The Philippines Dairy Cattle Farming Sector:
A Briefing for Canadian Livestock Genetics Suppliers

March 2010

*Abbreviated 


Prepared for:
the Embassy of Canada in the Philippines
and
Office of Southeast Asia Regional Agri-Food Trade Commissioner
Agriculture and Agri-Food Canada

Prepared by:
Stanton, Emms & Sia
80 Raffles Place
Level 36, UOB Plaza 1
Singapore 048264
Tel: (+65) 6334 7030
Fax: (+65) 6223 2010
Email: emmsia@pacific.net.sg (General)
Website URL: http://stantonemmsandsia.foodandbeverage.biz

This report contains market information collected by Stanton, Emms & Sia. The Government of Canada assumes no liability for the accuracy and reliability of the market information and intelligence provided herein. *For the complete report, Canadians are invited to contact Ms. Yvette Buendia at the Embassy of Canada in the Philippines : yvette.buendia@international.gc.ca

Map: Description of this image follows.
Description

Map - Philippines Provinces - Abra, Agusan del Norte, Agusan del Sur, Aklan, Albay, Antique, Apayao, Aurora, Basilan, Bataan, Batanes, Batangas, Benguet, Biliran, Bohol, Bukidnon, Bulacan, Cagayan, Camarines Norte, Camarines Sur, Camiguin, Capiz, Catanduanes, Cavite, Cebu, Compostela Valley, Cotabato, Davao del Norte, Davao del Sur, Davao Oriental, Dinagat Islands, Eastern Samar, Guimaras, Ifugao, Ilocos Norte, Ilocos Sur, Iloilo, Isabela, Kalinga, La Union, Laguna, Lanao del Norte, Lanao del Sur, Leyte, Maguindanao, Marinduque, Masbate, Metro Manila, Misamis Occidental, Misamis Oriental, Mountain Province, Negros Occidental, Negros Oriental, Northern Samar, Nueva Ecija, Nueva Vizcaya, Occidental Mindoro, Oriental Mindoro, Palawan, Pampanga, Pangasinan, Quezon, Quirino, Rizal, Romblon, Samar, Sarangani, Shariff Kabunsuan, Siquijor, Sorsogon, South Cotabato, Southern Leyte, Sultan Kudarat, Sulu, Surigao del Norte, Surigao del Sur, Tarlac, Tawi-Tawi, Zambales, Zamboanga del Norte, Zamboanga del Sur, Zamboanga Sibugay

http://www.chanrobles.com


1. Introduction

This briefing has been prepared by Stanton, Emms & Sia for Canadian exporters of livestock genetics, the Embassy of Canada in the Philippines and the Southeast Asia Regional Agri-Food Trade Commissioner, Agriculture and Agri-Food Canada.

The objectives of this briefing are to provide exporters and the Canadian government with:

  • a snap shot of conditions in the Philippines market for milk and dairy products;
  • an update on the government policies covering the dairy cattle farming industry and its future development;
  • a review of the state of the dairy cattle farming industry and its operations;
  • a SWOT analysis on the dairy cattle farming industry;
  • an assessment of the future strategic direction of the dairy cattle farming sector; and,

The research supporting this briefing was performed in February and March 2010.


2. The milk and dairy products market in the Philippines, a snap shot

According to government data, the consumption of milk and dairy products in the Philippines today amounts to around 1.8 million liquid milk equivalent (LME) tonnes, including both local and imported products.

The market for milk and dairy products in the Philippines comprises two very different segments:

  • The market for milk and dairy products that are processed in the Philippines from imported dairy ingredients or imported in retail packed form. This comprises well over 98% of total consumption; and,
  • The market for products that are produced from locally produced raw milk by the Philippines dairy farming industry. This comprises less than 2% of total consumption.

The Table below provides an overview of government calculated liquid milk equivalent (LME) data for the level of domestic production and import of milk and dairy products over the period from 2005 to 2009.

Liquid Milk Equivalent Supply in the Philippines – 2005 to 2009
(LME '000 Tonnes)
  2005 2006 2007 2008 2009
Domestic production from dairy cattle 7.02 7.37 7.57 8.20 *9.00
Domestic production from Carabao (buffalo) and goats 5.32 5.42 5.86 5.61 5.27
Total supply 12.34 12.79 13.43 13.81 14.27
Imported dairy products 1,604.61 1,773.32 1,739.87 1,618.71 1,789.65
Total supply 1,616.95 1,786.11 1,753.30 1,632.52 1,803.92
% annual growth - 10.5 % ( 1.8%) ( 6.9%) 10.5%

*: Preliminary estimates.
Source: Bureau of Agricultural Statistics

The Philippines is heavily dependent on imports to meets its national demand for milk and dairy products. According to the government, about 80% of all imported milk consumed in the Philippines is imported in powder form for use by the dairy processing and packaging industry.

Imports in 2008 were valued at US$ 736 million (see Chart below).

Imports of Dairy Products into the Philippines in 2008 ( US$ 736.1 Million)

Figure 1: Description of this image follows.
Description

Imports of Dairy Products into the Philippines in 2008 (US$ 736.1 Million): Milk Powders and Concentrates 63%, Buttermilk 8%, AMF and Other Diary Fats 8%, Curd and Cheese 7%, Whey 6%, Liquid Milk and Cream 6%, Lactose 2%

Source: Philippines External Trade Statistics

As can be seen from the data in the Table above, the Philippines has a significant consumption base for the local farmers to target with their products. This is one reason, along with the dream of import substitution, why government policy on livestock industry development has such a heavy focus on the dairy farming industry.


3. Government policies covering the dairy farming industry and its future development

3.1 The Agriculture and Fisheries Modernization Act

The government has put in place some broad policies to develop the country's agricultural sector. Under the Agriculture and Fisheries Modernization Act (AFMA), which was signed into law in 1997, the government aims to strengthen the agriculture and fishery sectors through:

  • industry modernisation;
  • greater participation of small-holders (or small stakeholders);
  • food security and food self-sufficiency measures;
  • private sector participation; and,
  • people empowerment.

The Ginintuang Masaganang Ani Livestock Program is the banner program for agricultural development, which was established by the government as the blueprint for implementing the AFMA.

3.2 The Ginintuang Masaganang Ani (GMA) Livestock Program

The GMA program focuses on achieving food security and poverty alleviation, with Local Government Units (known as LGUs) and other stakeholders developing their own livestock industry development plans and programs that are suitable to their respective localities across the Philippines archipelago.

The objectives of the GMA Livestock Program are as follows:

  • contribute in the development of agribusiness lands (pasture establishment) and reduction of costs of wages and goods through productivity enhancement, more efficient logistics and improved retailing linkages (Goal 1 and Goal 2 of the Medium-Term Philippine Development Plan - Agribusiness Section, 2004-2010);
  • increase livestock production and improve livestock productivity to help ensure the availability, accessibility and affordability of livestock products;
  • increase the incomes of livestock farmers by providing access to technology, resources, support services and infrastructure;
  • ensure the compatibility of practices in livestock and poultry enterprises with environmental standards;
  • transform the livestock industry from a resource-based to a technology-based industry; and,
  • work for the global competitiveness of the domestic poultry and livestock enterprises.

Specific development policies affecting the various livestock sub-sectors have been developed and proposed by the Livestock Development Council (LDC).

Apart from the GMA Livestock Program, policies for each individual livestock sub-sector have been proposed in a Road Map that was developed by the Livestock Development Council (LDC).

One of the LDCs Road Maps is a key part of dairy industry development policy today.

The LDC's mandate, as established by the Department of Agriculture, Philippines, is to:

  • serve as a forum between the public and the private sector to discuss the thrust for, and priorities of, the livestock and poultry sector and the industry's problems / issues, which are the basis for formulating development policies;
  • formulate policy recommendations and implement guidelines in collaboration with other government agencies and other stakeholders;
  • formulate long, medium and short-term programs and projects envisioned to attain self-sufficiency in food commodities of animal origin; and,
  • monitor and evaluate the activities of all units in the Department of Agriculture, Philippines, that are directly involved in the implementation of livestock development programs, projects and activities.

3.3 Dairy farming development policy and program initiatives

The current dairy farming industry policy has a long development history. It is set out in the following policy documents:

  • the Dairy Development Plan 2008 to 2030, including the Dairy Fast Track of 2008;
  • the Dairy Road Map of 2004;
  • the National Dairy Development Act of 1995 (Republic Act 7884), which has been amended a number of times since 1995; and,
  • the original policy milestone document known as the Medium-Term Dairy Development Plan and the Dairy Industry Development Model (DIDM) of 1989.

There is also legislation in place regarding milk feeding programs for children, which are also relevant to industry policy.

All of the above listed documents have similar strategic components, which include:

  • dairy herd build-up strategies;
  • the improvement of the capabilities and operations of dairying businesses, especially small-holder businesses;
  • improved milk quality assurance; and,
  • market making for dairy businesses, which in most cases relates to milk feeding programs for children.

The National Dairy Authority (NDA) has been provided with a mandate by the Department of Agriculture, Philippines, to ensure the accelerated development of the Philippine dairy industry through policy direction and program implementation. It has had this mandate for more than 15 years.

Trade sources seriously question whether the NDA has performed in accordance with this mandate based on the outcomes of its past activities. There are general criticisms about this agency, largely because many of its actions have varied from year to year due to the specific areas of interests, i.e. “pet projects” of some of its officials and groups of officials.

A range of aid funded research and development projects, some sizeable, have taken place in the Philippines dairy farming and SME dairy processing industry since the early 1990s. Trade sources comment that some of the key findings and recommendations arising from these studies on dairy farming business development have been ignored, sidelined or implemented in a way that has had no real impact on small-holder farmers.

There are also criticisms that this agency tends to operate in the “theoretical domain”, rather than in practical ways that can lead to commercial success for the farmers that it is attempting to assist through its programs.

The goals laid out in the new Dairy Development Plan 2008 to 2030 (DDP), as set for the NDA's new programs, are to:

  • increase the dairy herd in NDA-assisted projects to more than 190,000 head, with production at an average of 14 tonnes of raw milk per day;
  • create around 95,000 rural jobs and generate family incomes of about Peso 500 (about C$ 10.00) per day per farmer from dairying activities;
  • involve around 19,000 dairy farming families in existing dairy zones in crop-dairy systems, and dairy-related enterprises including forage production, breeding services, calf rearing, heifer care, feed mixing, milking equipment fabrication and maintenance, milk distribution dealerships and others in the DDP action plan;
  • improve milk handling, equipment and facilities in the existing dairy zones overseen by the NDA;
  • facilitate the setting up of Peso 500 million (about C$ 12 million) Dairy Credit Opportunity Window (D”COW) to support the investment initiatives of the private and public sector organisations in their dairy business development activities;
  • establish and operate viable dairy businesses that will showcase good dairy farming and dairy product manufacturing practices under some public-private joint venture arrangements, including:
    • the DFO (Dairy Farm Operation), which has been designed to serve as a major source of local born dairy animals; and,
    • the RDMG (Real Dairy Marketing Group), which has been established to ensure improved marketing of the local farmers' milk and dairy products;
  • implement the Philippine Milk Fund to ensure timely milk payments to dairy farmers that are supplying to the government's milk feeding programs for children; and,
  • cover about 1 million children in cost-shared milk feeding activities with local government units and other sponsors by 2030.

Under the newly promulgated DDP 2008 to 2030, the NDA has implemented the following long-term expansion programs:

  • The Herd Build-Up Program: This program aims to ensure and accelerate the increase in both local dairy stocks and local milk production. According to the NDA, the increase in local dairy herd will be realised through:
    • the importation of genetic materials, such as dairy animals and dairy breeding materials;
    • upgrading of existing local animals to dairy breeds;
    • production of replacement stocks through dairy breeding programs, such as artificial insemination programs and multiplier farm establishment; and,
    • the preservation of existing stocks.
  • The following sub-programs will strengthen this herd build-up program:
    • Save-the-Herd (STH) Program;
      This program was designed to channel dairy animals into a scheme that will stimulate animal trading, dairy enterprise enhancement and herd conservation.
      Under this program, the STH partner (a small-holder farmer) receives a dairy animal from NDA that he/she is obligated to rear, condition and impregnate, according to NDA prescribed dairy husbandry management standards.
    • The herd infusion program;
      This program includes importation of dairy stocks, diversification of countries of origin for such resources and the local procurement of dairy animals.
    • The improved breeding efficiency program;
      Under this program, breeding services are provided to maximise the reproductive capacity of dairy animals in the Philippines herd, either through artificial insemination or natural (bull) breeding.
    • The animal financing program;
      This program has the goals of tailoring animal loan programs to the dairy business cycle and tapping new sources of affordable animal loans from a range of NDA identified financing institutions.
    • The Palit-Baka Scheme of Dairy Animal Distribution;
      Under this program, the NDA distributes potential dairy animals to new, but eligible and qualified, small-holder farmer participants, who in turn will make a payment-in-kind for the animals by way of supplying female dairy animals back to the NDA.
    • The program for upgrading of local animals;
      This program involves the artificial insemination of local cattle with 100% purebred Holstein-Friesian semen. The calves born from this program are distributed to new farmers interested in dairying.
    • The breeding/multiplier farm operations program;
      This program is in place to engage and encourage private-public partnership in producing local born dairy stocks so that they can become major sources of affordable quality dairy animals for Philippine dairy farmers.
    • The Bull Loan Program;
      Under this program, the NDA delivers purebred and crossbred dairy bulls to the Regional Field Units of the Department of Agriculture, Philippines, or other Dairy Bull project partners so they can be managed, trained and maintained for semen production, collection and processing purposes at a localised level across the country.
  • Dairy Enterprise Development Program;
    According to the NDA, this program aims to infuse an enterprise orientation among dairy producers by equipping participants in the industry through installation of systems, continuous education and training, and new infrastructure development.
    The following thrusts are in this program's action plan:
    • efforts to gain market access in both commercial and consumer markets;
    • new areas being developed as future dairy zones, with existing zones be reinvigorated through on-going support under this program; and,
    • new milk processing plants, collection centres and processing equipment being established and installed, with existing operations being upgraded to ensure continued flow of the product from them to the market into the long term.
  • Milk Quality Assurance Program;
    According to the NDA, this program focuses on the installation of quality-based milk tests and payment systems in all NDA-assisted cooperatives.
    Under its strategy for this program, the farmers are paid, not only based on milk volumes, but also on the quality of the milk that they deliver to collection centres.
    Operationally, this program will revolve around regular laboratory testing of raw milk and finished products, as well as technical audits on the dairy farm and dairy processing plants that operate with the jurisdiction of NDAs programs across the Philippines.
  • National Milk Feeding Program.
    This program is at the core of much of the NDAs activities. According to the NDA, the existence of this program serves to provide a captive market base for localised dairy farmers, especially those who have just started in the business of dairying.
    This program's other goal is to address the issues of malnutrition and poverty by:
    • providing improved milk-based nutrition to rural children; and,
    • providing a steady flow of income from milk sales to local dairy farmers and their cooperatives.

Whilst all of these policies and programs have been in place and evolving since 1989, when the Medium-Term Dairy Development Plan and the Dairy Industry Development Model (DIDM) was promulgated, the Philippines government has been struggling to stimulate development of a viable dairy cattle farming industry for close to 20 years.

Although the industry has been in something of a growth phase over the past 10 years, the overall trend in industry output has not been at all dynamic. Production output is still very small (see Chart below).

Long Term Trends: Description of this image follows.
Description

Long Term Trends in Philippines Production of Raw Cows Milk – 1987 to 2009: 15000 (1987), 15000 (1988), 15000 (1989), 15000 (1990), 15000 (1991), 15420 (1992), 12500 (1993), 12100 (1994), 12110 (1995), 11500 (1996), 10220 (1997), 9240 (1998), 9850 (1999), 10210 (2000), 10800 (2001), 11000 (2002), 11250 (2003), 11550 (2004), 12340 (2005), 12790 (2006), 13430 (2007), 13810 (2008), 14270 (2009)

Source: FAO database and the Government of the Philippines

Trade sources comment that the efforts over the past 20 years can only be described as an unmitigated failure from a commercial standpoint. As one trade source commented: "There is very clearly an opportunity for the farmers in our market. A sizeable amount of effort, manpower and funding has been directed at it by the government and some aid agencies, however, the only measurable result has been a decline in the market share of the local dairy farming industry".

Imports of liquid milk and cream to the Philippines amounted to around 46 million litres valued at US$ 41.6 million in 2008. Such imports have almost doubled in size since the mid 1990s.

Imports of Liquid Milk and Cream to the Philippines – 1996 to 2008

Imports: Description of this image follows.
Description

Imports of Liquid Milk and Cream to the Philippines – 1996 to 2008: 21,779,796 (1996), 31,695,254 (1997), 25,498,166 (1998), 22,986,670 (1999), 26,347,731 (2000), 48,545,416 (2001), 69,016,814 (2003), 67,907,409 (2004), 58,373,229 (2005), 48,140,194 (2006), 48,131,648 (2007), 46,887,080 (2008)

Source: Philippines External Trade Statistics

While the NDA blames these imports on market liberalisation, trade sources in the Philippines are inclined to see the state of local farmer response to the new demand for liquid milk as a clear failure of a number of NDA's programs to support the farmers to take new opportunities arising from the growing demand for liquid milk.

It should be noted that, in its top line strategy, the Department of Agriculture, Philippines, prioritises the development of the Philippine dairy industry because it recognises this new and growing demand for liquid milk, and the scenario where:

  • the Philippines dairy farming industry will not be able to compete in the markets that are dominated by powdered milk supplies because of severe resource and other constraints;
  • the local dairy farmers and their organisations have to focus on supplying fresh milk to the consumer market in a way that maximises their returns from a premium product;
  • there is very clear, growing liquid milk market, involving demand from middle to upper income group consumers, the specialty coffee shops, and hotels and restaurants; and
  • highly localised government units can also generate useful demand for locally produced fresh milk for their milk feeding programs.

3.4 Other institutions involved in dairy farming development activities

The College of Agriculture, University of the Philippines Los Banos, has long been involved in some dairy farming development activities. In the past, one of its units was the high profile Dairy Training and Research Institute (DTRI), which was being promoted as a world class dairy farming training institute to prospective students in other Developing Countries in the 1990s.

Trade sources comment that, at the time, the status of the DTRI had been openly criticised by the private sector in the Philippines because the DTRI had done very little to assist the then struggling domestic dairy farming sector to modernise and grow. At the time, the DTRII had a sizeable academic program focused on dairy farming, science, breeding and technology, a teaching farm, and was producing some dairy products that were being marketed in the Metro Manila area market.

This university college has been reorganised into 5 different clusters over the past 10 years. This resulted in the DTRI being merged into the college's "Animal and Dairy Sciences Cluster" (ADSC). Subsequently, it has taken on a much lower profile stance.

The ADSC was formally created in October 2004, as one of the five clusters and essentially consists of the former operations of the Institute of Animal Science and the DTRI.

The ADSC is still involved in academic programs focused on dairy farming and operates with the following divisions:

  • Animal Breeding and Physiology Division;
  • Animal Nutrition Division;
  • Animal Products Processing and Utilization Division; and,
  • Dairy Products Processing and Utilisation Division.

4. The dairy farming industry and its operations

4.1 The status of the dairy farming industry in Philippines agriculture

The Philippines dairy farming industry is the smallest sub-sector in the country's mainstream livestock products industry. Additionally, it is also one of the smallest dairy farming industries operating in the ASEAN region today, i.e. smaller than in Malaysia and Cambodia, which have much smaller rural populations than the Philippines (see Table below).

ASEAN Region Raw Cow's Milk Production in 2008 (Tonnes)
Myanmar (Burma) 980,314
Thailand 827,252
Indonesia 574,406
Vietnam 240,000
Malaysia 39,300
Cambodia 23,800
Philippines 8,197
Laos 7,540
Brunei Darussalam 13
Singapore Negligible

Source: FAO database (Includes actual figures, projections and estimates)

The Table below provides details on the state of the Philippines population of dairy cattle in the period between 2005 and 2009.

Population of Dairy cattle in the Philippines – 2005 to 2009 (Head)
2005 2006 2007 2008 P2009
11,261 12,094 13,864 15,073 16,949

P: Provisional data
Source: Bureau of Agricultural Statistics (BAS)

The growth in the dairy herd of around 5,700 head over the period is directly related to the on-going NDA managed programs. The growth rate is high and equates to about 10% per annum.

This is a very small herd by both global and ASEAN standards. By comparison, Indonesia's national dairy herd numbered around 487,000 head in 2009.

The Department of Agriculture, Philippines, categorises dairy cattle farming, carabao dairy farming and goat dairy farming under the dairy farming sub-sector.

According to the NDA, the dairy farming sub-sector accounted for only 0.04% of total agricultural production and 0.24% of livestock production value, respectively, in 2009. In that year, dairy cattle made up 47% of the total population of all dairy animals and produced around 60% of the raw milk collected.

4.2 The dairy farming industry today

4.2.1 The structure of the industry

According to the Department of Agriculture, Philippines, the dairy farming industry is characterised, on the whole, as a smallholder-based industry. It consists of:

  • an informal sub-group of individual unorganised producers; and,
  • a formal sub-sector that is comprised of three distinct sub-groups:
    • the small-holder dairy farming families, with herds of between 1 to 10 head of milking cows;
    • larger small-holder producers, with growing dairy herds numbering from between 20 to 100 head of milking cows; and,
    • milk producer-processors that maintain farms with more than 100 head of milking cows in their herds.
      These producer-processors are generally SME corporations that operate a milk pasteurisation plant and also undertake marketing of milk to consumers in neighbouring urban centres. It is very common for these businesses to procure raw milk from small-holder dairy farmers in close vicinity to their processing operations.

According to the NDA, the Philippines has around 11,800 dairy farmers and just over 300 formalised dairy farms involved in local milk production today.

The Table below provides an overview of the structure of formalised dairy farm sector in the Philippines in 2009.

Structure of the Formalised Dairy Farming Sector in 2009 (No. of Farms)
Type of Operation Luzon Visayas Mindanao Total
Dairy cooperatives 46 71 35 152
Institutional farms 25 20 11 56
Private/commercial farms 63 12 23 98
Total number of farms 134 103 69 306

Source: NDA

There are basically three types of entities producing raw milk in the Philippines today:

  • cooperatives of small-holder producers;
  • institutional farms; and,
  • private/commercial farms.

Close to 50% of the dairy farms are managed by dairy cooperatives, while the private/commercial farms comprise around 30% of the total number of operational dairy farms.

4.2.2 The industry's herd and its structure

The Table below provides an overview of the structure of the Philippines national dairy herd and its development over the period from 2005 to 2009.

The Philippines National Dairy Cattle Population – 2005 to 2009 (Head)
  2005 2006 2007 2008 2009
Dams 4,751 5,425 6,371 6,871 7,583
Bull 349 570 582 596 NA
Heifer 1,642 1,389 1,621 1,879 NA
Yearling 1,635 1,789 2,279 2,599 NA
Calf 2,884 2,921 3,011 3,128 NA
Total dairy herd 11,261 12,094 13,864 15,073 16,949

NA: At the time of writing this report, some of the data for 2009 was not available.
Source: Bureau of Agricultural Statistics (BAS)

Trade sources comment that despite an increase in the number of dairy animals, the average milking capacity per animal remains very low, mainly due to inadequate feeding and poor animal management practices. According to trade sources, the Holstein Friesian-Sahiwal crosses in commercial farms are producing an average of 8 litres per day today. Only about 30% of the total dairy herd are on the milk line. The Table below shows distribution of dairy cattle on the milk line in the years from 2005 to 2008.

Dairy Cattle on the Milk-line (Head)
Source 2005 2006 2007 2008 2009
Individual farms 115 782 887 1,117 NA
Cooperatives 2,503 2,184 2,347 2,385 NA
Commercial farms 303 392 332 367 NA
Institutional farms 279 281 318 311 NA
Total 3,200 3,639 3,884 4,180 NA

NA: Data not available at time of writing this report.
Source: Bureau of Agricultural Statistics (BAS)

Dairy cattle on the milk line have grown from 3,200 heads in 2005 to 4,180 heads in 2009. In 2008, 84% of the dairy herd on the milk line were from individual farms and cooperatives. However, only 9% of the dairy herd on the milk line were from commercial farms in that year.

4.2.3 Milk production by the industry

Local milk production grew to 8,990 tonnes in 2009, up from 7,019 tonnes in 2005. This equates to an average growth of about 6% per annum over the period. The Table below provides details of the quantities of milk produced by the various sub-sectors in the industry in the period from 2005 to 2009.

Dairy Cattle Production by Industry Sub-Sector ('000 Litres)
Source 2005 2006 2007 2008 2009
Cooperatives 5,411.98 5,000.92 4,864.29 5,039.92 NA
Commercial farms 822.98 1,023.95 1,112.88 1,096.49 NA
Individual farms 202.31 790.39 1,146.18 1,488.12 NA
Institutional farms 581.43 551.91 445.63 572.67 NA
Total in '000 litres 7,019.00 7,367.00 7,568.98 8,197.20 *8,990.00
Total value (Peso million) 344.00 367.00 391.00 412.00 461.00

* Preliminary estimate.
NA: Data not available at time of writing this report.
Source: Bureau of Agricultural Statistics (BAS)

Over 60% of the milk produced was from cooperative farms. Individual farms produced around 18% of supply, with commercial farms producing the balance of around 13% in 2008. Trade sources comment that most of the liquid milk produced, i.e. around 60%, is processed and distributed to grocery stores, supermarkets, coffee shops, hotels and restaurants. The balance of about 40% is absorbed by the milk feeding programs that are targeted at school age children. It should be noted that the small-holder dairy farmers are given priority as suppliers to the government sponsored milk feeding programs.

4.2.4 Characteristics of the small-holder dairy farming sub-sector

Small-holder dairy farms were developed through various government programs over the years as part of the government's efforts to improve the economy of the rural community, while commercial farms were upgraded with investments from the private sector. Under these programs, regionally-based dairy cooperatives have also been set up to better organise the small-holder farmers, provide them with stronger bargaining power, and to assist in milk collection processing and better distribution to the market. The following information was also provided by government and trade sources about the small-holder dairy farmers operating in the Philippines today:

  • dairy farming is a recently introduced farming activity, which is foreign to most local farmers in the Philippines;
  • most dairy farmers have a limited dairy farming knowledge and operate with poor farm management practices;
    The above scenario exists today, despite 20 years or more of government policy and program intervention in the dairy farming industry.
  • small-holder farmers usually start dairy farming on a part time basis with one to three dairy cattle;
  • small-holder farms have developed in recent years on the back of investment funds remitted to their families by Filipino overseas workers;
  • some small-holders pool the raw milk that they produce and sell it to nearby processing plants. In general, most small-holder dairy farmers are members of local dairy cooperatives that operate a raw milk collection centre; and,
  • in the dairy farming zones that have been set up by the government, there is usually some form of entity, e.g. a dairy co-operative federation, that buys collected raw milk in bulk from the local cooperatives for processing in the federation's milk processing facility, and for onward marketing to consumers and users in its target market.

Government sources also comment that small-holder farms do develop into larger farms operating with 5 to 20 head of dairy cattle when a member of the owning family moves into full time dairy farming. This is usually done with assistance from other family members in fodder gathering, feeding, milking and sale of milk to rural customers close to the farm's area of operations.

4.2.5 Characteristics of the private dairy farming sub-sector

The large importer-processors of dairy products in the Philippines, such as Nestle Philippines Inc and Alaska Milk Corporation are not involved in dairy farming. Trade sources comment that these major dairy product manufacturers continue to prefer imported dairy ingredients because imported ingredients, such as milk powders, are very price competitive, when compared to local raw milk. Additionally, the quality of local raw milk generally does not meet with the high standards required by the major dairy manufacturers. Consequently, they are not part of the market for raw milk, or the industry that produces it. According to the Department of Agriculture, Philippines, the private dairy farming sub-sector is comprised of individual farms and commercial farms, which are corporate owned and operated. Private enterprises, like the farmer-cooperatives, both receive technical and other assistance from the government. The assistance provided is primarily aimed at improving the dairy herd's productivity and increasing the production capabilities of the dairy farming sector in the country. In this connection, the NDA also provides technical assistance to dairy cooperatives in all identified dairy zones across the country, and provides farmers with training in animal care and milk hygiene to ensure improved dairy farm profitability.

4.2.6 Characteristics of the institutional dairy farming sub-sector

According to the Department of Agriculture, Philippines, institutional farms usually operate as research farms and cattle stock farms. Examples of these dairy farms are operated by:

  • the Albay Breeding Station;
  • local government units, such as the San Vicente LGU and Sogod LGU; and,
  • state colleges and universities based farms, such as that operated by the Animal and Dairy Sciences Cluster of the University of the Philippines Los Baños, i.e. the former Dairy Training and Research Institute (DTRI) model and training farm.

According to the Department of Agriculture, Philippines, the bulk of raw milk produced by these farms are usually processed and sold to rural consumers. Some of the products of the University of the Philippines Los Baños dairy farm do access some of the supermarket channels in the Metro Manila area.

4.2.7 The dairy zones

Dairy zones have been created within selected areas near to urban centres to enable the concentration of dairy herd, dairy farming expertise, milk processing facilities and other necessary infrastructure. The principal goal of the zones is to create some form of economies of scale for the small-holders, thus allowing the development of more viable dairy farming enterprises. The standard set for such a dairy zone is around 100 farmers operating with around 300 dairy animals. These farmers should be located in adjacent villages, served by a processing plant located within a 30 kilometre radius of an urban centre that has a market capable of absorbing at least 300 to 500 litres of milk per day. Under the dairy zone system:

  • the farmers own and operate the herd of dairy cattle;
  • a primary cooperative operates the milk collection centre; and,
  • a federation, or private entrepreneur, owns and operates a milk processing plant and undertakes marketing of the processed milk and dairy products.

Today, there are 26 dairy zones, which are concentrated in North Luzon, South Luzon, Visayas and Mindanao. Taken together, these zones had close to 80% of all dairy farms in 2009.


5. Breeding cattle and genetic material supplies in the Philippines

The Philippine Department of Agriculture (DA) has been importing bovine semen, as well as pure-bred cattle for breeding, to upgrade the national herd and improve the genetic stock in the country. It should be noted that the DA utilises Public Law 480 (PL 480) Title I loans from the USA to purchase livestock genetics, such as bovine semen and cattle for breeding, from the USA. The Table below provides the data for bovine semen imports into the Philippines between 2005 and 2009.

Imports of Bovine Semen – 2005 to 2009 (FOB Value)(US$)
Source 2005 2006 2007 2008 2009
Australia 0 5,127 5,926 0 10,362
New Zealand 3,790 8,097 0 0 0
Netherlands 2,487 0 0 0 0
USA 22,045 10,680 0 32,996 113,003
United Kingdom 5,684 8,607 3,777 35,435 64,359
Total FOB Value (US$) 34,006 32,511 9,703 68,431 187,724

Source: Government Trade Statistics

The above import data is not analysed between beef cattle semen and dairy cattle semen. Trade sources comment that imports from New Zealand are likely to be for dairy cattle semen, while those from the other countries are likely to be for beef cattle semen. According to the Department of Agriculture, Philippines, some dairy bulls are kept by the Animal and Dairy Sciences Cluster of the University of the Philippines Los Baños and at the National Artificial Breeding Center (NABC) for producing semen. While these resources exist, there is also reported to be an on-going need to acquire new bulls for semen collection. These are periodically imported from New Zealand to augment the local stock of bulls. Dairy cattle are generally imported from New Zealand for distribution to various farmers' cooperatives for dispersion amongst selected farms. The different breeds of dairy cattle that have been imported into the Philippines in the past include the Holstein Friesian, Shorthorn, Guernsey, Jersey and various crossbreeds, e.g. Friesian Sahiwal. The Table below provides an overview of import data for pure-bred dairy cattle for breeding for the period from 2005 to 2009.

Import of Live Pure-Bred Bovine, for Breeding (Heads)
Source 2005 2006 2007 2008 2009
New Zealand 750 649 520 0 NA
Total (Heads) 750 649 520 0 NA
FOB Value (US$) 987,108 459,898 481,282 0 NA

NA: At the time of writing this report, the data for 2009 was not available.
Source: Government Trade Statistics

Trade sources comment that New Zealand is the preferred country of choice for dairy cattle. This situation exists because of the excellent record and global reputation that this country has for dairy husbandry. Additionally, there has been close working relationships between New Zealand's suppliers of dairy genetics and their customers in the Philippines for many years. The dairy cattle imported from New Zealand are generally of the Holstein Friesian-Sahiwal dairy crossbreeds. Trade sources comment that these crossbreeds are preferred because they readily adapt to the tropical conditions in the Philippines. Some other information to note about the Philippines supplies of breeding cattle and genetics:

  • In the recent past, 750 dairy cattle have been privately imported by the Lanao del Norte Foundation. All other imports were made by the NDA. Most imports are for pregnant cattle but in 2007, two Holstein Friesian-Sahiwal bulls were also imported;
  • breeding in the dairy farming sector is mostly accomplished through AI using locally produced or imported frozen semen;
  • AI is also actively practised by the larger independent commercial dairy operations; and,
  • under the Herd Build-Up Program run by the NDA, the national herd is upgraded by artificially inseminating local cattle with 100% purebred Holstein-Friesian semen.

The NDA launched the Multi-Year Dairy Animal Procurement and Breeding Program in 2008 under which breeding farms will be developed across the Philippines. These farms will eventually supply the dairy cattle requirements of the country, thereby lessening dependence on live dairy cattle importation. A Pilot Model of a breeder farm located in Quezon Province was launched in August 2008. The NDA plans to import 1,000 heads of dairy cattle annually over a four-year period from the USA under a PL480 funding scheme that has been made available under an agreement between the Philippines and the USA. These dairy cattle will form the foundation (base) stock for future dairy breeding farms.


6. Trade viewpoints on the current state of the dairy farming industry

The Philippines continues to rely heavily on imports for its milk and dairy product needs. The dairy farming sector is still able to supply only a negligible quantity of milk annually. This situation exists in a market environment where trade sources perceive there is growth in demand for milk and dairy products, both today and in future. Trade sources comment that the dairy farming industry is still underdeveloped and continuing to face significant challenges, including the following:

  • shortage of productive dairy cattle. The average milking output per animal remains low, due to inadequate feeding and poor animal management practices;
  • dependence on imports for tropical crosses, mainly sourced from New Zealand;
  • lack of focus on dairy cattle farming with limited financial support from the government over the decades;
  • limited new entrants from the private sector. Most new entrants are small players;
  • lack of large-scale commercial farms, which can cost-effectively produce milk and dairy products to meet some of the market demands;
  • lack of support from the major dairy products manufacturers. Dairy farmers have to rely on the school milk feeding program to absorb their output;
  • inability to compete with imported dairy ingredients due to price and quality issues;
  • limited farmer education, with poor farm management practices continuing to impede development of the industry; and
  • immaturity of the farming industry, which inherently lacks technical expertise and experience in dairy husbandry and milk production practices.

Trade sources comment that the above situation indicates that decades of government-funded programs and aid related activities to stimulate development of the industry have resulted in a situation where:

  • the same challenges that existed in the 1980s for the dairy farming industry still exist today;
  • the local dairy farmers are loosing market share as the market for milk and dairy products grows around them; and,
  • the top line goals of Department of Agriculture, Philippines, are not being met, i.e. that:
    • the local dairy farmers and their organisations have to focus on supplying fresh milk to the consumer market in a way that maximises their returns from a premium product; and,
    • the industry should focus on the very clear, growing liquid milk market, which involves demand from middle to upper income group consumers, the specialty coffee shops, and hotels and restaurants.