Philippines Dairy and Products Annual 2008

Despite continuing government and industry efforts to increase dairy production, Philippine milk production remains at less than one percent of total dairy requirements with import filling most of the supply, reports USDA, Foreign Agricultural Service. A link to the full report is also provided.
calendar icon 30 November 2008
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USDA Foreign Agricultural Service

Executive Summary

Despite continuing government and industry efforts to increase dairy production, Philippine milk production remains at less than one percent of total dairy requirements with import filling most of the supply. Imports of milk and milk products are expected to slowdown this year due to continuing high world prices. Dairy products are the country's second largest agricultural import.

Production

Data from the Philippine National Dairy Authority (NDA) shows that in terms of volume, domestic milk production grew 3.44 percent from 12,870 metric tons in 2006 to 13,320 metric tons last year. Value of dairy production in 2007 amounted to P387.11 million ($7.9 million at current exchange rate1). Local milk production is projected to continue to increase due to the growing demand for fresh milk. The country produces less than one percent of its total annual dairy requirement and imports the balance.

As of January 1, 2008, there were an estimated 28,191 dairy animals, an increase of about 8 percent from the previous year, comprised of dairy cattle (13,864), water buffalo (13,416) and dairy goats (911). Dairy cattle numbers, in partic ular, increased by nearly 15 percent due mainly to the on going herd build-up programs of the NDA. Dairy animal numbers are expected to continue increasing by 500-1,000 annually, due to this government program as well as increasing farmgate prices for milk.

Dairy Animal Numbers (as of January 1, 2008)
  2006 2007 2008
Cattle 11,261 12,094 13,864
Carabao 13,380 13,155 13,416
Goats 1,105 923 911
TOTAL 25,746 26,172 28,191
Source: Bureau of Agricultural Statistics

Female breeders or dams accounted for about 58 percent of total cattle and carabao (water buffalo) population, respectively. The rest were bulls, heifers, yearling and calves. On the other hand, goat female breeders comprised 52 percent of total dairy goat inventory, and the rest classified under kids and bucks.

Despite an increase in the number of dairy animals, the average milking capacity per animal remains low due mainly to inadequate feeding and poor animal management practices. Milk production of NDA-assisted dairy projects in 2007 was estimated at 9.27 million MT or 70 percent of national milk production.

The average farmgate price of raw cow’s milk rose by 11.76 percent to P19/liter ($0.42/li) in 2007 from P17/liter ($0.33/liter) in the previous year, while the price of raw carabao’s milk increased slightly to P45.50/liter ($0.99/li). The price of raw goat’s milk increased by 6.06 percent from P33/liter ($0.64/li) in 2006 to P35/liter ($0.76/li) last year.

According to trade sources, retail prices of local fresh milk increased by about 4.4 percent per year from P45/liter2 ($0.87/li) in 2002 to P55/liter ($1.19/li) in 2007. Retail prices of UHT milk on the other hand grew by as much as 10.3 percent per year from P39/liter ($0.76/li) in 2002 to P63/liter ($1.36/li) in 2007.

Basically, there are four farm types in the Philippine producing raw milk: unorganized smallholder producers, cooperative smallholder producers; government and commercial farms. Both smallholder and cooperative producers allocate for home consumption and home-based processing. Milk from smallholder producers and are members of cooperatives is usually consolidated in a collection center and then delivered to a processing plant. There are at least 16 dairy processors in the country. The bulk of raw milk produced in government farms are processed in government-owned processing facilities and are sold to rural consumers. Fresh milk from commercial farms is sold to commercial processors for processing. Among the major suppliers to the coffee shops are milk processors from Batangas and Laguna. Other milk suppliers are importers of UHT milk, mostly coming from Australia and New Zealand. Large dairy companies have milk processing facilities but do tool packaging of their UHT milk from New Zealand. These companies use their known milk brands in the local market but use imported milk (Food and Agribusiness Monitor, University of Asia and the Pacific).

Consumption

The Philippines, with an estimated population of 86 million, growing annually at 2.36 percent, is a large market for milk and milk products. Dairy products are the country’s second largest agricultural import after wheat. The country’s dairy industry, which sources 99 percent of its inputs from abroad, is estimated to generate sales of up to $1 billion annually. The Philippines is now the 3rd largest market for U.S. dairy products, after Mexico and Canada. Total dairy exports last year reached $152 million, up nearly 58 percent from 2006. The top US dairy exports to the Philippines in 2007 were: nonfat dry milk powder ($100 million), whey ($23 million) and cheese ($4.3 million).

In 2007, NDA estimated total domestic dairy requirements to be about 2.635 MMT, growing at about 2 percent yearly. According to the latest Food and Nutrition Research Institute (FNRI) survey, per capita milk consumption increased from 16 kg/year in 2002 to 19 kg/year in 2003.

Over the last few years, numerous dairy cooperatives have sprung up in various regions of the country. About half of local milk production, according to NDA, is absorbed in the local communities where it is produced. The other half goes to school and community milk feeding programs co-funded by local government units. With dairy production in the country being more community-based, maintaining the quality of fresh milk becomes a major concern due to the lack of dairy processing facilities and milk delivery vehicles.

Trade

Dairy products are the country’s second largest agricultural import after wheat. In 2007, imports of milk and milk products declined by about 2 percent in liquid milk equivalent (LME), from 1,733 MMT in 2006 to 1,740 MMT last year. While the value of total milk exports grew by as much as 43 percent last year due mainly to the significant rise in world market prices of dairy products which started in 2006 and a slowdown in global milk production. The major country suppliers by volume were New Zealand with 42 percent share of the total imports; followed by the United States with 18 percent and Australia at 13 percent.

Non Fat Dry Milk (NFDM) and Whole Milk Powder (WMP) imports comprise about 58 percent of total milk imports. NFDM and WMP imports declined by about 4 percent and 6 percent, respectively in 2007. Liquid milk imports, on the other hand, increased by about 17 percent by volume in 2007 as a result of increasing domestic demand for fresh milk and liquid milk particularly by specialty coffee shops. Imports of butter and other dairy spread also increased by about 26 percent while imports of cheese increased by nearly 20 percent in 2007. Imports of dairy products in the first half of 2008 have fallen by as much as 14 percent and are expected to continue to slowdown for the rest of the year due to high world prices.

Total dairy exports increased by 8 percent in 2007 with exports of whole milk powder comprising about 95 percent of the total volume . The main countries of destination were Indonesia (51 percent) and Malaysia (26 percent); other export markets include Thailand and Vietnam in 2007.

Exports of dairy products from January to June 2008 grew by 12 percent by volume and as much as 47 percent in value. The re-export of dairy products to other Asian countries is expected to remain strong.

Policy

The Philippine DA continues to prioritize the development of the Philippine dairy industry, recognizing the growing demand for fresh milk by the specialty coffee shops, hotels and restaurants as well as by the local government units for their milk feeding programs. While the DA accepts that Philippines cannot compete in the powdered milk ma rket, it believes that it can focus on supplying fresh milk to the market.

The National Dairy Authority, an attached agency of the Philippine Department of Agriculture, is mandated to ensure the accelerated development of the Philippine dairy industry through policy and program implementation. The NDA aims to accelerate dairy herd build-up and milk production, enhance dairy business through the delivery of technical services at farm and enterprise levels, increase the coverage of milk feeding programs to reduce malnutrition and mobilize broad support for local milk consumption. The NDA implements the following four main programs:

  1. Dairy Business Enhancement – inculcates enterprise orientation along the supply chain from farm to market. Includes training programs to establish effective business models to assist participants to think business and profits and not merely productivity


  2. Herd Build-up Program – increase local dairy stocks and ensure good animal performance. Supervises animal infusion from importation, compliance with quarantine procedures, distribution and provision of technical services, as well as strengthening of the animal loan program of Quedancor. In 2006, 615 dairy animals were imported by NDA from New Zealand for distribution to various dairy associations


  3. Milk Feeding Program – the NDA Milk Feeding Program (MFP) provides a steady flow of income to local dairy farmers and cooperatives as well as used to address the problem of malnutrition in children. In cooperation with dairy cooperatives, partnerdonors such as local government units and other entities, the NDA undertakes milk feeding projects to raise the nutritional level of malnourished children. Improvement rates are monitored accordingly. Local Milk Trusts are created to facilitate payment to the farmers. A Philippine Milk Fund has been established through a public -private effort to widen the coverage of the NMFP.


  4. Milk Quality – in June 2005, the NDA’s Central Milk Testing Laboratory was accredited the Bureau of Food and Drug (BFAD) to conduct testing for milk quality and animal health. Following accreditation, the NDA began charging fees for its laboratory services and milk quality assistance and milk formulation standardization for milk feeding programs. The NDA Quality Assurance department was also created to disseminate quality standards and closely monitor quality procedures at the milk collection centers, milk plants and distribution points.

Marketing

Metro Manila remains as the major market for fresh milk classified into business and consumer markets. The business markets include the institutional markets and the retail sector such as coffee shops, hotels, restaurants, supermarkets and small retailers. Meanwhile, the consumer markets include households and schools through the milk feeding program of the government.

The main target of local milk processors are the institutional buyers like coffee shops. Specialty coffee shops are good markets because of the continuing trend towards coffee consumption as a lifestyle in the country. Local suppliers are enjoying this market as most coffee shops demand local fresh milk for their coffee concoctions because of its superior taste and ability to promote foaming compared to UHT milk.

The specialty coffee shop industry is seen to sustain its growth of 20 percent for the next five years. Players attribute this to the growing awareness of specialty coffee among consumer and the improving image of coffee in general. (Food and Agribusiness Monitor, University of Asia and the Pacific).

Further Reading

- You can view the full report by clicking here.

List of Articles in this series

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December 2008

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