Carabeef import ban to raise prices of processed meat products, says study

The proposal to ban the importation of carabeef from India will raise domestic prices of beef-carabeef processed meat products and will impact heavily on the herd build-up of the local carabao industry, according to a study conducted by the Philippine Carabao Center (PCC) and a research group called Sikap/Strive Foundation.

PCC executive director Libertado C. Cruz said the study indicates that a carabeef import ban will reduce the profitability of corned beef, hotdog, and meat loaf production.

"If the ban is imposed, meat processors will have no recourse but to use beef which is more expensive, while the costs of alternative sources of raw materials for these processed meat products will have to be passed on to consumers," said Cruz.

Local livestock producers, especially hog producers are lobbying for the ban on carabeef importation, saying the influx of cheap carabeef and pork meat imports, has been causing local pork prices to plunge to their lowest levels in years.

The government permitted members of the Philippine Association of Meat Processors Inc. (PAMPI) which include the likes of Swift Foods Inc. and Purefoods-Hormel to import carabeef to be used exclusively or solely for processing. This enabled meat processors to sell their products at competitive prices, and in some cases, at prices lower than tuna canned products.

Cruz said that if the additional raw material costs due to an import ban will be passed on to consumers, this will result in lower consumption of these products because they are very sensitive to price changes.

"The ultimate result is that the market will collapse and will endanger the sustainability of the meat processing industry," added Cruz.

The study which included an analysis of three major carabeef-beef based products showed that carabeef as a raw material ingredient comprised 40 percent of corned beef, 35 percent of hotdog, and 30 percent of meat loaf. The other processed meat ingredients are extenders such as a soy protein/water and other additives such as spices, flavorings and emulsifiers.

The 2002 current pricing and average cost structure of corned beef production showed that direct material costs comprised a major cost component at 69 percent; general administration 17 percent; while cost of selling, marketing and distribution shared 14 percent.

With no adjustment in the selling price if the ban is imposed, the study indicates that corned beef producers will be absorbing net losses, before taxes and interests of P6.39 per kilogram, while the hotdog and meat loaf producers will incur net losses of P3.16 per kg and P0.89 per kg, respectively.

On the other hand, if the prices are adjusted or raised, corned beef prices will rise to P140.70 per kg for corned beef; P115.16 per kg for hotdog and P110.69 per kg for meat loaf.

The study noted that processed meat products are very sensitive to price changes.

"Given the current level of relatively depressed consumers’ incomes due to the economic crisis, unnecessary increases in the selling prices of processed meat products, with defined market segments will result to lower effective demand, and market instability and product substitutions."

The ban will also have an impact on the local carabao population.

Figures from the Bureau of Agricultural Statistics (BAS) show that total carabao inventory as of January 2001 was about three million. Carabeef imports averaged 172,000 heads per year in the last nine years while slaughter animals averaged 298,000 heads during the same period.

The study noted that in 2001, carabeef imports of 339,000 heads slightly exceeded slaughtered carabao heads of 333,000, which means the average carabeef domestic requirement for both wet markets and processing is about 672,000 heads.

This shows that without carabeef imports, the domestic carabao population including breeder stocks will be easily depleted due to market demand. An analysis made between carabao population inventory and carabeef imports shows that imports are positively correlated with carabao domestic population.

At the average level of local population and imports, the study noted that for every one percent increase in carabeef imports, domestic carabao population will increase by 0.10 percent, or an average of 203,000 heads over the last three years.