Agribusiness seen posting strong growth in next 5 yrs

Philippine agribusiness enjoys a positive outlook over the next five years considering the strong potential seen in palm oil, sugar and livestock, according to Business Monitor International (BMI).

In a new report on the domestic agribusiness sector, the London-based research said the ongoing peace efforts between the government and the Moro Islamic Liberation Front could help revive agricultural investment especially in Mindanao

“It [the peace deal] could help Malaysian and Indonesian palm oil producers implement their long-held plans to develop palm oil plantations on the island,” BMI said. “However, we remain cautious regarding business environment and security issues in Mindanao.”

BMI’s reservation is based on the fact that peace with the MILF is still on the table and that infrastructure—particularly transportation system—is still lacking in Mindanao.

Also, the firm believes that the prospective palm oil projects face high operational risks.

“In spite of the 2003 ceasefire between the government and the MILF, terrorist attacks on foreign businesses are still frequent, mainly because other militant groups are still active and pose a risk for companies in the area,” BMI said.

The report was issued in late August, a few weeks before fighting in Zamboanga erupted, involving the Moro National Liberation Front—the government’s peace partner in the region during the administration of Fidel V. Ramos.

Regarding sugar and livestock, BMI holds a positive outlook on the former and anticipates continued healthy growth rates.

BMI forecasts that growth in sugar output would build up to 29.2 percent by the 2016-2017 crop year. Harvest is pencilled in at 2.9 million tons mainly due to improvements in yields.

Over the same horizon, growth in pork output is expected to reach 13.4 percent to settle at 1.5 million tons.

An expansion of commercial farming as well as rising domestic consumption are expected to drive this growth.

“The Philippines’ vast consumer market, along with strong government support, will foster domestic and foreign investment and favor output expansion,” BMI said. “However, backyard farming and infrastructure problems, especially transport costs, will continue to hamper the sector’s growth.”

This is particularly seen in the short term as BMI observed that meat retail prices have remained “elevated” in recent months due to higher production costs and lower output from backyard farms.

“High feed prices as a result of elevated international grain prices have turned many local backyard farmers, who can account to up to 80 percent to 89 percent of pork domestic output in certain regions, away from production,” the company said.

“We believe meat prices will stay elevated in the coming months, driven by historically high grain prices and tighter supply,” it added.