Experts See Long-Term Damage from Peak Pork Prices

Economists fear that the government’s insistence on enforcing maximum pork prices could lead to higher food inflation and affect the economy in the long run, emphasizing that the measure may push producers and retailers to the bankruptcy and lead to higher prices for other agricultural products in fear that the current shortage of pork will add pressure to the government’s efforts to keep inflation at 2 to 4 percent this year. Last month, inflation rose to a two-year high of 4.2 percent, due in large part to soaring pork prices.

“Any attempt to limit prices will only lead to distortions or even informal market prices. Selling below cost will eventually bankrupt some companies and thus we have seen some distributors close down the store and [refuse] to trade, ”said Nicholas Mapa, senior economist at ING Bank Manila.

“The current price cap will also generate inflationary pressure, this time on the demand side, as inflation expectations are fueled by the recent movement,” he said.

‘Zero sum game’

Ramon Clarete, dean of the School of Economics at the University of the Philippines, described the current situation as a “zero-sum game,” as lower prices for pork in Metro Manila would mean higher prices in places of origin of pork.

“Forcing the supply from Visayas and Mindanao to go to Luzon may help consumers in Manila, but there would be a compromise from consumers in Visayas and Mindanao,” he explained.

“This would only make inflation worse. The fundamental problem must be addressed: lack of supply, ”said Clarete.

The spread of African swine fever in the country since 2019, which has killed 4.5 million pigs, has not only restricted the supply, but has also discouraged pig farmers from reinvesting without any cure for the pig viral disease.

‘Whole nation’ approach

Part of the Duterte administration’s “nationwide” approach is to enforce maximum prices for pork for 60 days, set at P270 to P300 per kilogram in the face of requests from industry groups to keep the figures at P330 to P360 per kilo.

This has prompted retailers to go on a “pig vacation” since Monday, when price caps were imposed, to evade losses and government apprehension, forcing consumers to turn to other foods.

In a telephone interview, Agriculture Secretary William Dar said the government was finding ways to fork out at least 800 million pesos to stop the pig meat holiday by subsidizing pig producers and traders who could not comply. with maximum prices.

The promised subsidies range from P10 per kilo for pig farmers in Luzon, P15 per kilo for those in Visayas and P21 per kilo for those in Mindanao.

However, with limited funding from the Department of Agriculture (DA), possible cuts to regional budgets as well as the agency’s national livestock program are being considered.

Dar said that if readjusting the budgets were not enough, the Prosecutor’s Office would request more funds from the Department of Budget and Management.

Pledged funds assistance

Chester Warren Tan, head of the National Federation of Pig Farmers Inc., said breeders in the city of General Santos stick to this commitment. Currently, a large part of Metro Manila’s pig supply comes from Mindanao.

Tan acknowledged that group members cannot reach the maximum price without financial assistance from DA.

According to Ernesto Pernia, the country’s former chief economist, the price caps will eventually lead the government to deliver aid like this that will eventually affect the economy.

He noted that the government was already spending more than it was earning, and with the coronavirus-fueled recession, increasing revenue would be a challenge.

“This is not a good idea,” Pernia said in a telephone interview. “Someone will have to pay the difference [in the price ceilings against the farm gate]. If the government supports it, it would result in a larger public deficit, which is already high. “

For Mapa, the subsidy program may work for now, but noted that “shortages are always best addressed by increasing supply.”

“It will help keep companies afloat and at the same time work to keep price pressures at bay. This will have an impact on the deficit, but given the current crisis, limiting inflation during recession time will help ensure that GDP (gross domestic product) does not deepen further, ”he said.

More pork imports?

At a press conference in Malacañang on Tuesday, Dar said an advisory council had endorsed increasing the volume of pork that is allowed to be imported into the country with lower tariffs to help contain supply shortages and rising prices. .

He said the council recommended an increase in the minimum access volume (MAV) of pork imports to 388,790 metric tons, which would be called MAV Plus. The MAV management committee will submit a referendum before presenting it to the president for approval.

Dar said another suggestion was to allow not only traders but also pig farmers to import pork.

A representative of the pig farmers, Rosendo So of Samahang Industriya ng Agrikultura, said there is no need to lower tariffs for imported pork, adding that importers were already “making a lot of profit.”

With a 40 percent tariff, the cost of landing pork is $ 110-120 per kilo, So said. Adding in delivery and storage costs, importers can sell their pork at P152. 87 the kilo, he said.

Commerce Secretary Ramón López said the department had recommended the imposition of a lower maximum price or a suggested retail price for imported pork sold in grocery stores and supermarkets, noting that the cost of landing of imported pork was lower than prices on the farm.

The Prosecutor’s Office and the Department of Commerce and Industry are still calculating the amount, López said.

Even with the possible importation of more pork, presidential spokesman Harry Roque said the government’s first priority was to increase local pork production, including restocking for which P600 million had been allocated.

Financing is also available to pig farmers, as well as insurance for pigs, Roque said. He cited P15 billion from the Land Bank of the Philippines, P12 billion from the Development Bank of the Philippines and P500 million from the DA’s Agricultural Credit Policy Council.

He reiterated the provision of transportation subsidies and the designation of nautical roads to facilitate the delivery of pork from the provinces to Metro Manila.

Quality control markets

In Quezon City, more pork and chicken vendors returned to public markets Tuesday despite the difficulty of obtaining the meat from merchants and vendors.

“Suppliers could not find suppliers that could meet the maximum price,” Procopio Lipana, program and project officer in QC’s Market Administration and Development Department, told the Inquirer.

Mayor Joy Belmonte asked private markets to waive rental rates for vendors they were unable to sell due to government-imposed price caps. He previously inspected Mega Q Mart and Commonwealth Market.

Lipana said the city government has already eliminated rental fees in city-owned markets for those who chose not to sell during the price freeze period. –WITH REPORTS FROM LEILA B. SALAVERRIA, ROY STEPHEN C. CANIVEL AND NIKKA G. VALENZUELA INQ

Read next