Follow the money

Veteran investigators often tell the newbies that if you want to find out who is involved in something just “follow the money,” but for today I am using the phrase as an advice for those who often ask me where should they put their money or what business to get into. Whether you have substantial cash flow or you are someone starting in business I would say the same thing: “Follow the money” or observe what businesses the big boys or big corporations are investing in, figure out why they are doing so and evaluate if you could do something similar at your economic level and then START SMALL.

Last Saturday, I was in Candelaria, Quezon with the BMeg Southern Luzon team sharing our knowledge and experience concerning hog raising and updating backyard hog raisers on the latest development in feeds, management and medications. As I probed the level of knowledge of our audience of several hundred, I was intrigued that most of them were beginners or at entry level. It didn’t take long for me to realize that the only reason they were “beginners” was because many of them had been hit and wiped out by the deadly ASF virus. But in spite of all our common financial and herd losses, they are all back at it, trying again in spite of the continued threat of ASF. Whether you are a conglomerate with billions of pesos in capital or a simple individual who saved up enough money to buy one or two piglets or put up a one-pen operation, at the end of the day, the risks are about equal. Until someone comes out with a stabilized vaccine for ASF, anybody, billionaire or backyard, can still get hit by ASF and be wiped out in a week or two.

I asked myself if we backyard hog raisers are optimistically delusional, desperate or is there something out there that justifies getting back in the ring time and time again. I stepped back mentally and looked at the directions taken by San Miguel Corporation, Ramon S. Ang, as well as the companies like BMeg, Magnolia and Monterey. Years before Covid lockdowns, RSA led BMeg into upgrading their network of feed mills that resulted in SMC/BMeg investing in supersized ultra-modern feed mills or factories.

Some people were unsure of the plan because the plants had such production capacities that it might result in surplus production or under-utilization of the plants. The program pushed forward and the plants went online one after the other. As expected, supplies of raw material became a concern but it turned out to be a “good problem” because it resulted in SMC/BMeg developing relations with farmers, LGUs and farmer groups that insured supply and sale between BMeg and farmer/producers of corn and other needed grains. So, they had addressed supply chain and production challenges that used to be headaches many years ago.

An added plus in hindsight was that BMeg was able to push back the attempts of foreign competitors to invade local territories and take over the Philippine animal feed markets. Anyone who had invested in a smaller version of the idea such as farming corn and other feed mill requirements or being a BMeg dealer at the time of Covid would by now be established or running a small profitable business. This year Ramon Ang shared what is now an on-going reality; the construction and operation of 12 super-sized poultry farms each capable of producing 80 million birds a year or a combined total of 960 million birds annually. The program will cost an estimated $1.2 billion and the farms will be located in Ilocos, Pangasinan, Bataan, Quezon, Batangas, Bulacan, Cebu, Iloilo, Davao, Zamboanga del Sur, Sorsogon and Misamis Oriental. When I asked him about this, RSA pointed out that the requirements for processed poultry meat is far greater for markets outside the Philippines, particularly in ASEAN and the Middle East.

This business model is something any newbie or person in search of opportunities can use as a pattern on a micro or much smaller scale. The point is that food remains a big business opportunity, particularly poultry meat, eggs and processed products. The problem is that all the experts, financial gurus all talk about economies of scale, percentages of profitability etc., etc. A person selling one egg a day, one tray of eggs daily, or a truckload, while small in comparison to super farms, is still selling something and, if done right, presumably making money.

If I sold 10 or 20 ordinary average roosters or “pang sabong” but got enough money to buy one really good broodcock or breeding material, I would at the end of the day have reduced mouths to feed and laid the course for better things to come. Starting on something gets you further than just debating over it and the big players have already done the analysis for you.

Last Saturday, I was surprised and glad to hear that San Miguel Food and Beverage Inc. has started to do a serious comeback in hog raising. From practically throwing in the towel at the height of ASF, I am told that the company has increased the population of breeder hogs to the 10,000-sow level. Given the severe shortage of hogs/ pork in the region and in the Philippines as well as the prices higher than ever before, it is clear that demand and profitability is pushing giants such as San Miguel to stay in the game.

Another bit of good news is that a vaccine for ASF which has been tested in several countries abroad will be introduced and launched and tested in the Philippines this month. 10,000 doses will be tested in different farms and locations all over the Philippines and if all goes well, then hog raising will surely come back with a vengeance! If San Miguel is doing it big time, why not us?

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