The Perspective of ABM Students about the Issue of High Price of Poultry and Meat Products

REVIEW OF RELATED LITERATURE

International

The rapid growth of world population, requirement of quality and quantity assurance in

food supply, need for protein of animal origin, increasing consumer awareness and preferences

in terms of healthy and balanced nutrition have brought the broiler sector to the situation of a

large industry having a significant place in rural and national economy in Turkey as in many

countries.

Despite factors such as the demand reduction and sudden drops in chicken meat prices

due to causes economic crises experienced in Turkey, various sensational comments, Highly

Pathogenic Avian Influenza (HPAI) outbreaks etc., broiler production has made significant

progress in recent years in quality, productivity and capacity (BesdBir, 2006). Herein, factors

such as using high-yield broiler parent stock, modernization of poultry farms and

slaughterhouses, investment and employment level, production-industry integration, increasing

consumer demand, advance in sales and marketing organization, export potential have acted.

The major problem in broiler sector is dependence on external resources in the supply of

parent stock, feed raw materials (especially corn and soybean), vaccines-medicines, feed

additives to a certain extent, and this situation affects the competition of the sector in foreign

markets adversely as a result of increasing production costs (Cicek and Tandogan, 2007).

Many factors affect chicken meat prices such as input costs (feed, chick etc.), income

level, purchasing power and consumption choices of the consumer, substitute product prices,

economic conjuncture and external trade. Chicken meat prices in Turkey are influenced rapidly
from seasonal and periodic demand variations, and instability in markets due to speculations

and epidemics.

The aim of this study was to determine the effects of factors such as the economic crisis,

some speculative comments related to broiler sector (hormone usage, antibiotic residual, etc.)

and HPAI outbreaks on the chicken meat prices and to identify the variations and seasonal price

fluctuations between chicken meat and feed prices that occurred in Turkey in 1994-2006 period.

Meat and poultry consumption in Japan over the last three decades has two main

characteristics: an increasing trend in meat and poultry consumption; and a rapid increase of

meat imports. Historically, increases in per capita income in Japan have accelerated meat

consumption. Figure 5.1 illustrates annual per capita beef, pork and poultry consumption and

shows how per capita consumption of meats and poultry has been steadily increasing since

1960. Pork consumption increased until the early 1980s, but its growth seems to have levelled

off thereafter. Over the last 30 years, the average consumption of beef has not increased as

rapidly as that of pork and poultry. However, the increase in beef consumption has accelerated

since the mid-1980s, and in recent years beef has been increasing more rapidly than pork and

poultry consumption. In 1960, per capita consumption of beef, pork and poultry was 1.1, 1.1 and

0.8 kg, respectively. Ten years later, beef consumption had nearly doubled, and pork and

poultry consumption had increased fourfold. By 1980, beef consumption had tripled, and pork

and poultry consumption had increased tenfold. By 1995, beef consumption was seven and a

half times its 1960 level, and poultry consumption had increased by nearly 14 times.

The Japanese Government protected beef producers with import quotas. Before the

1988 BMAA, all beef imports, except a small portion under the private quota, were monopolized

by the Livestock Industries Promotion Corporation (LIPC) (see Hayami, 1979; Alston et

al., 1990). Under the BMAA, quotas were raised by 60 000 tonnes each year from April 1988 to
April 1991 (Persaud and Chern, 1999). Thereafter, the quota restriction was replaced by an

import tariff. This agreement significantly curtailed LIPC's intervention in the beef market.

Consequently, the Japanese beef market became freer; the Japanese cattle industry had to

adjust its supply and pricing to the market situation, and consumers enjoyed the benefits of

increasing competition from foreign countries.

The increases in meat imports since the 1988 agreement have been remarkable. Trends

of beef, pork and poultry imports and shows how all meat imports increased rapidly after the

mid-1980s, with beef imports surpassing pork imports during most of the 1990s. Poultry imports

have been lower than those of beef and pork during the last three decades. Domestic beef

production has been stagnant since the mid-1980s, and beef imports have grown at an even

faster rate than before. These figures clearly show that beef imports have exceeded domestic

production since 1992. Given the historical restrictive beef quota and its trade liberalization in

1988, the relatively high growth rates of beef consumption were stimulated by increased imports

in the late 1990s. Beef prices have been more volatile than those of pork and poultry. Since

trade liberalization, beef prices have shown a downward trend, although the magnitude of this

trend is not as large as might have been expected.

Food prices in Japan have generally been considered high, relative to other developed

countries. Hayami (1979) reports the price differentials of food commodities based on 1977

data. Two decades ago, the retail price of beef in Tokyo was seven to nine times higher than in

the capitals of other developed countries. In order to have an overview of the price differentials,

MAFF regularly issues price comparisons for food items in major cities of the world. As shown

on Table 5.1, which is based on 1996 data, beef is still more expensive in Tokyo than it is in

other major cities, although the price differential ranges from twice to none. The pork price

varies among major cities, and poultry is cheaper in Tokyo than in several other major cities.
Combined with Hayami's survey, the price differentials among large cities in developed

countries have decreased significantly over the last 20 years.

Estimation results on the own-price elasticities of meat demand in Japan, the United

States and Canada vary considerably. Hayami (1979) investigated the consequences of

Japanese beef trade liberalization and reported the results of own-price elasticities for beef from

other studies: the results vary from -1.3 to -1.8. Applying the Rotterdam demand system, Sasaki

(1995) estimated various meat demand elasticities in Japan. The own-price elasticities of beef,

pork, poultry and meat products are -1.26, -1.53, -0.68 and -0.81, respectively. These results

are consistent with Hayami's survey: beef and pork are highly price-elastic, while poultry is

relatively inelastic.

There are many studies on United States and Canadian meat and poultry consumption.

Eales and Unnevehr (1993) conducted a survey of meats and poultry demand elasticity studies

in Canada. Table 5.2 shows excerpts from their results. In their survey, the estimates of own-

price elasticity are considerably lower in absolute value than those from Hayami's study,

particularly for beef and pork. Using the AIDS model estimated with United States data, Chen

and Veeman (1991) reported own-price elasticities for beef, pork and poultry to be -0.77, -0.87

and -0.95, respectively. The Chen and Veeman study on United States meat demand yields

estimates that are far closer to those obtained from Canadian data. The studies' comparisons

between Western countries and Japan indicate that the own-price elasticities of meats and

poultry are higher in Japan than in the United States and Canada.

Expenditure elasticity is one of the key determinants of future meat demand, and it is

important to have an accurate estimate of expenditure elasticity in order to forecast the medium-

to long-term demand for meat. Eales and Unnevehr (1993) surveyed the results of Canadian

expenditure elasticity studies. Table 5.3 shows part of their survey results. Using United States
data, Moschini and Meilke (1989) reported various expenditure elasticities on meat demand.

The estimated expenditure elasticities of beef, pork and poultry were, respectively, 1.39, 0.85

and 0.21 in the post-structural change period of the fourth quarter of 1975 and in the 1967-1987

data set. There are only slight differences between the estimates made from Canadian and

those made from United States data. In the Eales and Unnevehr study, expenditure elasticities

for beef, pork and poultry are positive, but only the beef expenditure elasticity exceeds one in

the Moschini and Meilke study.

Sasaki (1995) reported the income elasticities of meats and poultry in Japan, and found

elasticities for beef, pork, poultry and other meat products of 0.80, 1.29, 1.42 and 2.10,

respectively. It is interesting to note that Sasaki's study shows beef to be a normal good,

although pork, poultry and meat products are superior goods. These results are quite different

from the findings of the Canadian and United States studies. Sasaki's estimates depend on the

specification of the Rotterdam model and the use of time series data. In the present report, the

AIDS model with cross-sectional data has been applied, which should yield more reliable

estimates of expenditure elasticities.

Culturally, meat is associated with wealth and consumption is viewed as a reflection of

favourable economic conditions (Nestle, 1999). Recently, red meat consumption has fallen in

response to food scares, the Bovine Spongiform Encephalopathy (BSE) debacle and the initial

banning and subsequent authorisation of beef exports, the foot and mouth crisis, general health

concerns and putative links to bowel cancer (Bingham, 1996; DOH, 1998; FSA, 2002a; WCRF,

1997). Reduction in red meat consumption, however, is not a recent phenomenon, but reflects

an historic trend owing much to industrialised farming which has made cheaper, more efficient

production of other animal proteins such as poultry and fish, available on an large scale

(Fernandez-Armesto, 2001).
 As a result, poultry has overtaken red meat as the most commonly purchased meat for

the home in the UK (MAFF, 1997). Poultry per capita consumption has reportedly increased

from 20.2 to 28.1 kg per head over the last decade (Poultry World, 2000). Red meat

consumption is currently estimated at 14.1 kg per head (FSA, 2002b) reflecting a complete

reversal in the traditional market dominance of beef over chicken (Mannion et al., 2000). Poultry

now accounts for 40 per cent of all meat eaten in the UK (MAFF, 2000a, b). The type of chicken

meat purchased has also changed. Whereas roast whole chicken has been the traditional way

of cooking and serving chicken as part of a family meal, now chicken has become a regular

component of most meals and not just for special occasions (Mitchell, 1999).

Accordingly, quality expectations and perceptions are likely to have changed and differ

greatly among cultures and between individuals. The changing commercial and consumer

climate in regard to meat and poultry indicate an emerging need to understand better factors in

determining the choice of meat and particularly chicken. Consumers expect good quality

products derived from healthy animals raised in a healthy environment, to be natural, fresh

tasting and nutritious (Morrisey et al., 1998). Earlier studies on perceptions of meat have in the

main, used quantitative methodologies (Lennerna¨s et al., 1997; Morrissey et al., 1998) which,

although providing a wealth of information which can be summarised, analysed statistically and

generalised, have rarely provided sufficient insight into consumer perceptions in relation to

poultry meat.

The value of qualitative studies in studying the factors that motivate consumer opinions

and behaviours that may explain product choices, is now recognised (Munoz, 1998). A

qualitative study of beef carried out in four countries reported that the most important aspects of

quality to consumers were that it tasted good and was tender, fresh, lean, healthy and nutritious

(Grunert, 1997). More recent qualitative research carried out in Scandanavia, implied that meat

preferences were tied up with notions relating to the origins of meat.

on raw meat, expressing a preference for chicken over red meat for this reason (Kubberød et

al., 2002). A small-scale qualitative study (Holm and Møhl, 2000), identified four main

areas/themes that influenced choice, two of which related to the perceived origins of meat. They

are: first, the way in which meat is produced and processed in modern agriculture and industry;

second, the idea that meat derives from dead animals; third, the food culture associated with

meat; and, finally, the perceived unhealthiness of meat.

Although consumers expressed critical and often negative attitudes towards meat, this

was not necessarily associated with decreased meat consumption, but with the restructuring of

meals and a change in the role assigned to meat (Holm and Møhl, 2000). These existing

studies, however, have almost exclusively focused on consumer perceptions of beef. There

appears to be lack of qualitative research exploring perceptions of chicken. This is surprising

given the degree to which chicken consumption has increased. This study therefore, explores

perceived factors underpinning the choice of chicken by consumers.

Theoretical frameworks have been put forward to explain how different factors interact to

determine food product quality judgements. Perceptions of fresh meat quality are likely to reflect

the ways in which consumers’ process information (Becker, 2000). According to the “perceived

quality” approach certain cues are used by consumers to predict product quality attributes

(Northen, 2000). Product attributes can be categorised according to whether they relate to the

production process, including animal welfare and food safety issues or to specific product

attributes associated with nutritional content, sensory factors, and product image (Caswell et al.,

1998).

Such cues convey information which is taken in when shopping or during product

consumption and can be used to make inferences as to product quality (Olson and Jackoby,
2000). Intrinsic cues associated with meat include visual factors such as flesh colour, leanness

as indicated by visible fat and marbling, and odour, whilst packaging and information/labels are

examples of extrinsic product attributes (Northen, 2000). The present study aims to establish

which of these cues and perceived attributes are most important in the selection of chicken

meat and to understand how such factors interact to influence decisions relating to the selection

and consumption of poultry meat. The purpose of this exploratory research has been to

generate hypotheses and inform methods for further sensory studies involving novel chicken

products.

Local

Research on meat production worldwide indicates that poultry is the fastest growing

livestock sector, especially in the developing countries (Delgado et al. 1999; Taha 2003; Landes

et al. 2004; Conroy 2004). The Philippines is no exception (Costales et al. 2003). The outlook

for the Philippine chicken industry appears optimistic because the demand for chicken products

is expected to increase, along with population and income growth (DA and NAFC 2002a, b).

Productivity improvements and developments in marketing infrastructure, such as the expansion

of food processing, the modernization of the retail sector (e.g., growth in supermarkets and

hypermarkets), and increasing refrigeration ownership, are additional drivers for future demand

growth (Livestock Development Council 2002; DA and NAFC 2002a, b).

However, there are increasing concerns about the threats from imports due to the more

liberalized trade policies (Gonzales 1995; Mangabat 1998; Mateo 2001; Arboleda 2001). As in

most countries, and for many years, the Philippine poultry industry (including chickens and

ducks) has been protected from foreign competition through tariffs and other non-tariff

measures. However, the forging of trade agreements in both global (e.g., World Trade

Organization) and regional forums (e.g., Asia-Pacific Economic Cooperation and ASEAN Free

Trade Area) since the mid-1990s has resulted in the lowering of tariffs and the removal of
quantitative restrictions on agricultural products. Imports of poultry products (mainly frozen

chicken leg quarters and offal) have increased substantially.

It is envisaged that as trade barriers are reduced further, the Philippine poultry industry

will face increasing competition from overseas. The continuing survival and growth of the

Philippine poultry industry therefore depends on its ability to compete in the global market,

which, in turn, depends largely on the efficiency of its production and marketing systems. A

number of studies have looked at the impact of trade liberalization on the commercial poultry

sector in the Philippines. In most cases the Philippine commercial poultry sector was found to

be high-cost producers and hence uncompetitive in a more liberalized trade environment (e.g.

SEARCA 1999; SIKAP/STRIVE 2001; DA and NAFC 2002a, b; Delgado et al. 2003; Costales et

al. 2003). However, to date, little attention has been given to the backyard poultry sector and

little is known about how it will be affected by trade liberalization.

The backyard poultry sector, which is defined by the Bureau of Agricultural Statistics

(BAS 1987) as having less than 100 birds per household, deserves more attention because it

comprises the majority of the poultry inventory in the Philippines. For example, the backyard

production of native chickens accounted for about 54% of the total chicken inventory in 2005

(BAS 2006a), while backyard duck production accounted for about two-thirds of total duck

inventory (BAS 2006b). It is also worth a separate investigation because it differs from the

commercial sector not only in terms of the scale of operation but, more importantly, the

respective production and marketing issues.

Therefore, a clear distinction is made between the commercial and backyard operations

in this paper, with a focus on future developments in the chicken meat industry.1 The objectives

of the paper are to identify the issues and opportunities facing the Philippine chicken meat

industry and to suggest policy responses for both the commercial and backyard sectors. The

analysis is based on a survey of the literature; secondary data; informal discussions with

farmers, researchers and policymakers; and lastly, the author’s personal observations from field
trips. The paper is organized as follows. First, an overview of the production and consumption of

major meat products is provided. Second, the commercial and backyard sectors are defined in

the Philippine context. Problems and opportunities facing the commercial and backyard sectors

of the chicken industry are then identified, followed by policy recommendations and concluding

remarks.

Earlier qualitative studies of meat have indicated that freshness, sensory factors and

perceived healthfulness are the most important drivers of product choice (Munoz, 1998;

Verbeke and Viane, 1999) and that poultry tends to be perceived more favourably than beef or

pork in terms of these attributes (Verbeke and Viane, 1999). This dialogue implies that flesh

colour/appearance and convenience were the most important cues referred to in choosing

chicken. Flesh appearance was taken to indicate product freshness and healthfulness (including

fat content). Convenience was discussed with reference to preferred cut of chicken and product

versatility. Chicken fillets were perceived to be convenient in that that minimal preparation and

cooking was required especially if pre-prepared sauces were used, and versatile in that it could

be used for various meals using pre-prepared sauces. Choice of chicken was also related to

concepts of added value. Chicken fillets were considered good value in that there was no waste.

The perceived blandness of chicken fillets was also considered a positive functional product

attribute because it rendered the product amenable to the addition of pre-prepared sauces.

Interrelationships between issues associated with the four main themes of appearance,

convenience/ versatility, added value and the changing culture surrounding meat