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May 12

The Explainer: Porktastic night

We’ve looked at rice, and how today’s higher prices are a lesson in how everything –weather, politics and policies, high finance and your own spending behavior, are interrelated and interdependent.

Tonight I thought we’d look at another gut issue, by looking at a particular industry, the hog industry.

You may have noticed in recent weeks, that the Bureau of Customs conducted raids and confiscated, among other things, frozen piglets that were allegedly smuggled into the country.

This came at the heels of a convention of Philippine hog raisers in Cebu last April, where they complained of smuggling. That and what else they’re squealing about, is what we’ll look at.

I’m Manolo Quezon. The Explainer.

 

I. Everything but the oink

 

In a country that invented sisig, an essay like Jeffrey Steingarten’s “It takes a village to kill a pig” in his marvelous book of food essays, “It must’ve been something I ate,” may seem rather peculiar.

In his essay, Steingarten describes how residents of a French village get together to slaughter a pig and make all sorts of things, include a particularly delicious blood sausage, from it. Being a Westerner, he was rather disturbed to witness a pig at the slaughter.

But Steingarten’s brief account of the French and their love for pork reminds me both of our own love for pork and how inventive we are when it comes to the pig.

As the saying goes, the only thing you can’t use in a pig is the oink.

But let’s begin by taking a look at where our pork come from.

Most of it, or 75 percent of total swine stocks, are raised in backyard operations –Mom and Pop hog farms- while only 25 percent comes from commercial farms.

Of the pigs we raise and then slaughter, more than half of total population came from the top five producing regions: Central Luzon (13.8 percent), CALABARZON1 (12.5 percent), Western Visayas (9.8 percent), Eastern Visayas (7.5 percent) and the Central Visayas (7.2 percent). ?Mindanao wants to be a major hog-raising area, too.

But the news from Mindanao isn’t so good. A recent news report says that in Mindanao, 30% of backyard hog raisers have folded up. For the money they have to spend on raising pigs, one of them said, they might as well invest in educating their kids. The cost of a healthy sow -100,000 pesos- requires an investment that could reap rewards, but a surer risk-to-reward ratio seems to be provided by raising children, at least according to that hog raiser.

Commercial-scale hog farming ain’t cheap. You need sprinkler systems, adequate ventilation, an area of two square meters per pig to prevent overcrowding and disease. This adds up to 50 million as an ideal investment for 500 sows at the price we mentioned, which is 100,000 per head. If it works out, the investment could yield 80% return in three years time, according to industry experts.

But that’s if your pigs are perky and happy; if not, well… Calamity could strike. In the form of disease. Our hog industry’s been hard hit by  epidemics.

http://nationalhogfarmer.com/news/Porcine_disease_epidemic_/

In 2006, we had an epidemic of porcine epidemic diarrhea syndrome or PEDS.

http://www.thepigsite.com/articles/7/markets-and-economics/1767/philippines-livestock-and-products-annual-2006

In 2007, we had an epidemic of classical swine fever, also known as hog cholera.

http://www.pigprogress.net/news/id1602-24606/philippines_contain_swine_fever_outbreak.html

Bulacan was particularly badly hit. Government agencies stepped in and had to institute inoculation and quarantine programs. All of these costs money and another problem is that we’re running short on veterinarians.

There are other costs, when it comes to hog raising, too. And it’s these costs that are leading to higher pork prices.

Among these costs are the price of feed, particularly of corn and imported soybean meal, and  the high cost of medicines for pigs and the rise in transportation costs. I’d like to focus on the first of these factors, the price of feeds.

http://www.worldbank.org/html/extdr/foodprices/index.htm?cid=GS_FoodPriceCrisis2008_269

Remember the other week, when Ricky Carandang told us that commodity prices are up?

Take a look at this chart, showing corn commodity prices.

[cornprices.tiff]

See the spike?

Well, in addition, according to the World Bank:

http://www.worldbank.org/html/extdr/foodprices/index.htm?cid=GS_FoodPriceCrisis2008_269

Wheat prices are up 120%.

Rice prices are up 75%.

Poor families spend up to 80% of their budget on food.

Prices are expected to stay high through 2015.

Now I’d like to point out two articles that came out recently, that suggest that corn and soybean prices are going to be tricky, for various reasons.

http://news.tradingcharts.com/futures/4/5/108625954.html

Farmers in America are shifting from corn to soybeans, because costs for planting corn are up.

And remember when we pointed out the additional rains this year, are good for our rice crops? But take a look at this headline:

http://news.tradingcharts.com/futures/0/1/108617410.html

More rains aren’t good for corn and beans.

So the result is we can’t expect feed prices to go down, because feed itself is an increasingly valuable commodity, and shipping all that feed around requires increasingly expensive oil –Goldman Sachs predicts 200 dollar a barrel oil by the end of this year. I’ve heard hog raisers point out that it costs more to bring in feed from Mindanao, where we grow corn, than to import it from Thailand.

And so, government’s been asked by hog raisers to step in.

Recently, the Department of Agriculture through Undersecretary Jesus Emmanuel Paras said they have initially allocated 70 million of piglet and feed subsidy.??Paras said 50 million will be spent for piglet subsidy, while 20 million will go to feed assistance.?In 2004, the DA had allowed the duty-free importation of corn and soybeans for pigs but relatively few swine raisers were able to take advantage of the duty-free offer.

The end result of all this is that pork is getting pricier.

The farm-gate price of hogs has jumped from 78 per kilo last December to the present average of 90 a kilo.

When we return, how much pork do we eat? And can you turn pig poop into gold?

 

II. Turning poop into gold

 

The rise in pork prices is a cause for worry, because boy do we love eating pork.

http://www.thepigsite.com/articles/7/markets-and-economics/1178/philippines-pork-industry-overview-september-2004

According to the Philippine Food and Nutrition Research Institute (FNRI), our diet is composed of mainly of rice, fish and vegetables. Rice (282 grams) constitutes about a third of the total food we consume per day. Daily per capita consumption of fish and fish products constitutes 99 grams (68 percent), while 48 grams (27 percent) are consumed in the form of meat and poultry.

How much pork do we eat?

http://www.smileyberks.com/Community/Published+Researches/525.aspx

Last year, a report prepared by Elmer R. Esplana estimated that our per capita consumption of pork in the Philippines at about 18 kilos.  Of this total, two to three kilos are consumed in the form of processed pork per year.

According to Esplana, at the national level, the total volume of pork which is used in the meat processing industry is estimated from 200,000 to 300,000 MT per year.  Of the said total, around 10 to 15 percent are imported pork while 85 to 90 percent are locally sourced pork. In general our provinces  are net importer of pork. Cebu, according to the Cebu Daily News, for instance imports 60 percent of its pork supply from General Santos, Iloilo and Capiz.

Which brings up another point over which hog raisers have been raising hell –smuggling. This includes everything from live piglets, which can bring in disease, to frozen pork, including pork used by meat processors.

http://globalnation.inquirer.net/cebudailynews/enterprise/view/20080425-132626/Stop-smuggling-hike-subsidy-govt-urged

Hog raisers have essentially asked to be allowed to help identify smuggling in five major ports.

Meat processors on the other hand, don’t like accusations they’re tolerating, if not profiting, from pork smuggling. They insist that pork production locally simply can’t match the demand.

http://www.sunstar.com.ph/static/ceb/2008/04/18/bus/wto.quota.not.cause.of.increase.in.processed.meat.prices.nfhfi.html

According to this recent Sun-Star article, meat processors say that because of existing government taxes, they have to pay more for legally-imported pork. The result? The meat processors said, expect the price of your pork-product canned goods to go up on average, about 20 percent. They made this prediction about a month ago, so you should be experiencing the rise in prices, now.

So So what’s a beleaguered hog raiser to do? Think out of the box.

http://robots.cnnfn.com/2008/04/15/technology/Gunther_carbon_finance.fortune/index.htm?postversion=2008041704

Last month, Fortune Magazine did an article on carbon credits. One example they gave was from the Philippines.

Fortune reported on Daniel Co who raises about 10,000 pigs on a farm called Uni-Rich Agro Industrial in Tarlac. That many pigs results in a heck of a lot of pig poop. What to do with all that poop? According to Fortune, the usual method is to shovel the poop into concrete ponds, where it can rot away –producing oodles of methane, and a heck of a stink. And that’s for conscientious hog raisers. Environmentalists regularly battle hog raisers who simply put all the poop in the nearest river.

Well, the enterprising Daniel Co got interested in biogas technology. What if he could seal the pig poop ponds, and thereby trap all that stinky gas, and with the gas, produce electricity? But to do so would mean spending something in the neighborhood of 200,000 dollars. Countries committed to reducing greenhouse emissions can invest in projects in the developing world. Projects producing a measurable impact then produce credits, called Certified Emissions Reduction, or CER certificates, which are tradeable.

But as I mentioned, Co’s an enterprising type and he found out he could get paid to turn pig poop into gas for generating electricity.

The long and short of all this is that an Irish company identified Co’s piggery and EcoSecurities, an Irish company that has developed more carbon-mitigation projects than any other firm. Its experts, according to Fortune, calculated that the methane  from Co’s piggery would generate 2,929 CERs a year.

Pat, would you like to read directly from Fortune, about how it all came together?

EcoSecurities offered to pay Uni-Rich $4 per credit, or $12,000 a year, every year, until Kyoto expires in 2012, and to handle all the paperwork at the UN, which registered the project late in 2006. Uni-Rich then installed the methane digesters.

Now, thanks to the magic of carbon finance, Daniel Co and his family treasure their pig waste. They use it to produce electricity, which has reduced their utility bills by about $48,000 a year. They collect their $12,000 a year in carbon revenues. EcoSecurities, in turn, will sell the credits for about $18 each, or $54,000 a year, to a big French bank called Caisse des Dépôts.

So indeed, thar’s gold in them thar pigs –and they’re poop. You know there’s a shortage of millions of toilets in Metro Manila alone and it may be pretty soon that you can poop in a public toilet to generate electricity for your neighborhood. How’s that for sending a signal to Napocor?

When we return, everything you wanted to know about the hog industry but were afraid to ask.

 

My view

 

What ends up on your plate, got there because someone, somewhere, raised something, and that required feeding, keeping it healthy, and then getting it your table. Every step of the way not only costs money, but requires a certain amount of human knowledge.

The lesson here is the old-fashioned causes: less smuggling, greater efficiency, less red tape and more public service, are important not just during elections but every day in between.

But also, this is a time to realize we’re unable to produce not just enough rice, but so many other things we require, including pork. And even as we keep bewailing how there aren’t enough jobs at home, let’s face the reality this isn’t really true.

There are actually jobs that can’t be filled. But they’re specialized jobs. This is a good time, for example, to become a veterinarian.

And so, as Porky Pig used to famously say, bdi, bdi, bdi, that’s all folks!

 

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