+-----+---------+-----+
| **TOTAL             | **    | **    | **    | *   | **0**   | *   |
| DISTRIBUTION**      | 674** | 678** | 686** | *67 |         | *68 |
|                     |       |       |       | 9** |         | 9** |
+---------------------+-------+-------+-------+-----+---------+-----+
| Calendar Yr. Imp.   | 18    | 18    | 18    | 18  | 0       | 0   |
| from U.S.           |       |       |       |     |         |     |
+---------------------+-------+-------+-------+-----+---------+-----+

[^1]: ^C^

[^2]: Total chicken production including broilers, native, culled layers
    and other chicken.

[^3]: Average Peso to Dollar Exchange Rate 2005 \$1=55.0855; 2004
    \$1=56.0399

[^4]: BAS Forecast, July 2006

[^5]: As of June 28, 2006, DA Bureau of Animal Industry-Marketing
    Development Service

[^6]: January to April 2005 only

[^7]: All ASEAN members may avail of Common Effective Preferential
    Tariff (CEPT); KH-Cambodia, LA-Laos, VN-Vietnam