Impact of foot-and-mouth disease on pork and chicken prices in Central Luzon, Philippines.

Central Luzon is the number one pig-producing region in the Philippines and was affected by Foot-and-Mouth disease (FMD) in 1995. In this paper, the impact of FMD on the Central Luzon meat market from 1995 to 1999 was examined. Employing the error correction model (ECM) and historical decomposition, the impact of FMD on the Central Luzon pork and chicken meat market was quantified. The following findings were observed: (a) pig farm and pork wholesale prices dropped 11.8% and 15.7%, respectively, after the initial FMD outbreaks in January, 1995; (b) in February, 1995, chicken farm and wholesale prices declined by 21.1% and 14.2%, respectively (while chicken retail prices also went down by 10.5%); (c) the margins of pig and chicken traders were also adversely affected at some point; and (d) FMD caused changes of dynamic interdependence among prices by meat type at different levels of the meat supply chain. This study makes several contributions to the literature on the impact of FMD outbreaks. This study is the first that simultaneously investigates the impact of FMD outbreaks on meat prices, price margins along the supply chain, and price interdependence in the meat system in Central Luzon, Philippines. Also, the Philippine pork industry is dominated by backyard farmers rather than the predominantly large commercial pig farmers existing in developed countries. Secondly, it yielded the novel finding of price decline in both pig and chicken prices as a result of the FMD outbreaks. And lastly, the study showed that the profit margins of the pig traders, pork traders, chicken traders and chicken meat traders were also negatively affected by the FMD outbreaks in January 1995. However, over the long term, the price margins of pork traders were more severely affected in contrast to that of the other traders' profits.