Feedmilling is hurting from war jitters, nosediving peso

A shooting war in Mindanao between the Armed Forces of the Philippines (AFP) and the Moro Islamic Liberation Front (MILF) is sending fears, too, to the country’s feedmillers. Add to that, the war jitters in the Middle East with the United States of America and Great Britain poised to strike Iraq any week now.

The war in the southplaced occasionally with terror bombings– has sent 17,500 villagers to the evacuation centers out of about 170,000 affected by the AFP’s overrunning of the Muslim rebel base in Camp Buliok, Pikit, Cotabato in February. The conventional warfare is even more made uglier by terror bombings southern Mindanao where 60 percent of the country’s total corn output is produced.

Says Ric Pinca, vice president of the Philippine Association of Feedmillers: "The exodus of thousands of villagers in the four key corn-growing provinces – Maguindanao, North Cotabato, Lanao del Norte and Sultan Kudarat–to escape being caught in the turbulence could disrupt this year’s corn production and consequently obstruct supply and demand chain in production and the market. This could trigger more imports as farmers leave their farms.

"Bigger imports of grains and other substitutes, such as feed wheat would normally substitute for the scant supply of local corn harvest. But the Philippine peso is also being battered in the home front and war jitters halfway around the globe. A weak peso means more money to buy imports with dollars making it weaker some more like what is happening these days."

Since May 21, 2002 when the Philippine peso was way above the 50-peso mark against the dollar; it finally breached that mark first week of June 2002 till it nosedived P55.099 to a dollar on March 12. That mark is a historic low since the P55.75 mark on Jan. 17, 2001 at the height of Edsa II.

According to financial managers "the uncertainties in the Middle East will definitely bring more volatility to the currency markets in the coming days. The market is getting even more worried as even before the war breaks out in the Middle East, the Philippines is already hurting from a series of terror bombings."

The more recent bombing attack attributed by the military to the MILF was the deadly blast at the Davao City Airport on March 5 with 21 dead casualties and more than a hundred wounded.

In this scenario, further weakening of the peso is feared.

The fresh outbreak of violence in the south coincided with corn planting season for the main harvest in the third quarter. "That is a very urgent concern for us," explains Pinca, "as it might affect the flow of commodities to the production sites."

General Milling Corp., to which Pinca is director for corporate affairs, has plans of expanding its facilities in General Santos City but management finds it difficult getting their technical people on site due to the unstable peace and order situation.

The milling firm has two feed mills in the country with total capacity of 80 tons per hour. The cities of Davao and General Santos serve as discharging areas for corn shipments to Cebu and Luzon.

Nobody wins in this conflict, says Pinca. "We, too, are very much affected. With farmers leaving the fields who will plant the corn." The four corn-producing provinces account for 22 percent of the country’s annual corn production. Most of the domestic feedmillers rely on local farmers’s production for their requirements as imports are becoming prohibitive in prices because of the weakening peso.

"We usually import corn around April but due to the peso’s depreciation, we prefer local supplies. Importation is resorted to as a last resort," he said.

Forecast for local corn production this year is placed by the Department of Agriculture at around 5 million tons, up 16.27 percent from an estimated 4.3 million tons in 2002. For the first quarter of 2003, the DA places corn production at some 1.17 million tons, an increase of 6 percent from the same period last year.