Tackling the yellow corn value chain

The country’s yellow corn sector is drafting a new roadmap, a first that will try to chart its development over a span of three decades using a value chain approach. This is a departure from past farmer-centric planning exercises where discussions about corn are limited to farm productivity and yields, and farmers’ incomes.

Noticeable too is the marked distinction given to yellow corn, differentiated from white corn, the latter harvested largely for human consumption. Yellow corn, on the other hand, is recognized as a global commodity that a number of countries depend on for export revenues.

More importantly, yellow corn is extensively used for a number of purposes. Aside from being a stable stock for animal feeds, yellow corn can be used for snacks, oil, alcohol, liquor, fuel, and syrup.

In the Philippines, our yellow corn farmers have been clamoring for the government to allow them to export their produce, mainly because they feel that doing so would enable them to escape low incomes from depressed farmgate prices even as world prices have skyrocketed.

During last year’s rainy season harvest, when yellow corn farmgate prices dropped way below the average production cost to as low as P9 per kilogram, the Philippine Maize Federation, Inc. pushed for  support for the export plan, although they also asked to be allowed to import yellow corn during off-season months.

Of course, the prospect of exports is not always feasible, especially if the research supporting the current roadmap draft shows that local yellow corn for now is still uncompetitive within the ASEAN context.

Big potential

On the other hand, the potential for yellow corn to become big business is within reach if a good roadmap is agreed upon by all stakeholders and properly supported by government interventions, including the right budget.

Currently, importation of yellow corn is rising, mainly by the feed milling sector, because local growers are not able to supply. The livestock industry, mainly hog raisers and chicken growers, depend on feeds. Even with the African swine fever and the coronavirus pandemic that has dampened consumer appetite for meat, demand for imports still outstrips local production capabilities.

Just as farmers air their grievances, users of corn have their own sets of problems. Feed millers that buy more than 80 percent of local yellow corn have to contend with an uneasy global supply and pricing environment, especially now that world food supply chains and supply-demand behaviors are undergoing a reboot.

Local feed millers say they prefer local yellow corn to imports if only supply and pricing were reliable. Inventory levels of local harvests are perennially short, not only because production rates are below ASEAN and world averages, but also because there are few lands devoted to corn.

The pricing dynamics, too, needs to be understood to enable a system of checks and balances to counter abnormal fluctuations that affect both farmer producers and end-users, not just the feed millers, but also livestock raisers, meat processors, and ultimately, consumers who buy chicken, pork, and eggs.

Setting targets

Guided by an agreed vision and mission statement, stakeholders are committed to achieve measurable goals over the roadmap period. The trick is to put a price on how much will be needed to establish an efficient and stable supply chain.

On the farm side, producing quality corn would mean getting better seeds that are resistant to diseases and rotting, better drying capabilities to extend the storage life of corn, and even the age-old problem of capital sourcing.

Traders and middlemen have taken advantage of the situation to demand buying prices that do not leave a decent profit for the farmers. The agriculture department believes that having empowered, enterprise-oriented farmers will allow them to surmount this problem. Of course, this is easier said than done.

There is also the need to put on the table once again the country’s inter-island shipping and land freighting highways that account for the higher cost of grain when received by feed millers, many of them located in Luzon, far from Mindanao where a substantial amount of yellow corn is harvested.

Finally, as to how lawmakers may direct the policy environment – either by reforming existing laws or introducing new ones – it must be clearly stated and supported. The vision of creating a globally competitive yellow corn industry must be top of mind and we don’t mind if this can be done in less than 30 years.

The roadmap should identify low hanging fruits, achievable within a shorter timeframe, and how to motivate some groups to work on them and derive benefits. Looking at a 30-year horizon may be too daunting for many.

Reader’s reaction

In closing, here’s a short commentary by Gary Delongchamp on a past column about the country’s power grid. Here’s what he says: “Enjoyed your insights into the power grid problems. I don’t totally agree with your comments that things are much better than years past, as here in Pangasinan, we still have many power interruptions.

“Also, I would like to point out that this is the 21st century, it seems to me that our government is more than happy to remain in the 20th century as evidenced by the extremely slow modernization of every facet of life here in the Philippines, such as the power grid, internet service, healthcare, modern transit and government services, just to name a few.

“These problem areas are due to antiquated thinking by government leadership and uncontrolled greed and corruption!”

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.