Food security

Food security is increasingly a serious concern for many countries. Thanks to the Russian invasion of Ukraine, climate change and food nationalism, food security should be on top of many government’s list of concerns.

In Singapore, its government is very conscious of food security. CNBC reports that as a small island nation, Singapore lacks natural resources. It imports more than 90 percent of its food from more than 170 countries and regions.

Singapore is already feeling the effects of rising food inflation. Food prices rose by 4.1 percent in April from a year earlier, up from 3.3 percent in March, the Monetary Authority of Singapore and Ministry of Trade and Industry said.

With the country vulnerable to many external headwinds, the government launched a “30 by 30” initiative to produce 30 percent of its nutritional needs by 2030.

In the Philippines, food security and food inflation are related and are growing problems. It was reported that the national average for food inflation rose from 6.5 percent in August to 7.7 percent in September. Of the food items, the foremost drivers of higher food inflation are sugar, confectionery, and desserts (30.2 percent); corn (26.2 percent); and oils and fats (20.1 percent).

The big problem is the lack of productivity of our agricultural sector. Farming methods are antiquated, the economics of agriculture impoverish the farmers and government is focused on rice.

According to the Philippine Institute of Development study or PIDS, “with  traditional agricultural methods falling short, investing in new technologies is key to transforming the country’s livestock, poultry, and dairy (LPD) industries.”

“Many investments must be poured into production and process improvements, including technology, equipment, animal inventory, and manpower capacity upgrades, for the agriculture industry to be more competitive,” the PIDS paper said.

Though LPD industries produce a third of the agriculture sector’s output based on Philippine Statistics Authority data, local consumption still relies on imports. The study noted that pork import dependency showed “an increasing trend in value from 2012 to 2018”.

Dressed chicken imports are “significantly higher than exports” and local milk production constitutes only “ five percent of the total milk demand”.

“Processing consolidation of backyard operators under farmer organizations (FOs) can be an opportunity to transform the LPD industries…”

This recommendation was echoed by another PIDS study. PIDS senior research fellow Roehlano Briones and research analyst Isabel Espineli raised the need to undertake a comprehensive review of trade policies affecting the value chain of the LPD industries.

Both studies noted the Philippines’ failure to take advantage of export-driven industrialization. According to the authors, the country missed a phase in the structural transformation process by quickly shifting from an economy based on agriculture to one that is driven by services. The sector’s inability to move up the value chain was caused by policy inconsistencies that encouraged import substitution as well as foreign exchange.

For example, corn accounts for 50 percent of swine and poultry feed but local corn is more expensive than imported corn, prompting commercial producers to prefer  importation. While high tariffs on corn seek to protect local producers, they raise feed cost which is the highest among all operating expenses, thereby increasing the overhead cost.

Given the inefficiency of the agriculture department, perhaps the entry of big corporations will help increase our level of food security. There is good news. Metro Pacific and San Miguel have launched such projects.

Last year, MPIC ramped up investments to help reduce the country’s dependence on food imports.

Metro Pacific Agro Ventures, Inc. (MPAV) has tapped the LR Group of Israel to expand MPAV’s existing dairy business.

MPIC invested in the dairy industry by partnering with the Carmen’s Best Group. They plan to further develop and expand the operations of its dairy farm and dairy products manufacturing facilities.

“Our investment in agriculture is synonymous to food security and substantial independence but will ultimately become a means of alleviating hunger in our country – a pressing issue that we have taken as a challenge to address,” said MPIC chairman, president, and CEO Manuel V. Pangilinan.

“Our goal is and always will be to feed our people first.”

This partnership plans to annually produce at least  six million liters of milk in a facility in Bay, Laguna.

On the other hand, San Miguel Corp.’s (SMC) food unit San Miguel Foods has broken ground on its P20-billion Davao Broiler Complex project, the first of a planned 15 mega poultry farms the company is building in the next 10 years, to help ensure sufficient supply of chicken and improve food security in the country.

The new complex, to be built on 921 hectares of land in Hagonoy, Davao City, will feature 28 world class climate-controlled broiler houses that can produce up to 80 million grown broilers a year, and meet demand from the entire Mindanao region.

The broiler complex will feature multi-tier decks designed to allow for more efficient production and better health and welfare practices, and will include an integrated sanitation management program to neutralize odor and eliminate flies.

“This major investment is an important milestone not just for San Miguel and the whole of Mindanao, but more significantly, for our country’s food industry. Poultry is a staple food of Filipinos as it is versatile, affordable, and nutritious. This mega-facility is our first step at ensuring sufficient, year-long supply of high-quality, local poultry nationwide, and is among the ways we’re helping to achieve food security for every Filipino,” said SMC president Ramon S. Ang.

Ang said San Miguel Foods is set to begin work on four other mega-facilities within the next five years. These are set to be built in Sison, Pangasinan; Lucanin, Bataan, and Sariaya and Pagbilao in Quezon province.

In 10 years, these four mega farms, combined with the Davao complex, will be able to produce 400 million birds a year.

We need more investments like these to reduce our dependence on food imports and develop the economic situation in our farm areas.

Corporate agribusiness ventures have been successful in the past. Dole and Del Monte are good examples.

We have to think economies of scale which the conglomerates can provide.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco