Extension of lower corn tariff sought

The Philippine Association of Feed Millers Inc. (PAFMI), representing more than 30 feed millers in the country, is calling on the government to extend the reduced tariff regime on imported corn beyond 2022 given the continued volatility, uncertainty and complexity of the global foods, feeds, and fuel supply chain that have caused soaring inflation globally.

Executive Order 171, signed by former President Rodrigo Duterte last May, lowered the tariff rates on yellow corn, as well as pork, rice, and coal until the end of the year. The EO was intended to mitigate an expected worsening of inflation resulting from the Russian invasion of Ukraine in February and the disruption of global supply chains, particularly of oil, fertilizers, and grains.

Imported yellow corn, which augments local production, is a vital ingredient in feeds for the livestock and poultry sectors. It accounts for 50 to 70 percent of the total cost of feeds. The lowering of tariff on imported corn this year provided a much-needed reprieve to counter rising pork prices after local production was severely affected by the spread of the African swine fever.

However, the successive interest rate hikes imposed by the US Federal Reserve this year, which reached a cumulative total of 3.75 basis points as of  Nov 2 intended to bring down the United States’ own inflation rates, dampened the effectiveness of EO 171. A resulting strong US dollar weakened the Philippine peso, increasing the country’s cost of imports.

The Philippine government continues to apply various measures to manage local inflation, and PAFMI believes that maintaining the lowered tariff on imported yellow corn for an extended period in 2023 would help keep pork and chicken prices at levels that would not exacerbate inflation further.

Also, PAFMI is asking the government to increase the allowed minimum access volumes for imported corn to expand the benefit that accrues from lower tariffs, especially with inflation expected to remain elevated well into the next year.

According to PAFMI projections, global demand for grains and oil seeds will remain high, and some countries are already resorting to importing grains for storage. With the region heavily dependent on imported grains, additional measures are needed to ensure that importation of wheat and corn for feed use is not exposed to further uncertainties.

With EO 171, the country has been able to import yellow corn at lower tariffs of 5 percent in quota, and 15 percent for out of quota. This translated to a significant drop in the production cost of poultry, pork, eggs, and fish. About half of the yellow corn volume used for feeds production is supplied through imports, and the remaining from local farms.

Recent farm surveys conducted by PAFMI members, unfortunately, indicate lower local yellow corn yields. The soaring prices of imported fertilizers are influencing some farmers to defer planting corn; others, instead, risk lower yields by not using fertilizers.

Globally, as the Russian-Ukrainian conflict continues,the wheat and corn supply remained tight since both countries are major producers and exporters of the grains. The container and shipping industries are still unstable and unreliable, with still high transportation expenses driving up importation costs.

PAFMI also noted a ramp-up of renewable diesel production capacity globally, thereby competing in the market for soybean meal, corn oil, and other potential grains. Companies producing renewable diesel are already investing more in extraction facilities in anticipation of increased demand.

Consistent with its mission statement, PAFMI reiterates its commitment to being a partner in the development of strategies for food security of the country, to actively participating in the promulgation of the government policies affecting the agriculture industry, and to fostering unified sourcing and procurement of quality agricultural inputs for feed milling.

Further, the association supports the thrust of the Department of Agriculture (DA) and Philmaize in developing the local corn industry by investing in dryers and storage facilities, aside from supporting the use of better seeds and fertilizers.

PAFMI also supports the position paper submitted by the Foundation for Economic Freedom (FEF) to the Department of Finance that seeks to extend the effectivity of the 5 percent tariff imposed on non-Asean yellow corn.