Kingfisher School of Business and Finance Lucao, District, Dagupan City

COMMODITY
SYSTEM ANALYSIS
(View on Chicken Industry) A Partial Fulfillment On Agri-Business

Submitted by: Samboy R. Pascua

Submitted to: Maam Fatima Ross Perez

PART I: INTRODUCTION1
A. TECHNICAL DESCRIPTION

The chicken (Gallus

gallus

domesticus) is a domesticated fowl, a subspecies of the Red Junglefowl. As one of the most common and widespread domestic animals, and with a population of more than 24 billion in 2003, there are more chickens in the world than any other species ofbird. Humans keep chickens primarily as a source of food, consuming both their meat and theireggs. The traditional poultry farming view of the domestication of the chicken is stated in Encyclopdia Britannica (2007): "Humans first domesticated chickens of Indian origin for the purpose of cockfighting in Asia, Africa, and Europe. Very little formal attention was given to egg or meat production... "Recent genetic studies have pointed to multiple maternal origins in Southeast, East, and South Asia, but with the clade found in the Americas, Europe, the Middle East and Africa originating in the Indian subcontinent. From India the domesticated fowl made its way to the Persianized kingdom of Lydia in western Asia Minor, and domestic fowl were imported to Greece by the fifth century BC.
[3]

Fowl had been known in Egypt since the 18th Dynasty, with the "bird that lays every

day" having come to Egypt from the land between Syria and Shinar,Babylonia, according to the annals of Tutmose III. Chickens are omnivores. In the wild, they often scratch at the soil to search for seeds, insects and even larger animals such as lizards or young mice. Chickens may live for five to ten years, depending on the breed. The world's oldest chicken, a hen, died of heart failure at the age of 16 according to the Guinness Book of World Records.

Roosters can usually be differentiated from hens by their striking plumage of long flowing tails and shiny, pointed feathers on their necks (hackles) and backs (saddle) which are typically of brighter, bolder colors than those of females of the same species. However, in some breeds, such as the Sebright, the rooster has only slightly pointed neck feathers, the same color as the hen's. The identification must be made by looking at the comb, or eventually from the development of spurs on the male's legs (in a few breeds and in certain hybrids the male and female chicks may be differentiated by color). Adult chickens have a fleshy crest on their heads called a comb or cockscomb, and hanging flaps of skin either side under their beaks called wattles. Both the adult male and female have wattles and combs, but in most breeds these are more prominent in males. A muff or beard is a mutation found in several chicken breeds which causes extrafeathering under the chicken's face, giving the appearance of a beard. Domestic chickens are not capable of long distance flight, although lighter birds are generally capable of flying for short distances, such as over fences or into trees (where they would naturally roost). Chickens may occasionally fly briefly to explore their surroundings, but generally do so only to flee perceived danger. Chickens are gregarious birds and live together in flocks. They have a communal approach to theincubation of eggs and raising of young. Individual chickens in a flock will dominate others, establishing a "pecking order", with dominant individuals having priority for food access and nesting locations. Removing hens or roosters from a flock causes a temporary disruption to this social order until a new pecking order is established. Adding hensespecially younger birdsto an existing flock can lead to violence and injury. Hens will try to lay in nests that already contain eggs, and have been known to move eggs from neighboring nests into their own. Some farmers use fake eggs made from plastic or stone (or golf balls) to encourage hens to lay in a particular location. The result of this behavior is that a flock will use only a few preferred locations, rather than having a different nest for every bird. In 2006, scientists researching the ancestry of birds "turned on" a chicken recessive gene, talpid2, and found that the embryo jaws initiated formation of teeth, like those found in ancient bird fossils. John Fallon, the overseer of the project,

stated that chickens have "...retained the ability to make teeth, under certain conditions... ."

Breeding Origins
The domestic chicken is descended primarily from the Red Junglefowl (Gallus gallus) and is scientifically classified as the same species. As such it can and does freely interbreed with populations of red jungle fowl. Recent genetic analysis has revealed that at least the gene for yellow skin was incorporated into domestic birds through hybridization with the Grey Junglefowl (G. sonneratii). The traditional poultry farming view is stated in Encyclopdia Britannica (2007): "Humans first domesticated chickens of Indian origin for the purpose of cockfighting in Asia, Africa, and Europe. Very little formal attention was given to egg or meat production... " In the last decade there have been a number of genetic studies. According to one study, a single domestication event occurring in the region of modern Thailand created the modern chicken with minor transitions separating the modern breeds. However, that study was later found to be based on incomplete data, and recent studies point to multiple maternal origins, with the clade found in the Americas, Europe, Middle East, and Africa, originating from theIndian subcontinent, where a large number of unique haplotypes occur. It has been claimed (based on paleoclimatic assumptions) that chickens were domesticated in Southern China in 6000 BC. However, according to a recent study, "it is not known whether these birds made much contribution to the modern domestic fowl. Chickens from theHarappan culture of the Indus Valley (2500-2100 BC), in what today is Pakistan, may have been the main source of diffusion throughout the world." A northern road spread chicken to the Tarim basin of central Asia. The chicken reached Europe (Romania, Turkey, Greece, Ukraine) about 3000 BC. Introduction into Western Europe came far later, about the 1st millennium BC. Phoenicians spread chickens along the Mediterranean coasts, to Iberia. Breeding increased under the Roman Empire, and was reduced in the Middle Ages. Middle East traces of chicken go back to a little earlier than 2000 BC, in Syria; chicken went southward only in the 1st

millennium BC. The chicken reached Egyptfor purposes of cock fighting about 1400 BC, and became widely bred only in Ptolemaic Egypt (about 300 BC). Little is known about the chicken's introduction into Africa. Three possible ways of introduction in about the early first millennium AD could have been through the Egyptian Nile Valley, the East Africa Roman-Greek or Indian trade, or from Carthage and the Berbers, across the Sahara. The earliest known remains are from Mali, Nubia, East Coast, and South Africa and date back to the middle of the first millennium AD. Domestic chicken in the Americas before Western conquest is still an ongoing discussion, but blue-egged chicken, found only in the Americas and Asia, suggest an Asian origin for early American chickens. A lack of data from Thailand, Russia, the Indian subcontinent, Southeast Asia and Sub-Saharan Africa makes it difficult to lay out a clear map of the spread of chickens in these areas; better description and genetic analysis of local breeds threatened by extinction may also help with research into this area.

Current
Under natural conditions, most birds lay only until a clutch is complete, and they will then incubate all the eggs. Many domestic hens will also do thisand are then said to "go broody". The broody hen will stop laying and instead will focus on the incubation of the eggs (a full clutch is usually about 12 eggs). She will "sit" or "set" on the nest, protesting or pecking in defense if disturbed or removed, and she will rarely leave the nest to eat, drink, or dustbathe. While brooding, the hen maintains the nest at a constant temperature and humidity, as well as turning the eggs regularly during the first part of the incubation. To stimulate broodiness, an owner may place many artificial eggs in the nest, or to stop it they may place the hen in an elevated cage with an open wire floor. At the end of the incubation period (about 21 days) the eggs, if fertile, will hatch. Development of the egg starts only when incubation begins, so they all hatch within a day or two of each other, despite perhaps being laid over a period of two weeks or so. Before hatching, the hen can hear the chicks peeping inside the eggs, and will gently cluck to stimulate them to break out of their shells. The chick begins by "pipping"; pecking a breathing hole with its egg tooth towards the blunt end of the egg, usually on

the upper side. The chick will then rest for some hours, absorbing the remaining egg yolk and withdrawing the blood supply from the membrane beneath the shell (used earlier for breathing through the shell). It then enlarges the hole, gradually turning round as it goes, and eventually severing the blunt end of the shell completely to make a lid. It crawls out of the remaining shell, and its wet down dries out in the warmth of the nest. The hen will usually stay on the nest for about two days after the first egg hatches, and during this time the newly hatched chicks live off the egg yolk they absorb just before hatching. Any eggs not fertilized by a rooster will not hatch, and the hen eventually loses interest in these and leaves the nest. After hatching, the hen fiercely guards the chicks, and will brood them when necessary to keep them warm, at first often returning to the nest at night. She leads them to food and water; she will call them to edible items, but seldom feeds them directly. She continues to care for them until they are several weeks old, when she will gradually lose interest and eventually start to lay again. Modern egg-laying breeds rarely go broody, and those that do often stop partway through the incubation. However, some "utility" (general purpose) breeds, such as the Cochin, Cornish andSilkie, do regularly go broody, and they make excellent mothers, not only for chicken eggs but also for those of other specieseven those with much smaller or larger eggs and different incubation periods, such as quail, pheasants, turkeys or geese. Chicken eggs can also be hatched under a broody duck, with varied success.

Poultry farming
More than 50 billion chickens are reared annually as a source of food, for both their meat and their eggs. The vast majority of poultry are raised using intensive farming techniques. According to theWorldwatch Institute, 74 percent of the world's poultry meat, and 68 percent of eggs are produced this way. One alternative to intensive poultry farming is free range farming. Friction between these two main methods has led to long term issues of ethical consumerism. Opponents of intensive farming argue that it harms the environment, creates human health risks and is inhumane. Advocates

of intensive farming say that their highly efficient systems save land and food resources due to increased productivity, stating that the animals are looked after in state-of-the-art environmentally controlled facilities. In part due to the conditions on intensive poultry farms and recent recalls of large quantities of eggs, there is a growing movement for small scale micro-flocks or 'backyard chickens'. This involves keeping small numbers of hens (usually no more than a dozen), in suburban or urban residential areas to control bugs, utilize chicken waste as fertilizer in small gardens, and of course for the high-quality eggs and meat that are produced.

Artificial incubation
Incubation can successfully occur artificially in machines that provide the correct, controlled environment for the developing chick. The average incubation period for chickens is 21 days but may depend on the temperature and humidity in the incubator. Temperature regulation is the most critical factor for a successful hatch. Variations of more than 1 F (1.8 C) from the optimum temperature of 99.5 F (37.5 C) will reduce hatch rates. Humidity is also important because the rate at which eggs lose water by evaporation depends on the ambient relative humidity. Evaporation can be assessed by candling, to view the size of the air sac, or by measuring weight loss. Relative humidity should be increased to around 70% in the last three days of incubation to keep the membrane around the hatching chick from drying out after the chick cracks the shell. Lower humidity is usual in the first 18 days to ensure adequate evaporation. The position of the eggs in the incubator can also influence hatch rates. For best results, eggs should be placed with the pointed ends down and turned regularly (at least three times per day) until one to three days before hatching. If the eggs aren't turned, the embryo inside may stick to the shell and may hatch with physical defects. Adequate ventilation is necessary to provide the embryo with oxygen. Older eggs require increased ventilation.

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(1) http://en.wikipedia.org/wiki/Chicken

Scientific Classification and Origins2

Characteristics of Chickens2
The present day chickens are larger and more productive than the ancestral Red Jungle Fowl, but show similar behaviour and have similar requirements. Some knowledge of what these characteristics are assists in caring for chickens under a range of different circumstances, both confined and free-ranging. Non-oiled feathers Since chickens originated in a warm environment with a good tree cover they do not have a well developed preening gland. As a result their feathers are not well oiled and do not provide good protection against the rain. Provision of a shelter for shade and protection is essential. Predators Chickens are potential prey for a wide range of predators, and are to some extent adapted for this in that they have good near all-round vision. However, it is clear that chickens need to be protected against predators. This means that they need security of cover - including from above. Perching The chicken's feet are adapted for perching above ground and any housing for chickens should be equipped with perches large enough for the birds.

Scratching The feet with long claws, coupled with powerful leg muscles, are adapted for scratching. Given free-range they will make significant use of this scratching behaviour to search for food items. In a household vegetable/horticulture patch this feeding can be put to particularly good use in helping to control weeds and pests after crops have been harvested. Pecking The chicken pecks with its beak in order to get food. It must have food of the appropriate size and texture to suit this pecking behaviour. In particular, larger grains (e.g. maize) must be crushed or chopped before feeding. The pecking behaviour enables chickens to carefully select the tips of growing plants, e.g. grasses and leaves of herbaceous plants, and these sources of food are important to them. If birds are kept in a run, they should be provided with fresh green vegetation (old, wilted or dry growth is not suitable) presented in such a way that they are able to peck at it. Pecking Order Domestic chickens are social animals, and a group will establish an order of dominance. Normally a cock will be dominant, but in the absence of a cock on older hen will usually be regarded as dominant. A potential negative aspect to this is that some birds may peck excessively at others - particularly whilst feeding. As competition for food increases, so does the incidence of aggressive pecking. Where this becomes a problem, steps should be taken to provide enough feeders spaced at adequate distances., or to scatter grain over a large enough area to enable the less dominant members of a flock to obtain sufficient feed. Dust bathing Chickens will scratch in areas of fine, dry soil and then "bathe" in it. This helps to remove external parasites on the feathers and skin. Free ranging birds will normally find suitable spots.

Confined birds must be provided with a area with fine soil that is kept dry (a shelter is important for this and many other reasons). Dry wood ash from a fire provides an excellent dust bathing medium when mixed with some fine soil (but make sure it is cold) . The feathers of a chicken are not well oiled and do not provide good protection against the rain. Provision of a shelter for both shade and protection against rain is essential.

Breeds or Types of Chicken2

The different breeds or types of chicken can be considered under these following headings. Meat producers, The larger and heavier breeds are more appropriate for meat production. Being heavy they are also poor fliers and easier to confine. These are birds that have been bred specifically to produce a good quality carcass in terms of the amount of meat. High yielding meat types are normally hybrids that have been selectively bred to increase the daily weight gain (requiring high-input production systems, and high

Heavy breeds

levels of feed conversion). Egg producers, Light breeds are smaller and have a greater tendency to flight, but produce greater numbers of eggs than the heavy breeds. If the aim is to produce the maximum number of eggs possible, the choice of breed will be one of the modern hybrid breeds that have been specifically selected for egg production. Again these require high-input production systems. The colour of the eggs (generally brown or white) may also be of importance and this depends on individual market preferences. Dual purpose or Dual purpose birds are those that have characteristics of both the heavy and lighter breeds. They are capable of a reasonable "table weight" and also produce a good number of eggs. Types classed by Different geographical of origin Marketing Broilers breeds are often classed area according to the place of origin of the breed or group of breeds, e.g. Asiatic, American, or Mediterranean. terms: Technically these are birds that are suitable for broiling, or cooking by boiling or frying. The carcass weight would normally be between 1 and 2 kg. The term is now more loosely used to include birds suitable for roasting (otherwise technically called "roasters"). general purpose Light breeds

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(2) http://www.smallstock.info/breeds/chickens.htm

B. IMPORTANCE 3
No matter where you live, there must be a chicken around. That is, unless you live in Antarctica. Species of chicken are raised in all parts of the world usually for their nutritional value. Being chicken is not the best thing you can be, since most likely you will end up on someone's dinner plate. Today, almost 9 billion chicken in the USA are raised for meat or egg production. Chickens are the most common farm animal around the world. Recently, the prices of the food have gone up. Population of the world is growing and the farming land is disappearing. major and With strange record the weather patterns seen around the world, colds, hurricanes, other disasters,

production of grains and vegetables is down. This makes prices for us, people who buy it go up. The beef industry is having major issues. While beef was once everyone's favorite food, the outbreak of the scary mad cow disease has almost destroyed beef industry in some countries. Prices of the beef went up as well. However, chicken remained affordable and available. Demand for chicken means jobs for millions of people. From farms to transportation to restaurant crews, careers related to chicken create many different job opportunities.

The price of chicken depend on many factors. To begin with there is a cost of feeding and raising chicken. Often chicken feed includes corn and soybean and price of these crops effects the price of chicken. In addition, high beef prices make chicken appear even more affordable. Finally, there is the issue of diet. The whole world seems to follow diet craze and tries to lose weight. For a while Atkins Diet made beef the most popular meat around. While this affected the demand for chicken, it also increased the demand for eggs. After a while, people realized the high cost and cholesterol value of beef and turned back to chicken. With its lower fat and high protein content, chicken makes a great diet food. In addition the popularity of eggs has increased. For a while people stayed off too many eggs because they were afraid of cholesterol. But that changed with an "Incredible Edible Egg " campaign. Chicken today provides millions of jobs and millions of dollars in income. It is a popular food and in great demand. Because of worldwide consumption, chicken industry is incredibly important to world economy.

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(3) http://library.thinkquest.org/05aug/00044/id6.htm

PART II AGRIBUSINESS COMMODITY SYSTEM COMPONENTS

A.INPUT SUBSYSTEM 1. Major Inputs Used Feeds a. Corn b. Soybean c. Coco Oil d. Fish Meal e. Rice Brand f. Vitamins and Minerals g. Copra Meal
Veterinary Supplies ( Vaccines etc)

Breeds Buildings
Maintenance Equipments (Fans say for example)

2. Volume Utilization A normal chicken (specifically laying chicken) consumes lb. 4of feeds daily. If we convert this to kilograms, we will get approximately 1.13 kg. a day. If we multiply this data to the number of birds produced as of July 1, 2011, which is approximately 167.72 million chickens, the estimated consumption of feeds will be 19, 019, 128 kilograms or P401, 291, 688 assuming 1 kilogram of feeds is P21. Veterinary supplies on the other hand are calculated on a monthly basis. Buildings and equipments are being depreciated.

_______________________________________ 3. Sources of Inputs5

(4) http://www2.ca.uky.edu/afspoultry-files/pubs/How_much_will_my_chicken_eat.pdf

AVITE FEEDMILLING By-Pass, (0912) 305-6753 MR. JOSEPH TRINIDAD AND MARKETING San Vicente, COOP. Silang, Cavite BATANGAS Bo. BanayMR. TEODORO FEEDMILLERS AND Banay, Lipa City DIMAYUGA GROWERS ASSOCIATION MASAGANA FEEDS Bo. Turo, Bocaue, Bulacan 692-1890 LORETE FEEDMILL 920 Quimantong, (052) 214-6622/ MR. LYNUS LORETE Daraga, Albay 46688 FIRST FARMERS Mandalagan, (034) 433-1466 MS. ALETA LIBOON FOOD COOP. Bacolod City MONTE MARIA Cataluan Grande, (082) 297-13984, 221- MS. DALISAY SORIANO POULTRY FARMS Davao City 0687 4. Problems and Prospects in the Sector Problems that could arise in the future in the input subsystem is the eventual decrease in the production of corn which is the corn. We know that corn is the major component of feeds that the chicken/poultry industry rely to consume, but as the agricultural land for corn continues to decrease, this will also lower the production of corn. Worse scenario could be the Philippines importing corn variety from other country which would mean another cost to incur. Substitute for corn will not be enough as it would not produce the desired outcome for the chickens. The government should then impose ways on how to deal with these problems. They should build campaigns and advocate the production of more corns for the poultry industry to remain firm.

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(5) http://www.ldc.da.gov.ph/#

B. PRODUCTION SUBSYSTEM 5. Production Trends, Volume and Prices6 The country's total chicken population as of July 1, 2011 was 165.20 million birds, or 2.47 percent higher than last year's headcount of 161.22 million birds. The inventory of broilers and layers increased by 6.09 percent and 5.11 percent, respectively. Inventory of native chicken dropped by 1.06 percent.6

In the 1st half of 2011, total chicken production grew by 3.8 percent. Chicken egg production went up by 3.48 percent. This increment came from commercial farms which contributed around 81.17 percent of the total egg output.

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(6) http://bas.gov.ph/?ids=chickensituation

At current prices, gross value of chicken production in the first half of 2011 declined by 1.38 percent. This was due to the decrease in farm prices during the period. However, gross value of chicken egg output grew by 6.21 percent in comparison with last year's level. At constant prices, chicken and chicken egg production contributed around 12.01 percent to the gross output of agriculture in the 1st half of 2011. (PPA Report Jan-June 2011).

6. Farming Systems7 Organic farming - Organic farms attempt to provide animals with natural living conditions and feed Ample, free-ranging outdoor access, for grazing and exercise, is a distinctive feature, and crowding is avoided Feed is also organically grown, and drugs, including antibiotics, are not ordinarily used (and are prohibited under organic regulatory regimes) Animal health and food quality are thus pursued in a holistic fresh air, exercise, and good food approach. Biodynamic agriculture- method of organic farming that treats farms as unified and individual organisms (emphasizing balancing the holistic development and interrelationship of the soil, plants, animals as a self-nourishing system without external inputs) Do Nothing Farming method- no fertilizer farming. Biointensive- focuses on maximum yields from the minimum area of land, while simultaneously improving the soil Traditional poultry production8 A majority of chickens in developing countries are kept in traditional, rural scavenging systems. These are characterized by few inputs in terms of housing, feeding and disease control. The output in terms of number of eggs is low, e.g., about 50 eggs per hen/year and the weight gain for meat birds, or broilers, is low with perhaps more than 6 months required to produce a broiler that is ready to slaughter. Traditional poultry production is often described as a low input/low output system, where poultry flocks of 10-20 animals are left scavenging around the house during daytime. Here they obtain what feed they can get from the environment such as insects and seeds. In addition they may be given leftovers from the kitchen and other types of offal. Intensive systems8

Intensive commercial systems are costly, labour intensive and sophisticated in terms of housing, feeding and disease prophylaxis: Nevertheless, the output is _______________________________________

(7) http://www.slideshare.net/humanupgrade/native-chicken-production-in-thephilippines (8) http://www.smallstock.info/breeds/chickens.htm

high with regard to number of eggs per hen and weight gain for broilers, e.g., 280 - 320 eggs per hen/year and only 35 - 40 days needed to get broilers to their slaughter weight. In contrast to the traditional poultry production, modern poultry industry is concentrated on few big farms with flock sizes in the range of 5000-250,000 (or more) animals. Total confinement, improvement of cleaning and disinfection procedures, production according to an "all in - all out" principle, and extensive the prophylactic use of vaccines and drugs has reduced the significance of diseases in modern industrial poultry production. 7. Production Concentration9

As of July 1, 2011, broiler population was 58.07 million birds. Around 20.86 percent of the total inventory was in Region III. Region IV-shared 20.86 percent, and Region X, 13.67 percent. These three (3) regions contributed 63.39 percent to the countrys broiler inventory.

Total inventory of chicken layers (all ages) was 30.45 million birds. The top three (3) producing regions with bigger contributions in the total inventory were

Region IV-A with 39.22 percent, Region III with 21.48 percent and Region X with 10.35 percent.

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(9) chicken_ipr_jan-jun2011

Inventory of native or village chicken as of July 1, 2011 was placed at 76.68 million birds. This was 1.06 percent lower than last years 77.50 million birds. The top producing region was

Region VI with 17.17 percent share in the total inventory. The other major producing regions were Region VII with 9.69 percent share, Region III with 7.31 percent Region I with 8.48 percent, and Region X with 9.31 percent Altogether, these regions accounted for almost 52percent of the total native chicken inventory in the country. 8. TECHNOLOGICAL DEVELOPMENTS10 Technological advances in broiler production have contributed greatly to the popularity of broiler meat worldwide. However, there has been a steady rise in government regulations on, and consumer dissatisfaction with, industrialized poultry production systems (McMullin 2003). Of particular concern are: the use of antimicrobial growth promoters, animal protein and genetically modified materials in feeds; the impact on the environment; animal welfare; and disease control.

Obviously, meeting these additional requirements from the consumer and the government will have significant implications for the future cost of production and market competition (Ellendorff 2003). The Philippine broiler sector was found to be internationally uncompetitive _______________________________________
(10) http://www.searca.org/ajad/archives/v-04/01/ajad_v4_n1_chang.pdf

because of higher input costs, below-par on-farm productivity, and an inefficient marketing system (DA and NAFC 2002a, b; SEARCA 1999; SIKAP/STRIVE Foundation 2001). Therefore, threats from foreign competition had surfaced as a major concern when the Philippines became a member of the WTO in the mid-1990s. In 2005, chicken meat imports reached 26,000 tons, valued at US$14.5 million FOB (freight-on-board) (BAS 2006a), which is a significant jump from around 200 tons per year between 1993 and 1996 at the start of trade liberalization. Improving both production and marketing efficiency are necessary to become more competitive internationally. These will require coordinated efforts from both the private and public sectors.

9. PRODUCTION OPPORTUNITIES AND PROBLEMS11 According to industry sources, the integrators have attained only 70% of the international efficiency standards and there is a need to adopt the latest technology in poultry raising, particularly in the areas of environmental control and automation in feeding, drinking, and other management practices (DA-AMAS 2001). In Table 3, the onfarm performance of the Philippine broiler industry is assessed against those of the United States, China, Thailand, and Brazil, all of which are major broiler producers in the world market. As can be seen, the Philippine broiler industry is on a par with the worlds best practices in terms of livability, but is slightly below par in terms of feed conversion ratio (FCR). Production inefficiency, along with the reliance on high-cost imported inputs, has resulted in a higher production cost of live birds, which is 42% higher than in the United States and Brazil. Another reason for the higher production cost is consumer preference for smaller carcasses (around 1.01.2 kg dressed weight for a whole chicken, compared to 1.5 kg in other countries) (DA and NAFC 2002a). The demand for smaller carcasses

means that broiler growth is not allowed to reach its peak feed efficiency (normally at around 1.9 kg live weight), resulting in a small average weight per bird and hence higher cost per kilogram of meat. _______________________________________

(11) http://www.searca.org/ajad/archives/v-04/01/ajad_v4_n1_chang.pdf

Dressed birds at the wholesale/retail level in the country are 55% more expensive than in the United States, Brazil, and Thailand. The higher wholesale and retail prices are due to the inefficiency existing in the marketing chain, especially processing and distribution (for details, see DA and NAFC 2002a, b)

C. THE PROCESSING SUBSYSTEM 10. Product Lines12

Sausages containing meat mixes including chicken meat

Chicken meat is often used to partly substitute the more expensive red meats in meat products especially of the raw-cooked type such as luncheon meat, bologna or hotdogs. In such cases the chicken meat percentage can vary substantially. As a good manufacturing practice, the percentage of chicken meat should be indicated for consumer information, as such products are normally perceived as pork or beef products, not containing chicken meat. Also some liver sausages can contain larger quantities of chicken meat. These products are commonly labelled as Chicken Liver Sausage, although in many cases the liver and animal fats derive from pork. Chicken frankfurter and chicken bologna are finely comminuted products, which can be considered as raw-cooked products. Clean chicken meat provides the proteins and chicken skin replaces the fat to be finely dispersed in the sausage batter. Filled in small casings (18-22mm), this typical raw-cooked sausage mix is the basis for chicken frankfurters (Fig. 232), when filled in larger casings (40-60mm), for chicken bologna (Fig. 233). The mix also serves as the basis for products where coarse chicken meat (either diced or ground) is blended with batter and filled in casings of 60-80mm or

cans. These products may be named chicken or turkey ham sausage, chicken or turkey roll etc. (Fig. 236). Chicken meat balls, a product in high demand in the Asian region, are also of the same category. They are manufactured based on the method used for traditional meat balls from red meat (Fig. 237). Another chicken meat product, which resembles the cooked hams made from pork in both manufacture and appearance is called chicken ham (raw meat material may come from all parts of the chicken carcass) or chicken breast (in this case only chicken breast parts should be used). The meat material is tumbled together with brine containing curing salt, phosphates and spices, and either pasteurized when filled in casings or moulds (Fig. 234) or sterilized when filled in cans. For canned and sterilized chicken products see Fig. 238 and 239.

Fig. 232: Chicken frankfurter

Fig. 233: Chicken bologna

Fig. 234: Chicken ham

Fig. 235: Turkey ham

Fig. 236: Chicken roll

Fig. 237: Chicken meat balls Steamed (left) and oil fried (right)

Other chicken meat products Coated / breaded products In addition to chicken sausages, the chicken meat industry also developed new products, which contributed significantly to meeting the global increase in demand for poultry meat. These can be compared to a few examples from the red meat and fish sector, e.g. breaded and fried meat slices of pork or mutton known as Escalope or Wiener Schnitzel and in the fish sector as fish fingers. The characteristic of such products is the coating of meat surfaces with flour, fat/flour mixes and/or breadcrumbs etc. In the poultry sector, similar products include chicken nuggets (ground meat mix), chicken sticks or fingers (muscle strips) or chicken schnitzel (breast muscle slices). After the meat or meat mix is portioned, each portion is pre-dusted by applying a thin layer of dry flour on the meat surface. This serves to firmly absorb the batter and the breading in the following steps of the processing. Battering consist of dipping the meat pieces in a semi-liquid mixture of oil, eggs, water and spices. Breading is the coating with flour, fat/flour mixes and/or breadcrumbs. The final step in this process is heat treatment to stabilize the coatings on the meat surface. This short heat treatment in hot fat/oil (approx. +175C) as part of the processing must be seen as a pretreatment only and does not cook the product. The final heat treatment is carried out by the consumer right before eating. In large chicken industries, the above processes have been automated by using continuous processing lines. This industrial level processing mainly focuses on

comminuted and reconstituted meat parts, in some cases mechanically deboned meat (MDM) is used for cost reduction. Some examples of industrially manufactured chicken products are shown in Fig. 240 to 243.

Fig. 239: Canned chicken chunks in different Fig. 238: Canned chicken frankfurters gravies

Fig. 240: Chicken nuggets, small size

Fig. 241: Chicken wings with bones

Fig. 242: Chicken drumsticks (below),

Chicken nuggets, large size (above)

Fig. 243: Chicken 'tocino' raw (left) and fried (right). Philippines delicacies with high sugar content

Even though the large poultry firms dominate the markets, there is still scope for small manufacturers to produce and successfully market similar products of high quality standards using manual processing methods. Examples of technologies and products suitable for the small-scale sector are: Chicken burgers, chicken longganisa These two products are easily made from spiced ground chicken / poultry meat mixes. The mixture for the burgers is portioned into the desired weight and shaped using a hand-held moulding device (Fig. 245). The longganisas are also portioned and rolled into plastic wrapping.

Fig. 244: Raw material (ground chicken meat)

Fig. 245: Moulding chicken burgers

Fig. 247: Skinless chicken longganisa, made of ground meat, left frozen/fresh, Fig. 246: Chicken burgers, left fresh, right right fried fried

Chicken nuggets Also chicken nuggets can be manufactured at the small-scale level and a simple method is shown below (Fig. 248). Fig. 248: Small-scale manufacture of chicken nuggets

(c) Materials for pre-dusting (left) and coating with egg batter (right)

(a) Ground chicken meat with salt and spices, to be frozen for chicken nuggets manufacture

(d) Coated for frying

(b) Raw chicken nuggets cut-out from (e) Arrangement for coating and frying frozen block of nuggets

The meat selected for the chicken nuggets is mixed with spices, salt and herbs and ground to the desired particle size (1-5 mm). The ground mixture is spread in a tray

to the desired thickness covered with plastic foil and frozen. After freezing the nuggets are cut out and breaded (Fig. 248 a-e). Methods of processing chicken filets (to chicken fingers) and of chicken wings (to spicy marinated products) are shown in Fig. 249 and 250.

Fig. 249: Method for pre-dusting, battering Fig. 250: Marinating chicken wings for and breading of chicken filets fried products

11. Manufacturers One of the largest manufacturers of chicken products is the San Miguel Corporation. Included in the manufacturers are local restaurants, fast food chains like Jollibee, McDonalds, Mang Inasal, Chicken Inasal and others.

12. Volume and Value of Products The data arent available because they are not categorized. Like in San Miguel Corporation, only the gross sales are included. There are no breakdowns of the sales. 13. Processing Opportunities and Problems The main concern in the processing subsystem is the development of the machineries being used, the freshness of the chicken and the manpower requirements. _____________________________________ D. The Marketing Subsystem 14. Marketing channels and Volume Absorbed by Each Channel
(12) http://www.fao.org/docrep/010/ai407e/AI407E15.htm

Data are not available. 15. Marketing Strategies Adopted by producers and Traders13 There are two ways to market table eggs: using direct marketing, or marketing through middlemen or intermediaries. Marketing through middlemen is the more popular method and the more advisable one because this gives the farmers the opportunity to concentrate on the farm and production as compared to spending time on marketing and sales. Just remember, the most crucial part of marketing is meeting the demands and requirements of customers, and these usually rely on production, handling, storage, and transport of goods. The four ways to conduct direct marketing are: sales from the farm, door-to-door sales, producers markets, and sales to local retail stores. When a farmer directly sells from the farm, he gets the advantage of zero marketing costs, and consumers are assured of fresh eggs with almost no quality loss from transport. However, the farmer is not assured that the consumer will be willing to travel to his farm to avail of the eggs at regular market price as compared to farm-gate price. Door-to-door selling affords the farmer to command a higher price for the eggs for the added service of bringing the eggs to the consumers doorstep. However, this does not assure sales until the farmer gets regular customers who order the eggs. It is not advisable for the farmer to use producers markets alone to sell eggs because the main advantage of this market is that the farmer would have reduced the price of eggs greatly toward the end of the day, and the eggs would have already been exposed to the environment and temperature of the market. Selling directly to local shops, institutions and businesses like restaurants, hotels, schools and hospitals would require a prior agreement and contract. The farmer should be able to meet the quantity and quality demand of the customer organization.

16. Marketing costs and returns13

Costs to be considered during marketing are: packaging and storage, handling, transport, product losses, fees and taxes, and unexpected costs from unforeseen incidents such as derailment in delivery and such. Pricing for eggs fluctuates during the year, depending on factors that affect production and eventually supply and demand. But farmers should always keep in mind to maintain a steady supply of eggs to maintain stable prices. Profit can be calculated at the end of the year, when farmers can calculate total sales minus production and marketing costs.

17. Price Trends14

__________________________________
(13) http://www.agribusinessweek.com/layers-production-and-business-guideconclusion/ (14) chicken_ipr_jan-jun2011.pdf

18. Demand and Supply Situation15 Poultry: Supply and Utilization Accounts by Commodity, Year and Item SU Production Chicken Eggs 2001 2008 2009 2010 Dressed Chicken 2001 2008 2009 2010
SU - Supply UT - Utilization

SU Gross Supply

UT Processing

UT Total Net Food Disposable

246,700 350,789 368,464 387,335

246,726 350,789 368,809 387,335

4,934 7,016 7,369 7,747

226,990 322,726 339,332 356,348

587,067 812,324 826,294 867,023

598,221 856,082 887,738 965,027

. . . .

598,196 852,815 883,190 959,522

19. Projected Demand and Supply The demand and supply for the chicken will be increasing in the next few years because of the growing population. The supply however might be affected in the years to come if problems like high inputs arise. __________________________________
(15)http://countrystat.bas.gov.ph/index.asp? cont=selection&pageid=pxweb/dialog/varval.asp&ma=I60FCSUA&path=pxweb/datab ase/main/MEGA/&lang=1

20. Marketing Opportunities and Problems16 Despite the highly concentrated and vertically integrated production structure of the commercial broiler sector, about 70% of broilers are sold through the wet markets either as live birds or freshly slaughtered because of consumer preference for fresh meat (Abuel-Ang 2005). The three major market segments that are serviced by the integrators are: wet markets (50%), HRI (hotels, restaurants and institutions) (40%), and supermarkets (10%) (DA and NAFC 2002a). By contrast, the small- and medium-scale independent broiler producers sell to the live chicken traders or viajeros/traders who then sell the chickens, either live or dressed, to retailers in the wet markets and restaurants (DAAMAS 2001). The diversity of, and the involvement of many small traders and retailers in, the marketing channels mean that the broiler marketing system does not benefit fully from the economies of scale that exist in the industrialized production system. However, the current marketing system is likely to change in the foreseeable future for two reasons. Firstly, the marketing of live birds has a few disadvantages, namely: 1) it increases the risk of the spread of diseases; 2) it increases the probability of bruising on the carcass, weight loss, and death during shipping and handling; 3) it increases food safety risks because of the lack of hygienic facilities and practices in wet markets; and 4) it increases costs because of fragmented, smallscale operations. Secondly, despite the preference for fresh meats and shopping at wet markets, the trend over time has been for consumers, especially city dwellers, to shop at supermarkets and store perishable commodities such as poultry meat in refrigerators (Taha 2003).

__________________________________

(16) http://www.searca.org/ajad/archives/v-04/01/ajad_v4_n1_chang.pdf

E. The SUPPORT SUBSYSTEM 21. Institutions Supporting the Commodity System17

Department of Agriculture (DA) Increase the income of farmers and fisherfolk, thereby contributing to the achievement of the national goals of alleviating poverty, generating productive opportunities, fostering social justice and equity, and promoting sustainable economic growth.

Bureau of Animal Industry (BAI) To make the livestock farmer, in particular, and the farming sector, in general profitable through the formulation of policies and programs designed to accelerate the industries; and the provision of adequate technical services in animal health, feed quality promotion, livestock production technology, marketing, research and development, post production technology and human resources development. Bureau of Agricultural and Fisheries Product Standards (BAFPS) Total confidence in Philippine products; protection of consumers against unsafe and defective agriculture and fishery products; and, to promote the competitiveness of all locally produced products through implementation of quality assurance systems.

Agricultural Training Institute (ATI) Leadership excellence in agricultural technology and knowledge management for a more proactive and responsive extension service.

__________________________________

(17) http://bas.gov.ph/?ids=links2&cat=links

22. Development Programs and Projects18 WTO commitments Since 2005, the DA has continued to maintain tenth or final-year Minimum Access Volume (MAV) levels under its Uruguay Round commitments. For poultry HS 0207, the final-year MAV was 23,490 metric tons (MT). The DA previously stated that it will continue to do so until such time as a new WTO agreement is reached. In late 2007, the DA announced that it would undertake a review of MAV distribution guidelines in order to allow new entrants and more entities to participate in the MAV system. After extensive and spirited consultations with local stakeholders and main trading partners, in February 2009, the Philippine Agriculture Secretary announced that the current MAV system would remain in place and that no changes to would be initiated in the meantime.

Minimum Access Volumes (MAV)

Data from the MAV Management Committee of the Philippine Department of Agriculture (DA) shows that in 2005, fresh/chilled/frozen poultry meat MAV utilization dropped from 89 per cent in 2006 to 85 per cent last year. Despite uniform in and out-of quota duties of 40 per cent for most poultry products, the Philippines maintains a Tariff-Rate-Quota or MAV system for poultry.

Annual MAV utilization for poultry meat for the last three years has averaged around 90 per cent, but has been declining, in part due to the elimination of special safeguard duties for mechanically deboned chicken and thus use of MAV for those products, as well as the uncertainty caused by the extended MAV review last year. The majority of all the country's chicken meat imports (except mechanically deboned or separated poultry) fall under the MAV.

__________________________________ (18) http://www.da.gov.ph/n_sub.php? pass=programs/2012/livestock/livestock.html&banner=12

Animal Health and Genetic Improvement Programs

The Bureau of Animal Industry through its Animal Health Program conducted strategic vaccination, disease surveillance, quarantine and related activities and info dissemination to eradicate and control animal diseases.

The Office International des Epizooties (OIE) recognized the country as Footand-Mouth Disease (FMD )free without vaccination on May 26, 2011. This opened up export opportunities of Philippine pork products to other countries such as Singapore and Malaysia.

The country also maintained its status as Avian Influenza free that allowed us to continue exporting chicken to Japan and explore other export markets. Other economically important diseases such as Surra, Hemorrhagic Septicemia, Porcine Respiratory Reproductive Syndrome (PRRS), etc. were also controlled. More than 70 Nucleus and Multiplier Farms and Production Centers were maintained by the Genetic Improvement Program and distributed good genetics and planting materials to farmers and local government units. Unified Artificial Insemination Program (UNAIP) was also implemented that produced and distributed semen straws for upgrading of large and small ruminants. On Infrastructure

Establishment of Liquid Egg Processing Plant in San Jose, Batangas The project aims to achieve (1) higher growth rate for chicken egg production, (2) value adding of chicken egg and (3) availability of affordable and quality processed egg that will eventually substitute imports

Construction is on-going with a total budget of PhP 70.18 million. DA will shoulder PhP 60 million and the rest from the proponent, Batangas Egg Producers Cooperative (BEPCO) as its counterpart.

Establishment of Liquid Nitrogen Plants (LN2) - support to UNAIP

Four (4) sites were already identified (Tuguegarao, Camarines Sur, Tacloban and General Santos City) for the project. Assisted 49 Livestock Auction Markets (LAMs)

On Other Support/ Special Programs

Livestock and Poultry Information and Early Warning System (LPI-EWS) Project
o

Published quarterly supply and demand forecasts for broiler and swine which were used by the government as a tool for policy formulation on importation and used as a production and marketing tool by the private sector to avoid imbalance in supply and demand and spikes in prices Livestock Program 2012 Thrusts and Priorities and Plans Disease Prevention, Control and Eradication

Maintenance of FMD and AI Free Philippines Control and eradication of other economically important diseases Conservation and Improvement of Genetic Materials

Improve the production and reproductive potentials of the local herd through the introduction of superior genetic materials Develop and implement programs for conservation and utilization of native genetics (Philippine Native Animal Development Program) Establishment of Post Harvest Facilities

Completion of the establishment of Liquid Egg Processing Plant in San Jose, Batangas Construction of Triple A Slaughterhouses
o o

Southern Tagalog area (entry to SLEX) North and Central Luzon area (proximate to NLEX)

Establishment of Duck Dressing Facility

Animal Products Development Center (APDC) of BAI in Marulas, Valenzuela City

Establishment of Poultry Dressing Plant

o

Site for identification Region II (Tuguegarao) Region V (Camarines Sur) Region VIII (Tacloban) Region XII (General Santos City)

Completion of the Establishment of Liquid Nitrogen (LN2) Plants

o o o o

Explore and Promote Alternative Nutrition Technologies (e.g. feed substitutes) Pursue possible export opportunities specifically of pork and chicken

Taking advantage of the maintained AI-free status of the country and the recent declaration as FMD-free without vaccination

23. Investment Priorities The following are being considered by the government:
DA RADIO SEGMENT OF THE AGRI PINOY PROGRAM LEASE OF OFFICE SPACE TO HOUSE THE BUREAU OF AGRICULTURAL

STATISTICS (BAS) FOR CY 2012

CONSULTANCY SERVICES FOR THE DEVELOPMENT OF CENTRALIZED

ICT HELPDESK SERVICE REQUEST SYSTEM

CONSULTANCY SERVICES FOR THE DEVELOPMENT OF CENTRALIZED

ICT HELPDESK SERVICE REQUEST SYSTEM (CICT) FOR DA

CONSULTANCY FOR CONSTRUCTION MANAGEMENT SERVICES ONE (1) YEAR SUBCRIPTION/LICENSE RENEWAL OF THE FOLLOWING

ITEM I - FORTINET FORTIGATE ITEM II - BARRACUDA MAIL ANTI-SPAM

24. Other Agro-Services Agri-Pinoy incorporates principles and practices that optimize the development of Philippine resources, natural and human, to achieve Philippine goals in agriculture and fisheries, and contribute to national development.

Promotes a conducive environment for the development of the livestock & poultry industry through the formulation of relevant and sound policies and programs jointly by the government and private sectors.

PART III: INTEGRATED ANALYSIS

1. Overall SWOT ANALYSIS Strengths: Chicken is a commodity. Chicken has been part of Filipino tradition. Chicken has lower prices compared to pork. Chicken is part of Philippine restaurants. Chicken is nutritious. Chicken can be processed into different products.

Weaknesses: High input cost. Inefficient production Inefficient marketing systems. Lack of technological advancements. Low Productivity.

Opportunities Increasing population. Increasing fast food chains, restaurants, etc. Government intervention. Advancement in the processing. Promotion of Products.

Threats Competitors High Input Cost Inefficient Marketing Systems.

2. Critical Problems19 Threats from the Commercial Sector Backyard poultry production has come under more intense scrutiny due to the recent avian influenza (AI) outbreaks (Rushton et al. 2005). The sector was suspected of serving as a reservoir for disease spread. To prevent future disease outbreaks, increased restrictions are likely to be imposed on informal smallholder poultry production (Aho 2004). In the foreseeable future, it is likely that backyard poultry production will be either actively discouraged or phased out in some areas or relegated to the poorest and most isolated areas. If implemented, these policies will result in the displacement of smallholder production and quicken the structural change in the poultry industry. Any policy changes should carefully take into account the economic and social impact on smallholder producers and their livelihood. Generally, native breeds have relatively low productivity in terms of weight gain, size, body weight, and maturation time. However, the backyard sector does have some marketing advantages. Firstly, backyard production has low input requirements, which keep cost down. The slow growth rate, although a drawback, has the benefit of producing a carcass that has a unique flavor, texture and taste qualities that are sought after by a significant segment of the market (Fujimura et al. 1994; Gueye et al. 1997; World Poultry 2004; Lambio 2005). This is particularly true in Asia and Africa where native chickens command premium prices and are often in short supply (Kitalyi 1996; Alders and Spradbrow 2001; Taha 2003; Landes et al. 2004; Lambio 2005). Secondly, because most backyard poultry production uses little or no veterinary medicines or other substances, its output is much more natural than the products from the industrialized production systems. Natural products, such as free-range and organic chickens, have gained recognition and support from consumers worldwide in recent years (World Poultry 2004). Therefore, the backyard sector does not appear to be

threatened by trade liberalization, as does the commercial broiler sector. This is because its production is mainly for own consumption and there is not enough marketable surplus to satisfy demand, as evident in the premium prices native chickens command over broilers.
__________________________________ (19) http://www.searca.org/ajad/archives/v-04/01/ajad_v4_n1_chang.pdf

3. Prospect/Outlook20 DA Assistant Secretary Salvador Salacup said agriculture officials led by Secretary Arthur Yap have been "continuously in touch" with leaders of the livestock and poultry subsectors to monitor the domestic market situation and work out further intervention measures that might be needed to further boost domestic production and stabilize both supply and prices of these basic foodstuff. Salacup said that regular and new productivity programs put in place by the various DA-attached agencies concerned on Yap's watch have assured the country according to industry leaders themselvesof "at least 90% self-sufficiency" in pork and chicken, while importations would cover present or potential supply-demand gaps. "In all of these endeavors, the DA is continuously in touch with leaders of livestock and poultry groups through partnership arrangements and regular dialogues on the concerns of sectoral leaders or on issues affecting these industries, and have been working with these people to meet the meat, poultry and egg requirements of Filipino consumers," Salacup said. He said retail prices have inched up "mainly due to increased prices of feed ingredients of which a substantial portion are imported, such as soybean meal, bone meal, fishmeal, calcium and other minerals." Citing official figures, Salacup said domestic production in the year's first quarter totaled (in live weight) 30,038 metric tons for cattle; 442,695 MT for hogs; and 338,482 MT for chicken. Last year, he said, total cattle production reached 236,871 MT; hogs, 1,886,005 MT; and chicken, 1,211,623 MT. Director Carlos Mendoza of the Livestock Development Council reported, meanwhile, that pork imports totaled 79,381 MT last year and another 7,268 MT over

the January-March 2008 period while that of chicken totaled 45,075 MT last year and 4,325 MT more in the year's first quarter.

__________________________________ (20) http://pinoyagribusiness.com/forum/poultry/philippines_poultry_news_updatest486.10.html;wap2=

Mendoza said that while pork supply is tight, "there is no shortage as increased demand is covered by existing inventory." "Current efforts by the private sector to re-stock breeder gilts would further normalize pork production towards the end of the year and early next year," he said. As for chicken supply, Mendoza noted that total production even grew by 4% during the first quarter of 2008. Yap said that prospects for the hog and poultry industries are bright as the Philippines remain free of the avian influenza (AI) or bird flu, and the continuous disease control and eradication programs of the Bureau of Animal Industry have boosted chances for the whole Philippines to be declared totally free from the Foot and Mouth Disease (FMD) by the Animal Health Organization or OIE by the end of 2008 or early 2009. Surveillance, vaccination, quarantine and treatment programs to fight cholera, Newcastle, fowl pox and other hog and chicken diseases are also being stepped up by the DA on its own or in partnership with local government units (LGUs), he added. For cattle, the DA has been undertaking, among others, programs on breeder stock infusion and genetic improvement as well as land tenure and pasture lease negotiations, Salacup said. Moreover, the DA has a slew of initiatives like the pork-in-a-box project that are meant to provide consumers with greater access to quality but affordable beef, chicken and pork products, he added.

PART IV: CONCLUSION AND RECOMMENDATION

The Philippine poultry industry is very diverse. It comprises broiler chickens, layer chickens, native chickens, and ducks. The production of broiler and layer chickens is characterized by large-scale, intensive, commercial production systems with modern technology and imported hybrids. Native chicken production, on the other hand, is usually a backyard activity undertaken by rural households using minimal inputs. It appears that the Philippine chicken meat industry, including broiler and native chickens, stands to benefit from an increase in demand because of the anticipated growth in population and household incomes. However, it faces a number of challenges. For the commercial broiler sector, its main concern would be the threat from global competition because it is a high-cost producer by world standards and it is no longer protected by trade barriers. The future of the commercial sector will depend largely on the availability of cheap feed sources and improvements in production and marketing efficiency. It appears that in the longer term much improvement can be made by becoming fully vertically integrated. This will involve investments in breeding and genetic improvements to produce its own breeder stock and integrating forward into further processing and distribution. The backyard sector, on the other hand, is not directly affected by trade liberalization at the moment because most of its production is for home consumption by rural households and there are not enough market surpluses to meet the demand for native chicken. However, the backyard sector faces serious issues of low productivity and high mortality rates because of the lack of technical know-how and access to key inputs. The key recommendation here is to undertake more research that would identify not only the constraints to subsistence backyard production but also the means for effective extension and technical assistance.