Philippines Appraisal of the Second Livestock Development Project

ReportNo. 1070-PH FILECOPY Philippines Appraisalof

Public Disclosure Authorized the SecondLivestock Development Project

February20, 1976 GeneralAgriculture Division EastAsia and Pacific Projects Department FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized

InternationalBank for Reconstructionand Development Public Disclosure Authorized InternationalDevelopment Association

Thisdocument has a restricteddistribution and may be usedby recipients onlyin the performanceof theirofficial duties. Its contents may not otherwisebe disclosed without World Bank authorization. CURRENCYEQUIVALENTS

US$1.00 = Pesos (t) 7.50 ' 1.00 = US$0.133

WEIGHTSAND MEASURES- METRIC SYSTEM

1 hectare (ha) = 2.47 acres 1 kilometer (km) 2 = 0.62 miles 1 square kilometer (km ) = 0.3886 square miles 1 meter (m) 2 39.37 inches 1 square meter (m ) = 10.76 square feet 1 kilogram (kg) 2.24 pounds

INITIALS AND ACRONYMS

BAE = Bureau of AgriculturalExtension BAEcon = Bureau of AgriculturalEconomics BAI Bureau of Animal Industry BOI Board of Investments BPI = Bureau of Plant Industry COA - Commissionon Audit DBP Development Bank of the Philippines DNR = Departmentof Natural Resources FTI = Food Terminal Incorporated NEDA = National Economic DevelopmentAuthority NFAC = National Food and Agricultural Council NMIC = National Meat InspectionCommission PLA Pasture Lease Agreement PNB = PhilippineNational Bank UPCA = Universityof the Philippines, College of Agriculture

GOVERNMENTOF THE REPUBLIC OF THE PHILIPPINES

Fiscal Year

July 1 to June 30 FOR OFFICIAL USE ONLY

PHILIPPINES

APPRAISAL OF THE SECONDLIVESTOCK DEVELOPMENT PROJECT

TABLEOF CONTENTS

MAIN TEXT

Page No.

SUMMARYAND RECOMMENDATIONS......

I. INTRODUCTION ...... 1

II. BACKGROUND ...... 2

A. General ...... 2 Climate ...... 2 The Economy ...... 2

B. The AgriculturalSector ...... 3 Contribution to the Economy ...... 3 The Livestock Sub-sector and Government Policy ...... 3 Demand and Prices ...... 4 LivestockPopulation and Production Systems . 4 Animal Health ...... 6 AgriculturalCredit ...... 7

C. DevelopmentBank of the Philippines ...... 7

D. Implementationof the First Livestock Development Project ...... 9

E. AgriculturalServices ...... 10 Institutions...... 10 Marketing ...... 11

F. Project Formulation ...... 11

III. THE PROJECT ...... 12

A. General Description ...... 12

The appraisal team comprisedA.J. Blackwood, D.J. Babelon, M.L. Brown (Bank), D.I. Sillar, E.W. Root and M.J. Walshe (Consultants).

This document hasa restricteddistribution and may be used by recipientsonly in the performance of their official duties.Its contents may not otherwisebe disclosedwithout World Bank authorization. -2-

Page No.

B. Detailed Features ...... 13 Project Area ...... 13 Sub-loan Size ...... 14 Farm Development ...... 15 Pig Farms ...... 15 Poultry Broiler Farms ...... 15 Poultry Layer Farms ...... 15 Hill Beef Cattle Breeding Farms ...... 15 Integrated Coconut/Beef Cattle Breeding/ Fattening Farms ...... 16 Integrated Coconut/Dairy/Beef Farms ...... 16 Backyard Cattle Breeding/Fattening ...... 16 Slaughterhouse Development ...... 16 Livestock Feed Quality Control Program ...... 17 Technical Services, Training and Research ... 17 Environmental Impact ...... 19

C. Cost Estimates ...... 19

D. Financing ...... 21

E. Procurement ...... 22

F. Disbursements ...... o ...... 22

G. Organization and Management ...... 23

H. Lending Policies and Procedures ...... 23

I. Accounts and Audit ...... 25

IV. PRODUCTION, MARKETS AND MARKETING, AND PRODUCER BENEFITS ...... 25

A. Production ...... 25

B. Markets and Marketing ...... 26

C. Producer Benefits ...... 27

V. ECONOMIC BENEFITS AND JUSTIFICATION ...... 27

VI. AGREEMENTS REACHED AND RECOMMENDATIONS ...... 29 - 3 -

ANNEXES

1. Agricultureand the Livestock Sub-sector Map - Climate Types (No. IBRD-10133) Chart - Monthly PrecipitationAccording to Type of Climate (no. IBRD-6160) Table 1 - Crop Areas Table 2 - Crop Production Table 3 - Value and Volume of Imports of Livestock Products Table 4 - Livestock and Poultry Population by Regions

2. Pig and Poultry Production

3. Cattle and Buffalo (Carabaos)Production

4. Pig and Poultry Rations

5. Slaughterhouses

6. Demand, Marketing, Transport and Prices of Livestock and Livestock Products Table 1 - Consumptionof Animal Proteins Table 2 - Animals Slaughteredin the Provinces and Greater Manila Area 1974 Table 3 - Present and Proposed Retail Price Ceilings and Actual Prices - Meat and Eggs Table 4 - Transport Cost of Cattle Table 5 - Transport Cost of Pigs

7. Pig Breeding/FatteningModel

8. Broiler ProductionModel

9. Egg ProductionModel

10. Hill Beef Cattle Farm Model

11. Integrated Coconut/BeefCattle Fattening Model (5 ha & 20 ha)

12. Integrated Coconut/Dairy/BeefModel

13. Backyard Cattle Breeding and Fattening Model

14. Municipal SlaughterhouseModel

15. DBP Administration,Technical Services, Equipmentand Research - Investment Projections - 4 -

16. DevelopmentBank of the Philippines Table 1 - Agricultural Projects Department - Staffing Chart 1 - DBP-OrganizationChart (No. World Bank 9981) Chart 2 - DBP Agricultural Projects Department - Organization Chart (No. World Bank 15163)

17. Technical Services

18. Phasing of the Lending Program and Proposed Financing

19. Estimated Schedule of Quarterly Disbursements

20. Projected Project Cash Flow

21. Financial Rates of Return and Projections Table 1 - Financial Rates of Return Table 2 - Producer Benefits

22. Economic Rate of Return Table 1 - Summary Economic Rate of Return Calculations

MAP

The Philippines - Regions and Provinces (No. IBRD 11869) PHILIPPINES

APPRAISAL OF THE SECONDLIVESTOCK DEVELOPMENT PROJECT

SUMMARYAND RECOMMENDATIONS

The Republic of the Philippines has requested a second Bank loan to assist the livestock loan program of the Development Bank of the Philip- pines (DBP). The first livestock project (Loan 823-PH, US$7.5 million) is progressing satisfactorily and all funds have been committed. Sound financial and technical appraisal procedures have been adopted, and about 90 livestock appraisers have been trained, but there is need for more adequate sub-loan supervision and monitoring. The proposed second loan of US$20.5 million would assist DBP to continue financing livestock production, would improve sub-loan supervision and monitoring, and would assist the Government to introduce a feed quality control program. The proposed Project would finance about 1,850 pig farms; 400 poultry farms; 60 hill beef farms; 440 integrated coconut/ cattle farms; 200 small scale cattle farms; 10 municipal slaughterhouses, and provide for supporting technical services, training and research. A total of about 48 man-months of consulting services would be provided under the Project. The Project would support DBP's continuing trend towards financing smaller scale livestock enterprises.

ii. The proposed loan would be the eleventh loan for agricultural development in the Philippines. Government would be the borrower and DBP would be the on-lending agency for most of the funds, assisted by the Bureau of Animal Industry (BAI) on technical matters. DBP is a Government development bank and is the single largest source of long term development finance. DBP is the on-lending agency for seven Bank loans totalling US$193.4 million (Loans 720-PH, 823-PH, 891-PH, 998-PH, 1048-PH, 1120-PH and 1190-PH). The proposed Project would continue the institution building role of the first livestock project through further expanding and improving DBP's livestock loan capability.

iii. Agriculture is the most important sector in terms of employment (50% of the labor force) and export earnings (about 47% of total). The sector contributes about 35% of GNP with the livestock sub-sector contributing about 18% of total agricultural output and about 5% of GDP. The Government placed special emphasis on livestock development in the 1972-75 Agricultural Development Plan, but although the country has been fairly successful in meeting demand for pig and poultry meat, beef production has lagged behind requirements. The National Beef/Carabeef Development Program has been designed to correct this situation through the accelerated expansion of beef production. Pork and poultry meat production will continue to receive priority treatment as the main means of stabilizing consumer prices for meat. The Project has been formulated to respond to these Government objectives.

iv. Pig raising is the most important livestock production activity in the Philippines and although most pigs are raised as scavengers, the use of modern management techniques and improved breeds has increased rapidly in the last few years, particularly around Manila and in South Cotabato provinces. In rural areas the traditional raising of native poultry is widely - ii - practised. Commercial flocks vary in size from a few hundred birds to many thousands. Commercial pig and poultry farms use modern production methods and management standardsare generally satisfactory. Carabaos (buffalo) representabout 70% of the ruminant population and are used mainly for draft. Three main beef cattle production systems can be distinguished: (i) extensive grazing (mainlyon rolling hill country); (ii) grazing under coconuts;and (iii) backyard cattle raising. A fourth production system, feedlot fattening on crop by-products (mainly sugarcane tops and reject bananas) has developed recently but is not yet significant. Do- mestic dairy production is very limited. Although most of the common livestock diseases are present in the country they are not a serious constraint on production. v. The total cost of the Project is estimatedat US$41.3 million (t 310 million) of which US$12.4 million (t 93 million) is foreign exchange. The proposed Bank loan would be for US$20.5 million, of which about 60% would be for foreign exchange requirements. The Bank loan would be to the Govern- ment for 14-1/2 years including 5-1/2 years of grace. The Government would on- lend US$19.8 million of the proceeds of the loan to DBP on the same terms and conditions and would bear the foreign exchange risk. The balance of US$700,000 of the loan would be used by Government to finance in part the feed quality control program, the research componentand the short term consultants. Sub-loan commitmentsby DBP would be over three years and Bank disbursements would be over 5-1/2 years. On average, sub-loan beneficiarieswould contribute about 13% o, investment costs although this would vary from minor beneficiarieswho would contribute about 10% to major beneficiaries,including municipalitiesfor slaughterhourses,who would contribute at least 25%. Sub-loan terms would be similar to those for the first livestock project but interest rates would be 12% for loans secured by land and for loans of 1 5,000 or less and 14% for other loans, with a 2% one time service fee for major beneficiariesas defined by enterprise size after development. All but US$3 million of the Bank loan would be on-lent to small to medium sized farms. All sub-loanswhich exceed the equivalent of US$200,000 and all slaughterhouses subloans would require the prior approval of the Bank. vi. Procurement for farm development (US$35.6 million) would be by farmers from local suppliers, as in the first project. There are generally adequate commercial outlets for the main inputs (concentratefeed, medicines and -vaccines,and fertilizers)to permit sub-borrowers to obtain supplies at competitiveprices. The short supply of feeder and breeder cattle is a potential constraint, but this problem is specificallyaddressed by this Project and by the National Beef/CarabeefProgram (1976-1985). The scattered location and phasing over several years of the farm sub-loan projects and diversity of equipment and supplies required makes bulk purchase of inputs impractical. Some of the local suppliers are subsidiariesor associate companies of internationalfirms. Slaughterhouse contracts totalling about US$1.9 million) would be locally advertised since their small size (averageof US$190,000 each), scattered locations and phasing according to demand, is unlikely to be attractive to internationalcontractors and does not permit aggregation into larger contracts. There is adequate local fabricationand constructioncapability and compeititionto ensure that - iii - the relativelysimple slaughterhousesproposed can be procured efficiently. Equipmentand materials for the feed quality control laboratory(US$0.4 million) would be procured by internationalcompetitive bidding. Contracts for technicalservices (about US$0.2 million) may be provided by bilateralaid but would otherwisebe awarded accordingto standard Bank procedures. The vehicles and equipment (US$160,000)required for administeringthe Project and for technicalservices would be procured locally by DBP, using standard procedureswhich are satisfactoryto the Bank. Bulk internationalprocure- ment of vehicles and equipmentis not warranted because requirementsare phased over several years and the lot sizes are too small to be attractive to internationalbidders. vii. The Project is of high priority and has an estimated economic rate of return of 25%. Annual incrementalproduction at Project maturity in Year 11 would be about 25,000 tons of livestockproducts, 8,000 tons of copra and 5,200 cattle weaners. The Project would directly create the equivalentof 5,830 full time jobs. The Project would result in about US$17 million foreign exchange savings at maturity. Based on experienceunder the first livestock project about 80% of direct and indirect beneficiaries(over 40X of sub-borrowersand most wage earners) would be in the rural poverty target group with present annual per capita incomes of less than US$140. viii. The proposed Project is recommendedfor a Bank loan of US$20.5 million with a 14-1/2 year maturity includinga grace period of 5-1/2 years.

PHILIPPINES

APPRAISAL OF THE SECOND LIVESTOCKDEVELOPMENT PROJECT

I. INTRODUCTION

1.01 The Republic of the Philippineshas requested a second Bank loan to help finance the livestock loan program of the DevelopmentBank of the Philippines (DBP). The first loan for the livestock sub-sector (Loan 823-PH, US$7.5 million) is fully committedand the proposed second loan of US$20.5 million would mainly assist DBP to continue financing livestock production.

1.02 The proposed loan would be the eleventh Bank loan for agricultural developmentin the Philippines. 1/ Governmentwould be the borrower and DBP would be the executing agency. DBP is a Governmentdevelopment bank and is the single largest source of long term developmentfinance. Loan approvals to date total US$2.8 billion, but of this, only about US$220 million (about 8%) is for agriculturalproduction, the bulk of loans having been for industry (includingagro-industry). DBP is the on-lendingagency for seven Bank loans totalling US$193.4 million (Loans 720-PH, 823-PH, 891-PH, 998-PH, 1048-PH, 1120-PHand 1190-PH). DBP's complete operations have been reviewed most recently during appraisal of the second industrialloan. 2/ Based on this analysis and progress on the first livestock loan, DBP is

1/ 393-PH, 1964, US$6 million - AgriculturalEducation, UPAC (Los Banos) 432-PH, 1965, US$5 million - First Rural Credit Project (Central Bank) 607-PH, 1969, US$12.5 million - Second Rural Credit Project (Central Bank) 637-PH, 1969, US$34 million - Upper Pampanga Irrigation Project 720-PH, 1971, US$14.3 million - Rice Processing and Storage (DBP) 823-PH, 1972, US$7.5 million - Livestock I (DBP) 891-PH, 1973, US$11.6 million - Fisheries Credit (DBP) 984-PH, 1974, US$9.5 million - Aurora-PenarandaIrrigation Project (with US$9.5 million IDA Credit 462-PH) 988-PH, 1974, US$50 million - Industrial Credit InvestmentProject 1048-PH, 1974, US$20 million - Inter-IslandShipping Project 1010-PH, 1974, US$22 million - Third Rural Credit Project (Central Bank) 1080-PH, 1975, US$17 million - Tarlac Irrigation 1102-PH, 1975, US$25 million - Rural Development Project 1120-PH, 1975, US$30 million - Small and Medium Industrial Development Project 1190-PH, 1975, US$75 million - Second Loan for Industrial Financing Through DBP.

2/ Appraisal of a Second Loan to the Republic of the Philippines for IndustrialFinancing through the Development Bank of the Philippines, Report No. 820-PH, November 5, 1975. -2- considereda satisfactoryon-lending channel for the proposedsecond livestock developmentloan. Two other follow-upprojects through DBP (grainprocessing and fisheries)have been appraisedand are expectedto be presentedto the Board in FY76. There has been a markedimprovement in the executionof Bank projectsin the Philippinesin the last two or threeyears comparedwith ex- periencein the 1960's,and projectimplementation performance is now very satisfactory.

1.03 The Projectwas preparedby DBP staff and this reportis based on the findingsof an appraisalmission comprising Messrs. A.J. Blackwood,D.J. Babelon,M.L. Brown (Bank),D.I. Sillar,E.W. Root and M.J. Walshe (Consult- ants),which visitedthe Philippinesin April/May1975.

II. BACKGROUND

A. General

2.01 The Republicof the Philippines,with an area of about 30 million ha, is situatedin the Tropicsbetween latitude 4'23' and 21'25'N. The archipelagoextends over 1,600km from north to southand comprisesmore than 7,000islands, of which 11 accountfor about 95% of the totalland area. The Populationin mid 1973 was 40.2 millionwith a growthrate of 3.0%. GNP per capitawas about US$250in 1973. Climate

2.02 High temperature,humidity and rainfallcharacterize the climate. Mean temperaturesrange between21' C in Januaryto 190C in May. Rainfall, the most importantclimatic variable, ranges from 1,000mm in Southwest Mindanaoto 5,500mm in the highlandsof Luzon. Annual rainfallis most reliablewith an averagevariation between years of about 14%. However, pronounceddry seasonsdo occur. Climatically,the Philippineshas high potentialfor crop and forageproduction. The environmentis well suited to pig, poultryand beef production. The Economy1/

2.03 Prior to 1973 the economygrew for a decadeat 5-6% a year in real terms. In 1973 this rate increaseddramatically to 10%, largelyas a resultof increasedexport prices. The subsequentdeteriorating external terms of trade reduced the real growth rate to about 6% in 1974, and the real growthof GNP in 1975 is estimatedat about this level. The Government's

1/ Detailed analysis of the economy may be found in report No. 568-PH, CurrentEconomic Position and Prospectsof the Philippines,November, 1974.The Reportof the recentBasic EconomicMission which visited the Philippines in April/May, 1975, is in preparation. - 3 -

real growth target is 7%. Agriculture grew by 7% in 1973, following three years of poor weather which depressed output. In 1974 farm output registered a 10% growth rate, although with a dramatic fall in forestry production the growth of the agriculturalsector (which includes forestry and fishing) was only 3.4%. Inflation emerged as a major problem in late 1973 with consumer prices rising at an annual rate of 40% for 1974; inflationmoderated sub- stantially in 1975, however, and is expected to be about 10% for the year. The trade deficit has increased with falling export prices and this trend is not expected to reverse until the recession in major export markets is over. Employment increasedby 5% in 1974, but real wages declined by 20% except for rural wages which increased in real terms as a result of the rice price being increased. In 1975 real wages continued to decline. To meet these trends the Government is committed to development policies which concentrateon food production to achieve food self-sufficiency,diversified export production and investment in import substitutingproduction.

B. The AgriculturalSector

Contributionto the Economy

2.04 Agriculture is the most important sector in terms of employment and export earnings. Agriculture, forestry, fishing employ about 50% of the labor force and farming contributeson average just under half of exports. The main exports are coconut and sugar cane products. From 1972-74 agriculture contributedabout 35% of GNP. Food crops contributed 12%, livestock 6%, export crops 9%, fisheries 4% and miscellaneous 4%. The agricultural sector could make a significant contributionto import substitution. In 1974, imported agriculturalproducts accounted for 11% (US$356million) of total imports by value. Of this, US$155 million was grains and grain preparations, US$74.5 million was dairy products and US$36 million was feedstuffs.

The Livestock Sub-Sector and Government Policy

2.05 The livestock sub-sector contributesabout 18% of total agricultural output and about 5% of GDP. In addition carabao (water buffalo) and steers are an important source of draft power. The Government places high priority on the developmentof the livestock sub-sector to (a) increase production to meet increasing domestic demand, and (b) as a means of diver- sifying smallholderproduction. The Government put special emphasis on livestock development in the 1972-75 Agricultural DevelopmentPlan in order to satisfy demand for meat and increase meat and egg consumption towards matching national nutritional targets by 1975. Funds were allocated mainly to pig production (about 55%) and poultry development (about 15%). The country has been fairly successful in meeting demand for pig and poultry meat, but beef production has lagged behind requirements. The Government is very conscious of the effect on prices of supply shortages, and in the Greater Manila area, the most important consumptioncenter, meat prices are a major cause of popular concern. The livestock sub-sector is included in the Gov- ernment's Investment Priorities Plan which entitles investors to various - 4 -

financial concessionswhen their investmentscontribute to meeting unsatis- fied domestic demand or exports. A new livestock developmentprogram is under preparation and is expected to place emphasis on feedstuff production and on an expanded beef cattle developmentprogram. Pork and poultry meat production will continue to receive priority treatment as the main means of satisfying domestic demand for meat.

Demand and Prices

2.06 Domestic demand for livestock products is expected to grow at about 6% p.a. (para 4.02) through 1985 and increased dependence on imports or higher prices will result if domestic production expansion is not comparable. Philippine per capita meat consumption at 15.8 kg p.a. in 1972 is relatively high compared with per capita income. Of this, 52% was pork, 20% was beef (includingcarabao beef) and 18% was poultry. Fish is also a very important protein source in the Filipino diet. Increasing production of meat has only just kept pace with population increase so that per capita intake has not increased over the past decade and may have even decreased. For the whole country, the National Economic Development Authority (NEDA) estimated total protein intake in 1972 to be 97% of NEDA's recommended level. For animal proteins the intakes as a percentage of the target intake in a balanced national diet were for meat, poultry and fish 88%, for dairy products 28%, and for eggs 51%.

2.07 Domestic prices for livestock products except milk have been comparable to world prices, although local beef prices in 1974 were 80% above the unusually low Australian prices and poultry prices have recently been 20-50% above world prices. Fresh milk is about twice the price of developed countries supplies. In the long term domestic prices for meat and eggs are likely to be determined mainly by the local demand and supply situation. The opportunities for importingsignificant quantities of the main livestock commodities (pork, poultry meat and eggs) to stabilize prices in the event of domestic production not satisfying demand, are not likely to be significant. World trade in these three products is relatively small. Pork and beef imports are subject to a 10% tariff and there is a 70% tariff on imported poultry meat, but imports are controlled more by embargoes, during periods when price ratios favour imports, than by import duties.

Livestock Population and Production Systems

2.08 In January, 1973, the livestock population was estimated to be 9.7 million pigs, 100 to 110 million poultry, 2.2 million beef cattle and 5 million buffalo.

2.09 Pigs: Pig raising is the most widespread livestock production activity in the Philippines. The pig population is spread throughout the islands but there is a notable concentrationin Central Luzon serving the major consuming center of Greater Manila. Some 80-90% of pork production is believed to come from backyard producers. Most of these pigs are local razor-back breeds. Commercial piggeries, which have expanded rapidly in the last few years, are located principally in Central Luzon around Manila and in South Cotabato provinces. Most commercialproduction is in relatively small herds of less than 50 head. Commercial enterprisesemploy modern technologyand management systems. Pig rations are generallywell-balanced, although there may be periodic and/or regional shortages of some ingredients. Many large producers compound their own feed. In commercialunits pure bred boars of several of the improved temperate zone breeds are used to produce crossbredpigs for market. The role of the large commercial producers is expected to increase in the future but there is also opportunity for major expansion of small scale production,provided credit and technical assistance is available.

2.10 Poultry: Nearly three million households are estimated to keep poultry. Like the pig industry, the poultry industry is heavily concentrated around Manila near the feed mills and main consumption center. Some 90% of the poultry are in units with less than 500 birds and there are a few very large producers. In rural areas the traditionalraising of native birds is widely practiced. Individual output of these birds is very low, but the aggregate output of meat from this source is about 75% of total poultry meat produced. Commercial flocks vary in size from a few hundred birds to many thousandsand generally birds are kept in intensive confinement. On commercialfarms modern production methods are used and management standards are satisfactory. A small number of large vertically integrated units with 30,000 to 100,000birds have developed recently and are expanding rapidly. These units are owned mainly by the feed milling industry and operate complete systems from breeding farms, through hatchery, feed compounding, product,on units and processing plant to retail outlets. Many medium sized broiler producers have contractswith these 'integrators'who supply them with chicks and feed and take back the grown broilers. As in other countries this trend towards contract productionmay be expected to continue. Egg production in the Philippines is highly developed particularlyin urban areas. Modern housing, equipmentand management is used and the expanded egg industry has had a great impact on the market through quality control, price reduction and improving seasonal supplies.

2.11 Pig and Poultry Feeds: The main problem facing the pig and poultry industries is adequate availabilityof reasonably priced good quality feedstuffs. The Government is addressing the quality problem through the introductionof a feed quality control program which is supported by a component in the proposed Project. A large part of the soyabeans,fishmeal and meat and bone meal used in feeds is imported. Sorghum grain for feed was imported for the first time in 1974 (20,000metric tons). However, given the broad base of corn production (about 2.7 million ha) and the present very low average yield (o.8 m.t/ha), the Philippines has great potential for expanding feedgrain production. Improving the availabilityof high protein feedstuffs has greater problems (Annex 4). The feed production position is discussed in greater detail in Annexes 2 and 4 and reasons are given there for addressing the problem more in the context of other programs and projects rather than directly under this proposed project. Briefly, (i) the problem of feed production is considered more appropriatelyhandled under the on-going national coarse grain program Masaganang Maisan, which provides production finance, and (ii) funds for post-harvest grain handling are available under other Bank credit projects (the Third Rural Credit through the Central Bank and the present and proposed grain processing projects). - 6 -

2.12 Beef Cattle and Carabao: Eighty-two percent of the cattle and carabao are equally distributedbetween the two largest islands of Luzon and Mindanao with the Visayas accountiug for the balance. Carabaos represent about 70% of the ruminant populationand are mainly used for draft. Culled animals are slaughtered for meat and carabao beef accounts for 60-70% of all beef consumed in the country. However, in the long run the carabao as a specialist beef producing animal is unlikely to compete in the Philippines with cattle which are potentiallymore efficient producers. Present methods of beef cattle production are mainly traditional and are generally characterized by inefficientland use and poor management. Three main beef production systems can be distinguished: (i) extensive grazing (mainly on rolling hill country); (ii) grazing under coconuts; (iii) backyard cattle raising. A fourth production system, feedlot fattening on crop by-products (mainly sugarcane tops and reject bananas), has developed recently but is not yet significant. Beef cattle production is stratified. The hill farms are breeder units which supply stock to the other enterprises. Coconut/cattle enterprises are both fattening and breeding operations. Backyard production by small farmers is principally for fattening hill raised cattle, but there are also backyard breeder units and some steers are used for draft. Native cattle have been crossed with Bos indicus breeds for several decades and most recently American Brahmans have been introduced to upgrade these crossbred cattle. The resulting animal is large boned and suitable for beef production under Philippine conditions.

2.13 The average annual weaning rate for beef cattle in the Philippines is low at about 50% because of poor management and nutrition and possibly disease. It is too early yet to judge average weaning rates being achieved on cattle enterprises financed under the first livestock project, but rates of 70% to 80% should be achieved on coconut farms, with rates of 55%-60% being likely under the less favorable conditions on hill farms. There is ample scope for increasingproduction of fat cattle under the backyard, coconut grazing and feedlot systems if the supply of feeder cattle could be increased. Thus it is essential to concentrate first on increasing numbers and weaning rates of the national breeding herd in any development strategy. This is the main focus of the National Beef/Carabeef Development Program (1976-85),which was published in late 1975. Further detail on cattle production systems is in Annex 3.

2.14 Dairying: There are only about 50,000 dairy-type animals in the Philippines and most of the milk and dairy products consumed in the country are imported. Apart from carabao, which are sometimes milked for home consumption, there is no tradition of dairy production in the Philippines and there are only seven commercial dairy farms located in the vicinity of the main cities. However, there is potential for expanding the dairy industry based on improved grass/legumepasture under coconuts, particularly in the vicinity of towns where fresh milk can be readily marketed at an attractive price.

Animal Health

2.15 Many of the common livestock diseases are present in the country but they are not a serious constraint on production. Disease control is aided by the island structure of the country. Veterinary supplies are available throughout the country, mainly through the private sector, and most commercialproducers use modern vaccines and prophylacticmeasures and maintain reasonable standardsof hygiene.

AgriculturalCredit

2.16 Institutionalsources supply probably about a third of agricultural production credit which in real terms has not changed significantly since the late 1960s. This has partly been the result of Governmentpolicy which formerly channelled financial resources more towards industrial development. There were inadequate institutionsserving agriculture and collateral requirementshave not in general given the predominant small farmers, particularlytenant farmers, access to institutionalcredit. Government strategy to overcome these constraints focuses on the rapid expansion of private rural banks with supervision and subsidized funds from the Central Bank. There are now over 700 rural banks with assets of 12.1 billion (US$280million) and they have provided three quarters of the increased institutional credit, in current terms, for agriculture since 1965. Most of the rural banks lending is for short term production credit but they also provide medium term finance for machinery and equipment and they have in- creasingly financed small farmers. Three Bank loans (432-PH, 1965, US$5 million; 607-PH, 1969, US$12.5 million, and 1010-PH, 1974, US$22 million) have provided funds for rural banks through the Central Bank. The Philippine National Bank is also an important but declining source of credit for agriculture, accounting for 28% of the outstanding institutionalloans to agriculture. It provides mostly short term production credit and has financed half the loans in the national rice and corn programs (Masagana99 and Masaganang Maisan respectively). Some 30 private commercial banks provide about 27% of institutionalagricultural credit. In order to halt the relative decline in the proportion of funds from this source going to agriculture,a Central Bank directive requires that a minimum of 25% of all loanable funds of the commercial banks go to agriculture. In addition 32 private development banks (total assets of f300 million) are a further important source of agriculturalcredit. They lend long term funds for small scale enterprises and about half their loans are for agriculture. DBP is an expanding source of agriculturalcredit (in 1974 holding about 12% of institutionalloans outstanding to agriculture),although its operations are dominated by industriallending (78% of total approvals compared with 8% for agriculture). Ceiling interest rates in the Philippines have been fixed since 1970 by the Monetary Board at 12% for loans secured by land and 14% for loans secured by other forms of collateral. The 12% and 14% rates were negative real rates of interest during the period of high inflation (1970-1974)but with inflation now expected to stabilize at about 10%, a real positive interest rate will be restored.

C. Development Bank of the Philippines

2.17 The Development Bank of the Philippines (DBP) is a Government owned bank which plays a major role in mobilizing capital resources and in the past two years has accounted for 13% of total fixed capital formation. As of June 30, 1975, DBP's outstanding loans totalled P3,560 million (US$475mil- lion) of which agriculturalloans totalled 1989 million (US$132million). Total assets at this date were F2,923 million (US$390 million). Over 40% of DBP's agriculturallending is approved by its 35 branches, which have approval power up to f50,000 (US$6,670). Agriculturalloans cover most activities and in cumulative amounts approved are distributed as follows: food crops (mainly rice), 38%; commercial crops (mainly coconuts and sugar), 34%: livestock, 19%: and fisheries, 9%. Of the livestock portfolio almost 70% is for pigs, about 20% for poultry and about 10% for cattle. For FY75 DBP reports net earnings (excluding trust funds) of 171 million (US$9.5 million) on total operating income of ?570 million (US$77.2million). More detailed informationon DBP as a whole is available in the appraisal report for the second industrial loan. 1/ DBP has been charging a general interest rate of 12% with a special preferentialrate of 9% for loans under f5,000 (US$670). However, to improve its financial position DBP has agreed during negotiation of the second industrial loan to raise its interest rates for all types of loans to 12% for loans fully secured by land and loans under f5,000, and to 14% for all other loans. These are the present Monetary Board ceilings.

2.18 The AgrictulturalProjects Department is responsible for the agricultural credit programs of DBP, and fisheries and forestry loans. The Department has 178 staff (of which over 140 are professionals)and is headed by an experienced DBP officer. This officer resports to a Super- vising Governor who is also responsible for the Branches and Agencies Department, thus providing the necessary close coordinationof headquarters and branch agriculturallending. The AgriculturalProjects Department is divided into five technical groups for (a) Fisheries, (b) Livestock and Poultry, (c) Cereals and Feedgrains, (d) Crops, and (e) Plans and Programs, and a Management Services Group (Annex 16). The Livestock and Poultry Group was established under the first Livestock Development Project (para 2.22).

2.19 In common with the other DBP departments the arrears position of the AgriculturalProjects Department has been improving over recent years. As of April 30, 1975, some 45% (Y125 million) of the total agricultural portfolio was in arrears, but many of the accounts in arrears date back to the period before improved appraisal and collection procedures were introduced in 1974. Many of these accounts are being restructured,which should improve collection performance. Out of the 7,169 accounts in arrears, 1,411 were mature accounts of which 230 (16%) were in litigation with values of f17.5 million of principal balance and f21.5 million in arrears. Collect- ion performance has improved since the early 1970s with 89% and 84% realized respectively for the two quarters October-December1974 and January-March 1975. During negotiation of the second industrial loan DBP agreed to improve its arrears position by increasing penalty charges on all delinquent

1/ Appraisal of the Second Loan for Industrial Financing through the Development Bank of the Philippines, Report No. 872-PH, September 22, 1975. 9

loan accounts, and this can be expected to improve the arrears position further.

D. Implementationof the First LivestockDevelopment Project

2.20 A US$7.5 million Bank loan was signed in May, 1972 for livestock developmentin specifiedareas by providing finance, through DBP as on- lending agency, for some 1,450 small and medium size pig, poultry and integratedcoconut/beef cattle farms, 25 hill beef cattle breeding ranches, three slaughterhouses,and for technicalservices. After a slow start, the project is now progressingsatisfactorily. All of the loan funds have now been committedby DBP. Commitmentsare similar to appraisal estimatesfor numbers of farm loans approved. In view of the delayed commitmentof slaughterhousefunds (US$0.6million) the Bank agreed to reallocatethese funds to farm sub-loans,and DBP undertook to complete the slaughterhouse componentof the project from its own funds. Disbursementsas of January 31, 1975 totalled US$5.2 million (69%). Of total farm/ranchfunds, loans for piggeries absorb about 75% (appraisalestimate 44%); poultry, 15% (40%); coconut/beefcattle, 5% (10%); and hill beef, 5% (6%). The enterprises financed are in accordancewith the project objectivesand DBP has demonstrated its ability to handle medium and long term financingof mainly small to medium sized livestockenterprises. For the principal category of loans, for piggeries, the loans average aboutt50,000 (US$6,700)for 11 sow units. This is in contrast to the official view when the first project was appraised that, since economiesof scale were financiallyessential, it would not be possible to establishviable small scale modern livestockenterprises. The good results obtained under the first project have contributedto this change in official thinking and policy. Debt repayment flows have not yet reached levels which allow judgements to be made on repayment performance,but inspectionof a wide sample of enterprisesindicates that sub-loansare being used to establish viable units.

2.21 The loan was approved initially for livestock developmentin specific areas of the country: Central and Southern Luzon, Mindoro and Masbate islands and areas of North and South Mindanao. However, as DBP's livestockloan supervisioncapabilities expanded and more branches and agencies were opened the Bank agreed tto expand the project area to cover most of the country. The only limit to this expansionhas been DBP's ability to process and service loans in new areas with the appropriatelyqualified staff. How- ever, as a result of demand sub-loans have been committedmainly in the highest priority areas of Central Luzon and South Cotabato for pigs; Central and Southern Luzon for poultry; and Mindanao, Mhasbateand Mindoro for cattle.

2.22 The Livestock and Poultry Group in the AgricultureProjects De- partment of DBP was establishedfor the first project and is functioning effectively. It has 34 staff. Sound financialand technicalappraisal procedureshave been adopted, but there is need for improved loan supervision and monitoring. So far ninety-onelivestock appraisers have been trained under the project (40 existing DBP staff and 51 new staff), and of these after wastage, promotionsand transfers,70 remain in the branches or at - 10 - head office to process and supervise sub-loans. The Project provided for three full time technical specialists to assist DBP management, but these posts were filled through New Zealand aid and the funds have been reallocated for farm/ranchfinancing. The Project has provided short term consultants in the use of sugarcane by-products for cattle and in pig breeding and their reports are forming the basis for further developmentsin these fields.

E. Agricultural Services

Institutions

2.23 The Department of Agriculture,mainly through the Bureau of Animal Industry (BAI), is primarily responsible for the administrationof the livestock sub-sector. The Department of Natural Resources also has an important role in the sub-sector, since Pasture Lease Agreements for hill land are administeredby it under the Forestry Reform Code. The BAI provides veterinary services and maintains breeding stations, stock farms and artificial inseminationcenters. The BAI is a large organizationwith some 2,200 techniciansbut the quality and effectivenessof its services could be improved. Problems which require attention include staffing, poor service conditions,and inadequate incentives for field travel. The Government is aware of the present problems of the BAI, but at the time of appraisal it was agreed with Government that these problems should not be resolved in isolation for this bureau alone since many of BAI's problems are common to other agencies and would have been more effectivelyaddressed in an agricultural services project which was then under consideration. Subsequentlythe Government has decided that the agriculturalservices project is premature and is not expected to request some assistance for BAI under the upcoming rural credit and education projects. Consequentlythe proposed Project limits direct involvement of BAI to the provision of technical services, according to a new coordinationagreement to be negotiated with DBP (para 3.17) and assistance for the establishmentof a livestock feed quality control program (para 3.13).

2.24 Within the Department of Agriculture there are four other agencies which are closely concerned with the sub-sector. These are the National Grains Authority (controls import and distributionof all grains, including feedgrains);the National Food and Agricultural Council (coordinatesand implements all Government food self-sufficiencyprograms); the National Meat Inspection Commission (regulatesslaughterhouses and meat standards);and the Bureau of Agricultural Extension (which together with BAI supplies extension advice to livestock farmers). Livestock industry research is mainly the responsibilityof the BAI but is also carried out by a number of other agencies. The Bureau of AgriculturalEconomics (BAEcon) in the Department of Agriculture provides data and analyses for planning and policy purposes and disseminatesprice and market information. The University of the Philip- pines College of Agriculture (UPCA) at Los Banos and the College of Veteri- nary Medicine conduct the main basic research. Other universitiesand colleges also have livestock research programs. The Bureau of Forestry in - 11 - the Departmentof Natural Resources conducts range management trials,while Central Mindanao University,the BAI and UPCA are other important centers of pasture improvementwork. The agriculturalresearch program as a whole is coordinatedby the PhilippineCouncil for AgriculturalResearch, which also has direct control of all Governmentfunded research.

Marketing

2.25 The marketing of livestock products is predominantlyin private sector hands and although the system is generally adequate, costs and margins are high. The Greater Manila area, with four million populationand high per capita incomes, dominates the meat and egg marketing system. The establishment by Governmentof the very large Food Terminal Incorporated (FTI) facility to serve as a wholesale outlet and storage system for the Greater Manila area has not yet had a major impact on the marketing of livestock products. DBP has a majority shareholdingin this public corporation,but FTI's operations are in effect directed and controlledby the Government. Only 5% of FTI's capacity is at present used, but through the introductionof numerous provincial buying points FTI hopes to lower marketing margins and reduce seasonal supply and price fluctuations,particularly of perishableproduce (mainly vegetables,fruit, meat and fish). Present traditionalmethods of marketing pigs and cattle involve mainly live shipment to the Manila area, from the outer islands and Luzon generally,of batches of animals aggregated by middlemen. Typically,animals pass through several hands before reaching the consumer. Chickens and eggs are also handled in the traditionalmanner, but there is a greater degree of direct selling by producers to retail outlets, particularlyby producers located around Greater Manila. Marketing is not a constrainton developmentof the livestock sub-sectorand with the growing participationof FTI producers will have an additional outlet.

F. Project Formulation

2.26 The Project was prepared mainly by the AgriculturalProjects Depart- ment of DBP. The preparation report proposed a livestock sub-loan program similar to that under the first livestock project, finance for two large slaughterhousesand a 23,000 ha feedgrain development component. The feedgrain componentwas later dropped from the Project for reasons given in para 2.11 and in Annex 4. Finance for two large regional slaughterhouses(mainly to allow shipment to Manila of carcases instead of live animals) in the first livestock project has not been committed and the Bank agreed to reallocate these funds for farm loans. However, new Government requirementsto improve slaughterhouseshave given rise to a need for finance by municipalitiesfor upgrading over 500 small slaughterhouseswhich process local meat requirements and the Project provides some initial funds for this purpose. The Project appraisal also added additional small components to develop small scale backyard cattle breeding and fatteningand for small dairy enterpriseson pasture under coconuts. The feed quality control component of the Project was prepared by BAI. - 12 -

2.27 The main constraintson expansion of the livestock sub-sector are availabilityof suitable long term finance, inadequate technical services for livestock producers, feedstuff availabilityand quality, and inadequate breeder and feeder cattle supplies. In addition the poor state of public slaughterhousesis a further problem which is not strictly a constrainton production expansion, but which constitutesa significanthealth and environmental hazard. The Project has been formulatedwith these problems in mind and would contributesignificantly to amelioratingfactors now restricting expansion of livestock production.

III. THE PROJECT

A. General Description

3.01 The Project would: (a) continue to assist the Philippines to increase domestic production of livestock products by providing funds to enable DBP to continue and extend its lending for livestock producers, particularly for smallholderpig and poultry enterprises (69% of farm investment)and for beef cattle; (b) finance a number of small scale beef cattle and dairy enterprises; (c) improve the technical services provided to DBP livestock borrowers by both DBP and BAI; (d) provide for applied research and trials on specific livestock production problems; (e) assist the country's efforts to upgrade municipal slaughter facilitiesand (f) assist the establishmentof a livestock feed quality control program. The Proj- ect components are as follows: - 13 -

Z Total Number of Project Cost Project Components Loans (t Million) (US$ Million) Cost

(a) Farm Development

Pig breeding/fattening 1,850 108.8 14.5 35

Poultry: Broiler 250 20.8 2.8 7 Layer 150 27.1 3.6 9

Cattle: Hill Farms 60 18.2 2.4 6 Integrated coconut/ beef breeding/ fattening 440 40.8 5.4 13 Small scale breeding/fattening 200 1.1 0.2 -

Sub-total 2,950 216.8 28.9 70

(b) Municipal Slaughterhouses 10 11.6 1.5 4

Sub-total (a + b) 228.4 30.4 74

(d) AdministrativeCosts, TechnicalServices, Equipment and Research 11.9 1.6 4

Sub-total (a + b + c) 246.3 32.8 80

Expected price increases 63.2 8.5 20

Total 309.5 41.3 100

A greater proportionof farm development funds is expected to be required for poultry and cattle enterprises than have been committed under the first project since DBP is placing greater emphasis on financing these types of sub-loans. Greater emphasis on financingbeef production is required in order to support the implementation of the National Beef/Carabeef Program (1976-1985). Farm and slaughterhouse models are presented in Annexes 7-14.

B. Detailed Features

Project Area

3.02 Sub-loans under the Project would be available on a countrywide basis subject only to DBP having qualified livestock staff available in the relevant branches and agencies concerned. The appraisal mission also discussed - 14 - with DBP the concept of adopting a campaign approach to promote certain categories of loans in favorable locations in order to achieve a significant initial impact in new areas. This would provide greater impact in high priority areas compared with the present loan program which relies mainly on demand for loans without specific promotion by DBP. This would economize on processing time and reduce the work load by processing batches of similar loans simultaneously. It was agreed that this approach should be a regular feature of the Project.

3.03 Although it is proposed that the project should be countrywidein scope DBP is aware that there are a number of practical factors that militate against enterprisesbeing financed without critical regard to their locations. It is important that the resources available are concentratedin areas and enterpriseswhere they can achieve the best results. This implies inter alia, that pig and poultry production is financed only where there are readily available feed supplies and that hill farms are not financed where they are likely to have only a limited life because of land use problems (Annex 3). In the case of the initiativesin small scale cattle finance and dairying it is important that the enterprisesare concentratedin a few highly suitable areas to facilitate close specialist supervision. Assurances were obtained during negotiationsthat DBP would concentrate its efforts to committing funds in locations which take into account sound environmental,technical and financialcriteria.

Sub-loan Size

3.04 Average sub-loan size under the first livestock project has been satisfactoryat about J 56,000 (US$7,470). This reflects the financing of a large number of small and medium sized sub-projectsand a few large sub- projects. It is expected that the trend towards financing smaller sub-loans, establishedunder the first project, would continue under the Project. Larger loans would be made but on equity grounds and since many larger pig and poultry enterprises can expand using internally generated funds, the number of sub-loans which exceed US$100,000 equivalentwould be limited to a total of US$3 million (15%) of Bank funds, of which amount not more than US$500,000 would be for pig and poultry sub-loans. This provision would ensure that about US$2.5 million of Bank funds would be available to finance hill cattle and coconut/cattlefarms, the developmentof which forms an important part of the cattle expansion program. Accordingly,assurances were obtained during negotiations that DBP would commit no more than US$3 million (of which no more than US$500,000would be for pig and poultry sub-loans) of the Loan funds to financing sub-loans which exceed US$100,000 equivalent (taken together with any outstanding balance on previous DBP livestock loans). Sub-loans below US$100,000 equivalent are split into two categories according to enterprise size after development to allow for different sub-borrower equity contributions and a one time service fee for all but the smallest sub-borrowers (paras 3.26 and 3.28). - 15 -

Farm Development

Pig Farms

3.05 About 1,850pig farms would be financed under the Project. Loans would finance the purchase of 10 sows on average, constructionof buildings, and working capital for a two year developmentperiod. Typically the Project would finance both small new operations with 5-10 so0W and the expansion of small operations from the 5-10 sow level to the 15-30 sow level. The Project would finance about 6,160 sows per year on about 616 farms and this would represent about 80% of DBP's present financing of piggeries and about 26% of the expansion of sow numbers required to meet projected increases in domestic demand for pork (Annex 2). The bulk of the finance for the remaining expansionof pig production is expected to come from surplus funds from existing piggeries.

Poultry Broiler Farms

3.06 The Project would finance about 250 farms. The development period for these sub-projectswould be one year. This would represent about 57% of the incremental growth required to satisfy the minimum expected increased domestic demand (Annex 2). On average sub-loans would finance the expansion of units by 4,000 birds per batch (average investment per farm of US$10,700) and would be mainly contributingto the expansionof small units (1,000-5,000 bird capacity) to a size where they are more commercially viable. Loans would finance mainly buildings, equipment and incremental working capital. Borrowers would normally be expected to have some previous experienceof commercial poultry management.

Poultry Layer Farms

3.07 The Project would finance about 150 egg farms of about 4,000 additional layers each. This would representabout half the estimatedincre- mental growth required (Annex 2). Sub-loanswould average about US$24,000 and would finance mainly buildings, equipmentand incrementalworking capital over the two year developmentperiod. The main objectivewould be to expand small semi-commercialgrowers from about 2,000 layers to 6,000 which is a more viable commercialscale.

Hill Beef Cattle Breeding Farms

3.08 The Project would finance about 60 hill beef farms. Hill cattle farming is a medium to large scale operations,with Pasture Lease Agreements being generally for areas of from about 100 hectares upwards. Investments would therefore range from about US$20,000per farm to over US$100,000 for larger properties. The Total Loan funds for these larger properties would be limited for a maximum of US$3 million (para 2.04). Financewould be for mainly buildings, corrals, fencing, additional stock, a small area of improved pasture and incrementalworking capital. Farms would average 400 ha in size and loans would enable them to be developed over 4 years to carry about 150 animal units, a 52% increase wn present stocking rates (Annex 3). Hill cattle farms are a very importantsource of feeder cattle for small backyard fattening - 16 -

units,and also provide breeder cattle for the development of integrated coconut/beefcattle farms. The output from these Project farms will be readily absorbed by both Project and other demand for feeder and breeder cattle.

IntegratedCoconut/Beef Cattle Breeding/FatteningFarms

3.09 Some 440 farms would be financed with an average loan size of about US$14,500. Two types of breeding/fatteningfarms would be developed: about 150 small units of about 5 ha to carry 8 feeder cattle (US$3,400investment) and about 270 farms averaging 20 ha of pasture to carry a breeding/fattening herd of 40 animal units (US$16,000 investment). Larger farms could be financed within the limit set for large loans (para 3.04). The development period would be 3 years for all sizes of farm. Investmentwould be mainly for fencing, corrals, water supply, pasture establishment, stock and incremental working capital (Annex 3). Cattle under coconuts represents a major opportunity for expanding the national breeding herd (a major policy objective) since the production coefficientsare most favorable on this type of enterprise.

Integrated Coconut/Dairy/BeefFarms

3.10 This pilot development would aim to finance about 20 farms suitably located to allow convenient milk sales either fresh or to existing processing plants. Investment would average US$11,10W per farm of about 10 ha of pasture and would establish herds of about 27 animal units with 13 milking cows. Investment would be for fencing, water, a corral and milking shed, stock and incremental working capital. The development period would be 2 years. This component of the project would seek to establish the parameters for this type of enterprisewith a view to a possible larger developmentat a later date.

Backyard Cattle Breeding/Fattening

3.11 The project would finance about 200 small farmers to establish small units at an average cost of US$700 each. Finance would primarily be for a heifer and 3 feeder steers and the unit would build up over 9 years to contain 8 animals, of which 3 would be breeding cows (Annex 3). Other minimal investmentwould be for a small corral, legume seed and working capital. This type of livestock productionhas great potential for the smallholder with surplus feed from his farm and family labor available to tend the cattle. DBP already finances this type of enterprise,mainly for fattening on by-products.

Slaughterhouse Development

3.12 The project would finance the establishment, replacement or upgrading of 10 small municipal slaughterhousesover a three year period at an average cost of US$190,000 each. The slaughterhouseswould have capacity for a daily throughput of 20 cattle and 100 pigs, this being the size most in demand, and would be located in smaller cities throughout the country (Annex 5). This would permit municipalitiesnot only to improve hygiene and efficiency in town slaughterhousesbut where appropriate would also permit the reloca- tion of these facilities to lower cost, less congested areas away from town - 17 -

centers. Investmentin new slaughter facilitiesis required by a recent Governmentdirective to improve all unsatisfactoryslaughter arrangements. The new facilitieswould be self-financingand would reduce wastage, particularlythat caused by the poor flaying and curing of hides. Slaughter- house model designs would be subject to the approval of the Bank (para 3.14). The finance provided would cover site work (but not land purchase since these are replacement facilities),buildings, utility services, plant and equipment and meat transport. Funds for much larger slaughterhousein the first project have not been committed as quickly as expected (para 2.20) but commitmentof funds for the ten much smaller municipal slaughterhousesis expected to proceed more rapidly, since there are over 500 public slaughterhouses, most of which will require improvementto meet the new standards.

Livestock Feed Quality Control Program

3.13 The greatly expanded feed milling and compounding industry is not at present subject to adequate regulation and poor feed quality is a potential constrainton the further developmentof the livestock sector. The Government has formulatedplans to provide for the routine analysis of commercial feeds and to improve the quality of feeds. The Project would finance the equipment and material needs for the establishmentof a feed quality control laboratory, which is the main infrastructurerequirement of the program. The laboratory would be operated by the Bureau of Animal Industry in the Departmentof Agri- culture and it is intended that its operating costs would be largely financed from analysis fees. Regular analysis of commercial feeds would be required by law. Further preparation of the program is required and assurances were obtained during negotiationsthat full details of the proposal would be prepared and submitted to the Bank for review and comment before plans are finalized and expenditureson the feed laboratoryare incurred.

Technical Services, Training and Research

3.14 The Project provides for three categoriesof specialists:

(a) two full time specialists for one year to assist DBP (cattle production and monitoring);

(b) four short term consultants to be engaged by Government (to cover pig nutrition, poultry nutrition, use of by- products by ruminants and backyard cattle production systems); and

Much of the two technical specialists' time will be spent in the field based on branch offices. Terms of reference are in Annex 17. They will be assisted by DBP technicianswho will be assigned to work with them and who will be trained by the specialists to assume responsibilityfor promotional, supervision and monitoring programs. The emphasis of the two specialists'work in the Project will change, however, compared with the first project, to concentratemore on providing borrowers with technical services, on promotional work and on monitoring of sub-loan performance. Less emphasis is - 18 - now required on the routine processingof sub-loan applications,although this will fall within the monitoringrole of the specialistsin order to assist DBP to improve its processing performance, particularly to reduce sub-loan processing delays. The present three technical specialists engaged by DBP under the first livestock project are to remain until November, 1976. Assurances were obtained during negotiationsthat DBP would engage two specialistsacceptable to the Bank on terms and conditionsacceptable to the Bank for the 12 month period beginning not later than December 1, 1976, or such other period to be agreed with the Bank. The four short term consultants would be engaged by the Departmentof Agriculture. The work on the use of by-productsby ruminants is a continuationof that financed under the first project, which showed encouragingresults. Investigationof pig and poultry nutrition and backyard cattle productive systems would improve the quality of the technical services provided to livestock farmers. Assurances were obtained during negotiationsthat the Governmentwould, within six months of loan signing, engage four short term consultantsacceptable to the Bank on terms and conditionsacceptable to the Bank. The slaughterhouseconsultants are required to design model slaughterhouseswhich DBP can use as the basis for making loans to municipalities. Once acceptable models have been established it is expected that they would be used, with suitable adaptation, for all slaughterhousesub-loans. Assurances were obtained during negotiations that DBP would engage consultantsacceptable to the Bank, on terms and conditionsacceptable to the Bank, to design model slaughterhousesacceptable to the Bank, and use these models as the basis for all slaughterhousesub-loans. Some of these technical services may be provided by bilateral assistance,in which case the Bank funds in the loan would be reallocated to other categories, as in the first project.

3.15 Training of DBP staff for livestockwork would continue as under the first project, both through formal training and on-the-job instruction by experiencedDBP staff assisted by the three full time consultantsas necessary. Training and retrainingof technicianswould provide staff replacementsand further expand DBP's livestock lending capability,both at head office and in the branches. Formal training would consist of intensive courses over several weeks of groups of 20-30 staff with both classroom lectures and practical experiencebeing given in livestock production techniquesand loan processingprocedures. These training periods would also serve to identify more promising staff for appointment to specialist livestock posts. The Pro- ject also provides for internationaltravel to enable DBP staff to improve their knowledge of livestock production systems. Assuranceswere obtained during negotiations that DBP would train or retrain an adequate number of livestock techniciansto support the livestock lending program.

3.16 Under the Project the Governmentwould provide funds (about US$150,000 for mainly equipment, livestock and feeds to enable suitable institutionsto undertake applied investigationalwork on rations for pigs and poultry. This work would be planned and supervisedby the pig and poultry nutrition consultants in consultationwith the Bank. Assurances were obtained during negotiationsthat the Governmentwould within 12 months of loan signing submit to the Bank for review and comment the terms of reference for the applied investigationalwork into pig and poultry nutrition, and following Bank review would provide grant funds of not less than US$150,000 equivalent,or such other amount to be agreed with the Bank, for the work to be carried out. - 19 -

3.17 Since 1973, DBP has had an agreement with the Bureau of Animal Industry to coordinate their roles in the developmentof livestock production. Under this agreement DBP agrees to provide borrowers with "technical assistance and advisory services" for planning, budgeting and marketing and BAI agrees to provide animal husbandry and veterinary technicalservices upon the request of DBP. However, this agreement is not very effective because BAI techniciansare not involved in the sub-loan application and appraisal process and there is little incentive for them to become involved at a later stage of enterprise development. Since DBP cannot be expected to provide full livestock extension services from its own resources it is proposed that under the Project, DBP and BAI would renegotiate and implement a new agreement acceptable to the Bank to ensure that BAI technicians can be involved in sub-loan projects from the outset. Whenever the appropriate BAI techniciansare available to assist, the new arrangement will be designed to facilitate the involvement of BAI technicians as a matter of routine and not only at the request of DBP. Assurances were obtained during negotiations that as a condition of effectivenessthe Government would cause BAI and DBP to enter into an agreement satisfactoryto the Bank to provide for increased assistance by BAI to DBP borrowers for livestock purposes.

EnvironmentalImpact

3.18 The impact of the Project on the environment would be minimal, although the location of some livestock enterprisesclose to residential property requires review. All pig and poultry farms would use or sell waste products for fertilizer and fish farming purposes. Some pig farms would use wastes to manufacture methane gas for cooking using simple digesters. DBP includes finance for this purpose if requested. Hill farm and coconut/ cattle sub-projectswould be developed on existing grassland or coconut farms and would require negligible clearing of land. Hill farm development on natural grassland is subject to adequate Government controls and would not contribute to erosion problems. Slaughterhousedesign would be subject to Bank approval and would include facilities for satisfactoryhandling of waste products and effluents (para 3.14 and Annex 5).

C. Cost Estimates

3.19 The estimated total cost of the Project is US$41.3 million (0310 million) of which US$12.4 million (f93 million) is foreign exchange. Components of total project cost are shown in the table below. - 20 -

Total Project Cost % of Total LC FE Total LC FE Total Project % FE ---- Ct Million)- - --(US$ Million)- Cost Cost

I. Fixed Investments Pasture Estab- lishment 6.6 2.6 8.2 0.9 0.2 1.1 3 20 Fencing 5.0 2.2 7.2 0.7 0.3 1.0 2 30 Farm Water Facilities 8.1 2.0 10.1 1.1 0.3 1.4 3 20 Farm Buildings 51.7 9.1 60.8 6.9 1.2 8.1 20 15 Farm Machinery 1.0 10.5 1.5 0.1 0.1 0.2 - 33 Breeding Stock 36.7 1.1 37.8 5.0 - 5.0 12 - Slaughterhouses Buildings and Equipment 6.1 4.4 10.5 0.8 0.6 1.4 3 42 Feed Laboratory 3.0 3.0 6.0 0.4 0.4 0.8 2 50 Miscellaneous 4.2 0.5 4.7 0.5 0.1 0.6 1 10 Sub-total 122.4 24.4 146.8 16.4 3.2 19.6 47 15 II. Incremental Working Capital Concentrate Feed 22.8 34.2 57.0 3.0 4.6 7.6 18 60 Medicine and Vaccines 1.5 2.2 3.7 0.2 0.3 0.5 1 60 Fertilizers 4.6 6.9 11.5 0.6 0.9 1.5 4 60 Labor 3.7 - 3.7 0.5 - 0.5 1 - Feeder Steers 4.8 - 4.8 0.6 - 0.6 1 - Day-old Chicks 3.9 - 3.9 0.5 - 0.5 1 - Miscellaneous 2.0 - 2.0 0.3 - 0.3 1 - Sub-total 43.3 43.3 86.6 5.7 5.8 11.5 28 50

III. Administration, Technical Services, Equipment and Research 6.1 5.8 11.9 0.8 0.8 1.6 4 49

IV. Base Cost Estimate 171.8 73.5 245.3 22.9 9.8 32.7 79 30

V. Physical Con- tingencies (Slaughterhouses 10%) 0.6 0.4 1.0 0.1 ... 0.1 ... 42

VI. Expected Price Increases 44.3 18.9 63.2 5.9 2.6 8.5 21 30

VII. TOTAL EXPECTED COST OF PROJECT 216.7 92.8 309.5 28.9 12.4 41.3 100 30 Costs were estimatedat late 1975 prices mainly from data obtained under the first livestockproject with physical contingenciesof 10% for slaughterhouses. Expected price increasesare 10% for 1975, 8% for 1976 and 7-1/2% thereafter for local costs and as follows for foreign costs of equipment: 1975, 12%; 1976, 10%; 1977-79, 8%; and 1980-85, 7%. Expected price increases have been included in the allocation of funds for the loan program so that the physical program could be achieved and would not reduced by the effects of inflation. The size of the sub-loan program is related to the expected demand for finance by enterprise type and DBP's capacity to process loans.

D. Financing

3.20 Financing of the Project would be in about the followingamounts and proportions:

Financing - (US$M)

Beneficiaries DBP/Govt IBRD Total Components Amount % Amount % Amount % Amount %

Farm Development 4.8 13 t3.7 37 18.5 50 37.0 100

Slaughterhouses 0.5 25 0.5 25 0.9 50 1.9 100

Feed Quality Control Program - - 0.4 50 0.4 50 0.8 100

Administration, Technical Services, Equipment and Research - - 0.9 56 0.7 44 1.6 100

Total 5.3 13 15.5 37 20.5 50 41.3 100

3.21 The proposed Bank loan would be for US$20.5 million, of which about 60%, or US$12.4 million, would be for foreign exchange requirmentsand about 40%, or US$8.1 million, would be for local currency requirements.

3.22 The Bank loan would be to the Government for 14-1/2 years including 5-1/2 years of grace. The Governmentwould relend US$19.8 million of the loan funds to DBP on the same terms (includinginterest rate and grace period) and would assume the foreign exchange risk. The balance of US$700,000of the loan would be used by Government to finance in part the feed quality control program, research component and the short term consultants (para 3.14). Assurances were obtained during negotiationsthat the Government would relend the proceeds of the loan to DBP on terms and conditions acceptable to the Bank. On average, beneficiarieswould contribute about 13% of investment costs although this would vary from minor beneficiarieswho would contribute about 10% to major beneficiaries,including municipalitiesfor slaughterhouses, who would contribute at least 25%. - 22 -

E. Procurement

3.23 Procurement for farm development (US$35.6 million) would be by farmers from local suppliers, as in the first project. There are generally adequate commercial outlets for the main inputs (concentratefeed, medicines and vaccines, and fertilizers)to permit sub-borrowers to obtain supplies at competitive prices. The short supply of feeder and breeder cattle is a potential constraint, but this problem is specificallyaddressed by this Project and by the National Beef/CarabeefProgram (1976-1985). The scattered location and phasing over several years of the farm sub-loan projects and diversity of equipment and supplies required makes bulk purchase of inputs impractical. Some of the local suppliers are subsidiariesor associate companies of international firms. Slaughterhouse contracts (totalling about US$1.9 million) would be locally advertised since their small size (average of US$190,000 each), scattered locations and phasing according to demand, is unlikely to be attractive to internationalcontractors and does not permit aggregation into larger contracts. There is adequate local fabricationand constructioncapability and competition to ensure that the relatively simple slaughterhousesproposed can be procured efficiently. Equipment and materials for the feed quality control laboratory (US$0.4 million) would be procured by internationalcompetitive bidding. Contracts for technical services (about US$0.2 million) may be provided by bilateral aid but will otherwise be awarded according to standard Bank procedures. The vehicles and equipment (US$160,000)required for administering the Project and for technical services would be procured locally by DBP, using standard procedures which are satisfactory to the Bank. Bulk international procurement of vehicles and equipment is not warranted because requirements are phased over several years and the lot sizes are too small to be attractive to internationalbidders. Equipment and materials for the feed quality control laboratory ($0.4 million) would be procured following international competitive bidding in accordance with the Guidelines.

F. Disbursements

3.24 Loan commitments by DBP would be over three years and DBP would disburse to sub-borrowers over periods up to 4 years, depending on the type of enterprise. Bank disbursementswould be over 5-1/2 years, allowing for phasing of commitments and for 6 months slippage (Annex 19). The Bank would reimburse, against statements of expenditures, 50% of medium and long term loans granted by DBP to Project beneficiaries for pig, poultry, backyard cattle, dairy and slaughterhousesand 54% for coconut/beef and hill beef loans. This latter higher disbursement rate is necessary to ensure that Bank disbursements for these slower maturing developments do not extend beyond 5-1/2 years, after which time investments on these two types of enterprises will be small. For consultants, the Bank would reimburse 100% of the foreign exchange costs, or 60% of the total costs if local consultants are engaged, to cover salaries, international travel, and allowances. The Bank would reimburse 100% c.i.f. for equipment and materials imported by DBP or the Government for its use or 60% of total expenditures if procured in country. For the feed laboratory equipment the Bank would reimburse 100% of the foreign exchange cost or 100% of the ex-factory cost - 23 - of goods produced in the Philippines. The estimated schedule of quarterly disbursementis in Annex 19. Since the project would support DBP's on-going livestock program and the proceeds of the First Livestock Loan were fully committed at the end of 1975, it is proposed that the proposed loan finance retroactivelyup to $1.5 million of costs incurred under DBP's livestock lending program after December 31, 1975.

G. Organizationand Management

3.25 The Project will be executed mainly by DBP, in particularby the Livestock and Poultry Group of DBP's AgriculturalProjects Department (paras 2.18 and 2.19). Coordinationof headquartersand branch activities is maintained by the SupervisingGovernor who is responsible for both the Agricultural Projects Department and the Branches and Agencies Department. For sub-project technical services, DBP will increasinglyrely on its new agreement with BAI (para 3.17). DBP would monitor once a year a randomly selected sample of sub-loans (financedunder both this Project and the first Livestock project) of each enterprise type to evaluate the economic, financial and physical impact of the lending program for the guidance of DBP management and staff processing further sub-loans. Monitoring would be mainly the responsibility of the existing Plans and Programs Group of the AgriculturalProjects Depart- ment, assisted as necessary by the Livestock and Poultry Group and the two Project specialists (para 3.14). Assurances were obtained during negotiations that DBP would annually monitor in a manner acceptable to the Bank a randomly selected sample of sub-loans (financedunder both this Project and the first livestock project) and submit the monitoring report to the Bank together with the annual reports (para 3.29). The feed quality control and research components would be the responsibilityof the Bureau of Animal Industry (BAI) in the Department of Agriculture.

H. Lending Policies and Procedures

3.26 Loans would be made by DBP direct to project beneficiaries,both to farmers and to municipalitiesin the case of slaughterhouses. Loan applicationswould be evaluated with regard to technical, financial and economic feasibility,and creditworthiness. The trained technicians responsible for this work would be assisted as necessary by Project technical specialists. Sub-loans of less than 1 50,000 (or such other limit as DBP decides) would be approved by branch managers, subject to confirmationby DBP's board. Assurances were obtained during negotiations that DBP would use the standard sub-loan agreement for sub-loans as approved by the Bank for Loan 823-PH and not alter it materially without prior consultationwith the Bank. Loans would not exceed 70% of the market value of the property to be mortgaged including improvementsfinanced by the loan, or 65% of market value of items securing a loan by chattel mortgage. Minor beneficiaries would on average be required to provide 10% of the incremental investment from their own resources while major beneficiaries (as defined in para 3.28) would contribute at least 25% of the incremental investment.

3.27 Repayment terms would be flexible and would be based primarily on the ability of the applicant to repay the loan from the proceeds of the investment. Terms would in general be in accordance with the following schedule: - 24 -

Total Grace Term Period ----- Years…

Pigs 10 3 Poultry 8 2 Hill Cattle 13 5 Integrated Coconut/BeefCattle 10 4 Integrated Coconut/Dairy/BeefCattle 10 4 Backyard Cattle 10 4 Slaughterhouses 10 4

Interest rates would be 12% for sub-loans secured by land and 14% for other sub-loans, except that the 12% interest rate would apply to all loans of ' 5,000 or less. These are the interest rates which DBP agreed to apply to all its sub-loans during negotiationof the Second Industrial Loan. It is expected that most sub-loans under this Project would be made at the 12% rate. Sub-borrowerswould also be charged DBP's standard application fee which ranges from f 30 for loans below t 10,000 up to f 500 for loans over f 0.5 million. With inflation expected to stabilize at less than 10% the 12% rate represents a real positive interest rate to borrowers. The cost of DBP's capital averages 7-1/4% and assuming this loan is made at 8-1/2% the blended cost to DBP of Project funds would be 7.96%. This would give DBP a spread of over 4%. The financial implicationsof the Project are shown in Annexes 20 and 21.

3.28 The Project is intended to finance mainly small and medium scale farmers, but there are also likely to be a number of larger applicantswhose operations, although few in total number, contribute to stability and stimulate progress in the livestock industry as a whole. It is appropriate that sub-loan conditionsshould be stricter for this category of sub-borrower. Major beneficiarieswould be charged the appropriate 12% or 14% interest rate plus, as in the first livestock project, a one time service fee of 2% of the sub-loan amount. Major beneficiarieswould be defined in terms of the size of their enterpriseafter development as follows:

Estimated Size of Enterprise After Development

Piggeries 70 breeding sows Broilers 15,000 broiler capacity Layers 8,000 laying hen capacity Integrated Coconut/Cattle 50 breeding cows Hill Beef Cattle 165 breeding cows

In addition, all slaughterhousessub-loans would be classified in the major beneficiary category. All sub-loans which exceed the equivalent of $200,000 - 25 -

and all slaughterhousesub-loans would require the prior approval of the Bank. Assurance8 were obtained during negotiations that DBP would apply sub-loan interest rates and terms acceptable to the Bank and submit to the Bank for prior approval all sub-loanapplications which, togetherwith any outstanding balance on previous DBP livestockloans financed from Bank funds, exceed the equivalentof US$200,000.

I. Accounts and Audits

3.29 DBP's accounts are audited by staff of the Commissionon Audit (COA) which maintainsa permanent staff at DBP. The Examinationand Super- vision Section of the Central Bank also reviews and reports on DBP's accounts. Separate project accounts would be maintainedby DBP and audited annually by COA and such audit would be acceptableto the Bank. Audited Project accounts, together with DBP's financialstatements, would be submitted to the Bank within three months of the close of each fiscal year. DBP would submit quarterly reportson the Project, in a form acceptableto the Bank, within 30 days of the close of a quarter, as under the first livestockproject. Assuranceswere obtained during negotiationsthat DBP would maintain separate Project accounts and, followingan independentaudit acceptableto the Bank, submit those to the Bank within three months after the close of each fiscal year and submit quarterly reports on the Project in a form acceptableto the Bank.

IV. PRODUCTION,MARKETS AND MARKETING,AMD PRODUCER BENEFITS

A. Production

4.01 The project will produce mainly additionalpork, chicken meat, eggs and beef. Pork will be the greatest quantitativeincrease. In addition, the project will produce small quantitiesof copra, offals, hides and skins and milk. From maturity in year 11 onwards the project will also produce 5,200 cattle weaners per annum to contributeto the expansionof the national herd or as inputs to cattle fatteningenterprises and for draft. The followingtable shows the main products in metric tons and compares this incrementalproduction with national productionin 1974. - 26 -

IncrementalProject Production 1974 National Full DevelopmentFull Dev. as Products Production Year 5 Year 77 % of 1974 Prod. …------…--('000tons)------Pork Meat 345 12.7 12.7 3.7 PoultryMeat 110 /a 5.2 5.2 4.7 Eggs 140 Ta 5.6 5.6 4.0 Beef 100 0.7 1.0 1.0 Milk 28 0.2 0.3 1.0 Copra 1,703 5.0 8.4 0.5

Live Animals ------number------

Cattleweaners n.a. 3,017 5,200 n.a. /b

/a Missionestimates.

/b Not available,but probablyless than 1%.

B. Marketsand Marketing

4.02 The incremental production of the Project would be readily absorbed on the domesticmarket at presentprices. In all cases the incrementalpro- ductionof livestockproducts at maturity(1987) is 40% or less than the estimatedunsatisfied demand for each productin 1974. Projectincremental copra productionis a negligibleproportion of totalcopra productionand will be readilyabsorbed by exportmarkets without affecting prices. The Philippinepopulation is expectedto grow at 2.8% per annum and per capita real incomeat about 3.2% per annum through1985. Incomeelasticity of demandfor meats and eggs are estimatedto be close to unity and this indicates,at constantprices, growth in demandof about 6% per annum. At this rate of growthdemand would almostdouble by Projectmaturity at Year 11. In comparison,recent growth in domesticproduction of meat and eggs has been between5 and 6%. Projectproduction will provideabout a quarterof the incrementaldemand for pig meat and just over half the incrementaldemand for poultrymeat and eggs. For beef, incrementalProject productionis about 30% of incrementaldemand. Importsof meat, meat products and eggs have rangedbetween US$2.2 million to US$8.9million since 1969 and can be expectedto climb steadilyif domesticproduction does not expandto meet growingdemand. Importsof dairy productshave risen to over US$60mil- lion and Projectdairy productionwill have negligibleeffect on these imports.

4.03 Marketingof Projectproduction is not a problem. Much of the Project incremental meat production will occur in Southern Luzon to serve the main consuming center of Greater Manila. Marketing channels in this area are well developed and roads and transport facilities are adequate to handle the incremental production. The expanded operations of Food Terminal Incorporated(FTI), as more of its idle capacityis takenup, will provide major additionalhandling and storagefacilities for GreaterManila. The - 27 - marketing of increased production from outlying islands is less satisfactory but again mT's involvementhas already improved the situation marginally and will have greater impact later. A number of private initiatives are under considerationvhich together could improve transport facilities for livestock and the present wide marketing margins are likely to promote further investment in transport facilities. Thus the present traditional system of marketing plus known and projected private sector improvementsare satisfactoryfor handling Project production.

4.04 Philippine imports of meats and eggs are historicallyless than 0.02% of world trade in these commoditiesand Project incremental production would have a negligible effect on world trade and prices.

C. Producer Benefits

4.05 Incrementalnet income to the 3,050 Project producer families would average US$2,210 per annum at full developmentwith a range from US$410 to US$6,300 (see Table next page). The present incomes of these families covers a wide range but it is estimated it would include about 1,280 families with annual incomes of less than US$800. Net benefits to municipalitieswhich take up slaughterhouseloans would be about US$38,000 per annum at full throughput. Producer benefits are summarized in Annex 21, Table 2. In all cases, the models proposed as standard farm sub-loans are designed to allow the sub-loan to be repaid from proceeds in a reasonable time and producer benefits, after debts are fully recovered, are attractive. Rates of return in all models are attractive to sub-borrowers and cashflows provide reasonable margins for risk after debt service particularlywhen considered in current terms.

V. ECONOMIC BENEFITS AND JUSTIFICATION

5.01 The Project is of high priority and supports the Government's strategy for the livestock sub-sector. The Project has been designed mainly to consolidate and expand DBP's successful but relatively small scale livestock credit program. DBP is now the main institutionproviding supervised credit for livestock production and is making a valuable contributionto the expansion of the sub-sector in keeping with Government's livestock policy. The Project would continue the important institution building role of the first project, particularlyin the Livestock and Poultry Group of DBP and in DBP's branches. The Project economic rate of return is estimated to be about 25%. Unskilled labor has been shadow priced at 50% of its market cost to reflect the annual average opportunity cost of this input in the rural areas where sub-projectswould be financed (unskilled labor costs are less than 5% of total operating costs at project maturity in Year 11). Other costs have been adjusted for financial transfers (import duties and taxes) (Annex 22). Prices of inputs and outputs have been assumed to remain in real terms at projected early 1976 levels. Output prices for the economic - 28 -

analysis have been assumed to remain the same as present financial prices since these are normally close to world prices and are consistent with Bank price projections in constant terms. Only in the case of beef would the Philippines possibly be able to import significant quantitiesat lower prices than domestic costs of production,but Project beef production (1,000 tons) is less than 5% of total Project meat, eggs and milk output and does not reach this level until 1988.

5.02 Should the value of incrementalproduction fall by 10% as a result of a decrease in output real prices or a shortfall in physical production, the economic rate of return would fall to 13%. However,-- inTviewof the projected domestic demand and supply situation (para 4.02) such a fall in real prices is consideredhighly unlikely. Should the real price of pig and poultry feed increase by 10%, for instance as a result of a 15% real rise in the cost of imported ingredients, the economic rate of return would fall to 18%. However, given the projected domestic demand growth for livestock products (6% p.a.) there is little risk that the Project will prove financiallyor economicallymarginal, particularlysince there is comparative- ly little world trade in the products most in demand in the Philippines (pork and poultry meat) which form the bulk of the Project output. The only significant risk is that price control measures and rising costs may at times create a temporarilyunfavourable input/output price ratio which would limit demand for livestock production credit. However, the Governmentand DBP monitor input/outputprice relationshipsclosely, and Bank supervision missions routinely review this aspect.

5.03 Secondary benefits are substantial in the form of the wage employment created by the Project. The Project would directly create 1.4 million man-days of on-farm and slaughterhouseemployment annually at full development, equivalent to about 5,800 full time jobs. However, some 26% of this incremental labor would be in part time work and therefore employmentwould be provided for more than 5,800 people. In addition, a large number of other jobs would be indirectly created by the Project, inter alia for the production of feedstuffs and for processing, transportingand marketing incremental production. The average investment per job created (full time equivalent)amounts to about US$6,900.

5.04 The Project would result in net foreign exchange savings of about US$17 million a year at full development. This assumes incrementalcopra exports of US$1.1 million a year and US$25 million of substitutionof imports of meat, meat preparations, eggs and milk. However, given present trends in national production and consumption it is likely that the demand-domestic supply gap at full developmentwill still be at least equal to Project incremental output. Project incremental imports of animal feed ingredients and fertilizers would amount to about US$8 million a year at full development. In addition, the pilot dairy component would help lay the foundations of an expanded local dairy industry which could result in further substantial foreign exchange savings.

5.05 Social benefits of the Project would be substantial since about 80% of total direct and indirect beneficiaries (about 40% of sub-borrowers and most wage earners) would be within the target rural poverty group with per - 29 -

capita incomes of less than US$140. This estimate is based on experience under the first project regarding categoriesof sub-loan applicantsand the assumption that the agricultural employment created (predominantly on pig and poultry farms or as cowboys) is chiefly of a kind that attracts only the unemployed or greatly under-employed. Moreover, the Project will make a significantcontribution to expandingdomestic productionof livestock products, thus keeping price rises within reasonablelimits. The Project would help to maintain animal protein intake of the poorer people, since the diet of these people includes significantquantities of animal protein of the cheaper kinds.

VI. AGREEMENTSREACHED AND RECOMMENDATIONS

6,01 During negotiations assurances were obtained that:

Mi) Government would:

(a) relend US$19.8 milion of the proceeds of the loan to DBP on terms and conditions acceptable to the Bank (para 3.22);

(b) within six months of Loan signing, engage four short term consultants -acceptable to the Bank on terms and conditions acceptable to the Bank (para 3.14);

Cc) within 12 months of Loan signing submit to the Bank for review and co mment the terms of reference for the applied investigational work into pig and poultry nutrition, and following Bank review would provide grant funds of not less than US$150,000 equivalent, or such other amount to be agreed with the Bank, for the work to be carried out (para 3.16);

(d) submit full details of the feed quality control program to the Bank for review and comment before plans are finalized and expenditures on the feed laboratory are incurred (para 3.13);

(it) DBP would:

(a) concentrate its efforts to committing funds in locations which take into account sound environmental, technical and financial criteria (para 3.03);

(b) commit no more than US$3 million (of which no more than US$500,000 may be for pig and poultry sub-loans) of the Loan funds to financing sub-loans which exceed US$100,000 equivalent (taken together with any outstanding balance on previous DBP livestock loans) (para 3.04); - 30 -

(c) engage two specialistsacceptable to the Bank on terms and conditions acceptable to the Bank for the 12 month period beginning not later than December 1, 1976, or such other period to be agreed with the Bank (para 3.14);

(d) engage consultantsacceptable to the Bank, on terms and conditionsacceptable to the Bank, to design model slaughterhousesacceptable to the Bank, and use these models as the basis for all slaughterhousesub- loans (para 3.14);

(e) train or retrain an adequate number of livestock technicians to support the livestock lending program (para 3.15);

(f) annually monitor in a manner acceptable to the Bank a randomly selected sample of sub-loans (financed under both this Project and the first livestock Project) and submit the monitoring report to the Bank together with the annual reports (para 3.25);

(g) use the standard sub-loan agreement for farm sub-loans approved by the Bank under Loan 823-PH and not alter it materially without prior consultation with the Bank (para 3.26);

(h) apply sub-loan interest rates and terms acceptable to the Bank and submit to the Bank for prior approval all sub-loan applicationswhich, together with any outstanding balance on previous DBP livestock loans financed from Bank funds, exceed the equivalent of US$200,000 (paras 3.26-3.28);

(i) maintain separate Project accounts and following an independent audit acceptable to the Bank, submit these to the Bank within three months after the close of each fiscal year and submit quarterly reports on the Project in a form acceptable to the Bank (para 3.29).

6.02 As a condition of effectiveness the Government would cause BAI and DBP to enter into an agreement satisfactory to the Bank to provide for increased assistance by BAI to DBP's livestock borrowers (par& 3.17).

6.03 The proposed Project is recommended for a Bank loan of US$20.5 million, with a 14-1/2 year maturity including a grace period of 5-1/2 years.

February 20, 1976 ANNEX I Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Agricultureand the Livestock Sub-Sector

I. General

1. The Republic of the Philippines is situated in the tropics between latitudes 4°23' and 21°25'N. The archipelago extends over a distance of 1,600 km from north to south and comprises more than 7,100 islands. Eleven islands account for 96% of the total land area.

Climate

2. The Philippines enjoys a tropical maritime climate, characterized by high temperatures,humidity and rainfall. Mean annual temperatures,range between 21C (70°F) in the coolest month (January) to 29C (85°F) in the hot- test month (May). Rainfall is the most important climatic variable and ranges from 966 mm (38 in) in the south to 5,530 mm (218 in) in the highlands of Luzon. Rainfall is uniform from year to year, with anraverage variation between years of 14%. Typhoons occur most frequently in the northern part of the country. The climate can be classified most simply into four main categories,based on rainfall distributionthroughout the year. The distributionof these categories is shown on the left of Map No. IBRD 10133, and the correspondingaverage monthly precipitationis given on Chart 6160. A more recent classification distinguishesseven categories of climate as shown on the right of Map 10133. Humidity is high throughout the year. Regional differences in the occurrence of seasonal rainfall and typhoons have a considerablebearing on the season- ality of production and types of crops that can be grown in different parts. Climatically,the Philippines has a high potential for crop and forage production.

3. The environment is well suited to pig and poultry raising. Cattle with Bos indicus blood adapt well and there are no major climatic restric- tions on the developmentof beef cattle farming.

Soils and Vegetation

4. Soils are mostly free draining, with medium to low fertility levels. In general, there is a marked response to both phosphorous and nitrogen applicationsbut little response to potash. Ph is low on the shale and sandstone derived soils (4.8 to 5.6) but higher on the lime- stone and volcanic tuff (6.2 to 6.7).

5. The main variations in vegetation are due to the combined effects of altitude, rainfall and the biotic factor. The original forest situated from sea level to 700 m altitude is formed by numerous species of large ANNEX 1 Page 2 trees with high timber value. At about 700 m, the forest becomes open without much undercover vegetation. After the primary forest is cut, shifting cultivation is practiced on the uplands, and burning and cropping lead to a final reasonably stable grassland of low productivity. In isolated areas, the legumes Centrosema and Pueraria occur naturally.

Land Use

6. The Philippines has approximately 30 million ha of land, distributed in 1971 in the followingway:

Million ha

Productive forest 14.1 Unproductiveforest 1.8 Cultivated and plantations 9.8 open land 2.6 Managed pasture 0.8 Harsh and small water 0.2 Urban and others 0.7

Total 30.0

7. This classificationmay not represent optimum use of land for agriculture since it largely reflects the Government bureau under which land is administeredand controlled. This is particularly true of forest, open land and managed pasture categories (almost entirely stateowned),where sufficient reconnaissanceinformation is not available for accurate classification. In many areas, the land use pattern is changing due to population pressure, with land classified as forest, open land and managed pasture being taken up by small farmers. In such areas extensive livestock enterprises have only a limited future and further investments are not justified. In other large areas, hill cattle is the only development likely in the fore- seeable future.

Food and Commercial Crops

8. About 10 million hectares classified as cultivated and plantations are growing a wide range of food and commercial crops (Table 1 and 2). The food crops are rice (3.4 million ha), corn (2.8), roots, fruits and other crops (0.9); and commercial crops are coconuts (2.2), sugarcane (0.5), abaca, tobacco, rubber and others (0.3).

Economic Importance

9. Agriculture is the most important sector of the economy in terms of employment and export earnings. In 1973, agriculture, forestry, fishing and hunting provided work for about 53% of the total labor force. Over the period 1972-74, agriculture contributed about 35% of GNP. Food crops contributed 12%; livestock and poultry, 6%; commercial export crops, 9%; fisheries, 4Z, and miscellaneous,4%. ANNEX 1 Page 3

10. Out of total exports, amounting to US$2,722 million in 1974, agricultural products contributed US$1,562, i.e., 57%. Main export items include sugar, coconut and forest products, contributing 28Z, 22.4% and 9%, respectively, of export value.

11. In 1974, total imports amounted to US$3,143 million FOB. Imported agricultural products accounted for US$356 million (11.3%), made up of grains and preparations (US$155 million, mostly wheat, milled rice, shelled corn and flours), dairy products (US$74.5 m), raw cotton (US$34.3 m), feedstuff (US$26 m), fruit and vegetables (US$5.8 m), meat and meat preparations (US$4.5 m) (Table 3).

II. The Livestock Sub-Sector

12. During the period 1972-74, the Livestock sub-sector accounted for 17 to 20% of the total value added by agriculture.

Animal Population and Distribution

13. In the Philippines, there are about 9.7 million hogs, 100 to 110 million poultry, 2.2 million beef cattle and 5 million buffaloes (Carabaos) (Table 4). The pig population is spread throughout the islands and a large proportion of them are raised as scavengers and slaughtered-in the backyard for home consumption or sale on the local market. However, commercial piggeries have expanded very fast in the last few years, particularly in Central Luzon around Manila and in South Cotabato Province. The poultry industry is also heavily concentrated around Manila, near the feed mills, but about 40% of birds are on non-farm operations. Southern Tagalog accounts for 26% of on-farm chicken, Central Luzon for 15%, Southern Mindanao for 19% and the Western Visayas for 8%. Eightly-two percent of the cattle and carabao are equally distributed between the two largest islands of Luzon and Mindanao with the Visayas accounting for the balance.

Production Systems Cattle and Carabao

'4. Carabaos which represent about 70% of the ruminant population are used for draft in rice paddies. They are owned mostly by small farmers with one or two head and traditionally they are fed on green feed from roadsides and crop residues, mainly rice straw. They are slaughtered for meat at the end of their useful working life and carabao beef account for 60-70% of all beef consumed in the country. Beef cattle (not including carabaos) are produced under four systems: (i) Hill beef farming, the traditional source of feeder cattle, is essentially a cattle breeding enterprise based on low quality natural pastures (mostly in Masbate, Mindoro, Northern Mindanao and the Cagayan Valley of Luzon). Possibly 12% of the national feed herd is run under this system. (ii) Backyard fattening of feed cattle is practiced by villages and provides the families involved with appreciable additional income. This type of activity is carried out mainly in Central Luzon and Southern Tagalog and accounts for more than 75% of non-carabao beef produced in the country. (iii) Grazing under coconut. Although about 0.8 ANNEX 1 Page 4 million ha are presently grazed (10-13% of cattle) very little is under improved pasture. The main coconut beef areas are in Northern and Eastern Mindanao. (iv) There are a few feedlot operations using by-products of the banana industry (in Mindanao) and trials, for which technicalassistance was provided under the first livestock developmentproject, are underway in Negros on the use of by-productsof the sugar industry.

15. There are few dairy-type animals in the Philippines. They are unofficiallyestimated at about 48,000 head, comprising 29,000 carabaos, 12,000 cows and 7,000 goats in 1971. Almost all the milk and dairy products consumed in the country are imported or filled and reconstitutedfrom imported ingredients. There are only about 7 commercial dairy farms in the vicinity of the main large cities, and these produce most of the limited domestic fresh milk output.

Pigs

16. About 98% of the pigs are produced from herds of less than 50 head. The raising of pigs is a well developed traditionaloccupation among small farmers and villagers and, although individual enterprisesare small (most often 5 to 10 sows) there is considerableexperience in modern pig handling and management. On-farm mixing of feed is widely practiced from the broad range of low cost by-products available in the Philippines. There are a few very large pig operations in the Manila area and South Cotabato.

Poultry

17. In 1969, it was estimated that 90% of the poultry were on farms with less than 500 birds. This pattern does not appear to have significantly changed since then. About 3 million households keep poultry, of which 1.2 million are non-farm units raising native birds for home consumption and sale of the surplus on the local market. About 15% of the eggs and 60% of the poultry meat consumed in the country are produced by small backyard village owners. Modern integrated poultry farming is limited to a small number of farms with 30,000 to 100,000 broilers or layers that produce about 10% of total eggs and broilers. Most commercial farms, however, have flocks ranging from a few hundred to several thousand birds. The trend among the larger broiler products is for contract growing with one of the big five feed miUing companies (known as integrators)which supply chicks, feed and some veterinary supplies, while the producer undertakes to provide housing, labor and m8nagement and sells broilers at eight weeks of age to the integrator. The feedmillersown and operate processing plants and usually sell broilers wholesale to supermarkets and other outlets. At the present time, integrated operations,almost entirely located in the Manila area, produce about 60-70% of the poultry feed, 95% of the chicks and control about 70% of the broiler production. The developmentof contract growing in broiler production has been rapid during the last few years, particularlyamong medium and large producers who need to rely on regular supplies of feed and chicks in large quantities as well as on secure outlets for large batches of broilers. Little choice is left to them as integrators tend to give preference to their own contract growers ANNEX 1 Page 5 in time of feed shortage and only the integratorshave the processing facilities and regular markets for large quantities of broilers. Contractsare consequentlybiased in favor of the integrators. Small producers, however, can more easily get their feed and chicks from different sources and market their output themselvessince they deal with small quantities, and therefore remain independent from integrators.

Institutions

18. - - The Departmentof Agriculture,mainly through the Bureau of Animal Industry (BAI), is primarily responsible for the administrationof the livestock sub-sector. The Department of Natural Resources also has an important role in the sub-sector,since Pasture Lease Agreements for hill land are administeredby it under the Forestry Reform Code. The BAI provides veterinary services and maintains breeding stations, stock farms and artificial inseminationcenters. The BAI is a large organizationwith some 2,200 techniciansbut the quality and effectivenessof its services is generally poor. This is the result of staffing problems, poor service conditions, and inadequate incentives for field travel. The Government is aware of the present problems of the BAI, but at the time of appraisal it was agreed with Government that these problems should not be resolved in isolation for this bureau alone since many of BAI's problems are common to other agencies and would have been more effectivelyaddressed in an agricultural services project which was then under consideration. Subsequently the Government has decided that the agriculturalservices project is premature and is now expected to request some assistance for BAI under the upcoming rural credit and education projects. Consequentlythe proposed Project limits direct involvementof BAI to the provision of technical services according to a new coordinationagreement to be negotiated with DBP (para 3.17). Within the Departmentof Agriculture there are four other agencies which are closely concerned with the sub-sector. These are the National Grains Authority (controls import and distributionof all grains, including feedgrains);the National Food and Agricultural Council (coordinates and implements all Government food self-sufficiencyprograms); the National Meat Inspection Commission (regulatesslaughterhouses and meat standards); and the Bureau of Agricultural Extension (which together with BAI supplies extension advise to livestock farmers). Livestock industry research is mainly the responsibilityof the BAI but is also carried out by a number of other agencies. The Bureau of Agricultural Economics (BAEcon) in the Department of Agriculture provides data and analyses for planning and policy purposes and disseminatesprice and market information. The University of the Philippines College of Agricultural (UPCA) at Los Banos and the College of Veterinary Medicine conduct the main basic research. The UPCA's Animal Husbandry Department is capable and has well-trained staff. Other universities and colleges have livestock research programs. The Bureau of Forestry in the Department of Natural Resources conduct range management trials, while Central Mindanao University, the BAI and UPCA are other important centers of pasture improvementwork. The agriculturalresearch program as a whole is coordinatedby the Philippine Council for Agricultural Research, which also has direct control of all Government funded research. ANNEX 1 Page 6

AgriculturalCredit

19. Institutionalsources supply probably about a third of the credit used for agriculturalproduction but in real terms the amount available has not changed significantlysince the late 1960s. This has partly been the result of Governmentpolicy which formerly channelled financialresources more towards industrialdevelopment. In addition there were inadequate institutionsserving agricultureand credit terms (mainly collateralrequire- ments) have not in general given the predominantsmall farmers, particularly tenant farmers, access to institutionalcredit. Government strategy to overcome these constraints focuses on the rapid expansionof private rural banks with supervisionand subsidized funds from the Central Bank. There are now over 700 rural banks with assets of p2.1 billion (US$280million) and they have provided three quarters of the increased institutionalcredit for agriculturesince 1965. Most of the rural banks lending is for short term productioncredit but they also provide medium term finance for machinery and equipmentand they have increasinglyfinanced small farmers. The Philippine National Bank is also an important but declining source of credit for agriculture,accounting for 28% of the outstandinginstitutional loans to agriculture. It provides mostly short term production credit and has financed half the loans in the national rice and corn programs (Masagana 99 and MasaganangMaisan respectively). Some 30 private commercial banks provide about 27% of institutionalagricultural credit. In order to halt the relative decline in the proportion of funds from this source going to agriculture,a Central Bank directive requires that a minimum of 25% of all loanable funds of the commercial banks go to agriculture. The 32 private developmentbanks (total assets of f300 million) are a further important source of agriculturalcredit. They lend long term funds for small scale enterprisesand about half their loans are for agriculture. DBP is an expanding source of agriculturalcredit (in 1974 holding about 122 of institutionalloans outstanding to agriculture),although its operations are dominatedby industrial lending (78% of total approvals compared with 8% for agriculture). Ceiling interest rates in the Philippineshave been fixed since 1970 by the Monetary Board at 12% for loans secured by land and 14% for loans secured by other forms of collateral. The 12% and 14% rates were negative real rates of interest during the period of high inflation (1970-1974) but with inflationnow expected to stabilize at about 10%, a real positive interest rate will be restored.

GovernmentPolicies

20. Under the last AgriculturalDevelopment Plan (1972-75), the Gov- ernment put special emphasis on livestock development. The Plan proposed to meet effectivedemand for meat and reduce the gap between meat consumption and nutritionalrequirements by 1975 and for eggs to increase the ANNEX 1 Page 7

percentage of adequacy from an estimated 58% to 63% 1/. Production targets were as follows:

Targeted Annual Rates of Increase for the Period 1972-75 (Percent)

Production Animal Population im)

Chicken (broilers) 8.2 6.3 Pork/Hogs 8.0 12.0 Beef/Cattle 6.0 3.6 Beef/Carabaos 6.9 3.5 Total Meat 7.6 Eggs 7.3

The Plan was to cost from f 135 m the first year up to l 275 m in the last year. t 16 m to t 18 m would be provided each year by the Government out with of its revenue and tthe remainder in the form of credit to producers rural banks, the Agricultural Credit Administration, the Philippine National and market- Bank and the Food Terminal Inc. (servicing short term commodity iug loans) and DBP (concentrating on long term development credit). Swine production was given priority with 50-60% of all funds, with 10-20% going to poultry and the rest to cattle production. Measures proposed to achieve and these goals were the upgrading of the existing extension, animal health artificial insemination services and-BAI research activities. Support was 21 also to be given to feedgrain production by the implementation of a t million feedgrain production program by the National Food and Agricultural Council, the Bureau of Plant Industry and the Agricultural Credit Administra- tion. This was to aim at replacing in the long term the high priced imported feed ingredients by domestic production of yellow corn, sorghum and soyabeans. Similarly increases in fishmeal production was expected from a separate program to expand fish production. The only provision for dairying was for studies on the feasibility of a milk production and collection scheme to be developed for carabao milk.

21. Conflicting data makes accurate assessment of the performance of the Plan very difficult. Data on increases in animal population 2/ (8.5% annually from 1970 to 1975 for hogs, 6% for cattle and 2.6% for carabaos) are in conflict with the stagnant, but unreliable, official estimates of

1/ Projected effective demand was based on income elasticities of demand of 1.1 for meat and 1.0 for eggs, annual rates of increase of real income per capita per year of 2.5%, and 3.2% to 3.5% annual population growth. Nutritional requirements were calculated on the basis of a recommended allovance of 18.2 kg of meat per capita per year and 4.3 kg of eggs. 2/ Estimated by the Bureau of Agricultural Economics (BAEcon) on the basis of farm surveys. ANNEX 1 Page 8 slaughterand meat production. 1/ The mission's general impression,however, is that the country was fairly successful in meeting demand for pigs and poultry, but that beef production lagged behind requirements.

22. The pork and poultry industriesrespond well to changes in demand because investment in stock and infrastructurecan be rapidly scaled up or down without great losses of efficiencyand because returns on investments are very quick. The relative stagnation of the beef cattle industry can be attributed to higher production costs and slow returns, but also to land use conflicts and poor management in hill farming areas which are the main source of feeder cattle; insufficientlyorganized marketing structures, and on small farms, competition for feed between cattle and carabao. This inelastic supply has resulted in increased imports in order to meet the fast growing demand for beef meat from the medium/high income groups and the tourist industry.

23. The livestock sub-sector is on the list of the Investment Priori- ties Plan of the Board of Investments,which entitles investors to a series of incentives (mainly tax deductions, duty-free imports of machinery and equipment, freedom of repatriationof profits for foreign companies and priority in the allocation of foreign exchange). These concessions apply so long as additional production generated by such investments remains inferior to a yearly revised figure reflecting the likely demand-supply gap and export potentials (called "measured capacity"). For 1975, livestock industry measured capacities are as follows:

Measured Capacity Measured 1974 Production as % of 1974 Capacitj Estimates Production Beef (MTDW*) 43,000 100,000 43 Pork (MTDW) 29,936 345,000 9 Poultry Meat (MTDW) 32,097 110,000 /a 29 Eggs (MT**) 30,097 140,000 1; 22 Chicks (no.) 3,762,000 n.a. n.a.

/a 1972 NEDA estimates. * MTDW - Metric Tons Dress Weight.

** MT - Metric Tons.

These estimates of demand appear reasonable and indicate that production is far from meeting requirements,particularly for beef.

1/ BAEcon estimates of meat production are based on the number of animals slaughtered on-farm (from the above mentioned surveys), and those slaughtered in abattoris where the Bureau of Animal Industry has a meat inspection service, adjusted by an estimate of non-farm non- registered slaughterings. ANNEX 1 Page 9

24. The Government is currently preparing a new livestock development program. The final report is not yet available,but it appears that emphasis will be put on feedstuffproduction in order to allow for continued expansion of swine and poultry industrieswithout having to rely too much on feed imports. Pork and poultry meat will continue to be given priority with the objective of supplyingreasonably priced meat to low and medium income groups. It is expected that the developmentof the beef industry will concentrateon low cost grazing systems, and smallholder backyard stall feeding systems as proposed in the National Beef/Carabeef DevelopmentProgram which was published in November, 1975 (Annex 3, paras 23 and 24). Improvementof the marketing system to guaranteehigher farmgate prices will also be important.

PHILIPPINES CLIMATICREGIONS

120- 125- 120' 125-

20- e *S 20'- NEW SYSTEM

a A ORIGINAL SYSTEM (Huke 1972) fie,;>t(Hainsworth§ 0 & Moyer 1945) 5° 0 WITH LE.SSTHAN . OF RAINFALL - ~~~~~~~~~~Aporri .RS,/,4Aporfi MNI EL*VS ~~~~~~~~~~~~~~~~~~INTERMEDIATELOW555 DRY SEASON;4 DRYWET WINTER AND~ SP"ING, ~ ~ ~ ~ / MONTHSWITH LESSTHAW 2A" OF RAIN.

SESN EWINTER AN DtO"tP I .WE..T NO~~~~~~~~~~~~~~DRY S *n gS X | i .. SUMMERAND FALL FALLMPETMONTH. MONTHS WITH LESSTHA 2AMOF RAINFALLD PER MOTH.

IL ~~~~~~~~~~~~~~~~~~~O R ESN' SGNEDWNEHORTHIOH SUN DRYSEASON; I TO 3 MONITHS R LO THAN_U Mi wS DR ^YOFSE ASONRAINFALL ;DPDQI TO QNE 3PER ._N T" *_ U~~~~~~~~~~~~~~~~~~~~SANDOO ' DASO SE SOP OFON I T 3 I _" WITH LESS 2AD O7 RAINALL _tMONTH ALL MONTHSWMT 2A~ OR MORE RAINFALL; U~~~~.) No .RY SEASO AND No PROOUNCED WETTESTLOW SLN MAONTHWITH AT LEAST3 MAXIMLAIMRAINY SIEASON TIMESTHU RAINFALL OF ORVESTHIGH SUN ALL IOTHE WITH 2A OR MORE RAINFALL WETYISETIGHSUN MONTH WTHAT LEAST is~~~~~~~~~~~~~~~~ ~~~~~THREE TIMESTE RMAINFALLOF ONVEST < ALL MONTHSWIIW 2A1 OR AWNSRAINFALL. ) WOTTM MDNTHHAS LESSS THAN 3 TEH THE RtAINFALLOF THE ORYESTMONMTH.

C,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C E- 0 ,- C'

f/>> 5v/25eaW- /~~~~Q x,b < z cr ? LOW \_SM> ISo 200 W715'- O 50 tOO ~~~~~~~~~~~~~~~~~~~~~~~~~~~150't

PuFto Princesa to,...Pncs

SuIu SeaS Sea Q

50s 100 1.50 200 _0 so 10 ISO N00 I I I " I.. A II NfIES MILES 0 to 200 300 l 200 100

c. KILOMETERS DEa ILOMASTERS

ml- cc~~~~~~~~~~~~~~ w~~~~~~~c MALAYSIAaobo MALCAYSsIAe 175, 5 123' 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'1.

PHILIPPINES LIVESTOCK DEVELOPMENTPROJECT MONTHLYPRECIPITATION ACCORDING TO TYPE OF CLIMATE

FIRSTTYPE SECONDTYPE Inches Inches 25 m.m. 25 m.m. 600 600 20 500 20 500

15 400 15 400 77 ~300 300 10 10 ~~~~~~~~~~~200 - 200 5 100 5 4 -o100

Zazq cYme7 m L 0U > tj ,- Ic> > U 0 C z m w m w 0 *-1- X >- u- 0 _ - < , ~Es_ 0 in

THIRD TYPE FOURTHTYPE Inches Inches M.m. m.m. 25 600 25 600

20 500 20 500

15 400 IS 400 101 01 2300° 10 XT .2300°

~~~~~~Doo :oo loo oo oo I 0o 5 _ ooc oo o owv\\ \. \ n5\\>\\\\..\1n o% oo' o oo0o oo o200 v 300 ~~~~~=(o000000000 ooc ooo 00)00)0ooc zooc zoo \\s\c\ 00 00 000000 00 00 00 00 )0 I 0'0 5 00 0OOIOO OO OO OOgOCDC00 0 0C OC OC 0\ \n 0_ v z , tU rL O Ze> o>U

w ^5 t ,DD Z ) o z a < LLJ CL Z W R - 6160

IBRD- 6160

;L-' ~ PHILIPPINES < -u SEC0OD LIVESTOCK DEViLOPMENTPROJECT

(D O 'AgriculturalLand lUtilization(Crop Area Harvested)by Main Crops, 1968 to 1973-'

\C' CD 51/ -t'-0 1968 l0'69 1970 1971 1972 1973- ±974-

CD 2 Food Crops 6,401 6,440 6,4o6 6,345 6,561 6,j45 7,123

Palay (rough rice) 3,301 3,332 3,113 3,113 3,246 3,112 3,437 Corn (shelled) 2,24d 2.256 2,420 2,392 2,432 2,325 2,763 Fruits and Nuts (exceptcitrus) 376V/ 368 380 361 385 389 351 Citrus 26 25 21 19 19 19 19 Rootcrops 250 254 252 246 259 266 314 Vegetables (except onions & potatoes) 46 49 51 46 5z 54 - Onions • • 7 8 8 69 Irish Potatoes 3 3 3 3 4 3 - Beans & Peas 148 45 504 49 45 47 4•6/ Coffee 49 52 54 54 55 61 - Peanuts (unshelled) 30 31 32 33 33 33 37 All other food crops 11 11 12 13 lb 17 18

Conmmrcial Crops 2,1405 2.1479 2,540 2.752 2,821 2,868 2,994

Coconu , 1.O00 1,846 1,884 2.049 e,126 2,133 2,205 Sugarcar.e 318 4' 366 442 441 455 491 Abaca ±71 173 173 155 145 163 £7u Tobauco 94 89 87 76 78 84 n/a

Total Area Cropped

1/ Crop year is July 1 to June 30. 2/ Revised estimates. 3/ Less than 0.1 thousandha. 1/ Including soyabeans :/ Preliminary estimates / Including - Mongo (37) and Soyabeans (3)

Source: Bureau of Agricultural Econonic- zwMPHILIPPINES

SECONDLIVESTOCK DEVELOPMENTPROJECT

(D C- Agricultural Production by Main Crops - 1969 to 1973 rA (Thoand Metric Tons)

1968 1969 1970 1971 1972 1973

9,890 Ce Food Crops 9,294 9,346 10,670 10,774 10,625

Palay (rough rice) 4,561 4,445 5,233 5,343 5,100 4,415 Corn (shelled) 1,619 1,733 2,008 2,005 2,013 1,831 1,803 Fruits & Nuts (except citrus) 1, 3 7 1Y 1,373 1,570 1,663 1,739 Citrus 78 75 71 63 66 64 Rootcrops 1,305 1,338 1,316 1,221 1,218 1,221 Vegetables (except onions and potatoes) 201 215 255 245 240 272 Onions 15. 15 31 33 31 38 Irish Potatoes 12- 18 20 22 25 23 Beans and Peas 221/ 20 23 24 24 26 Coffee 44 44 49 50 52 51 Peanuts (unshelled) 15 15 17 19 19 18 All other food crops 46 49 68 79 87 - 113

Conmercial Crops 3,943 3,914 4,531 4,848 4,562 5,202

Copra 1,542 1,516V/ 1,656 1,574 1,703 1,698 Desiccated Coconut 51i2: 44 70 105 110 99 Sugar 1,658 1,663 1,987 2,109 1,870 2,305 Molasses 503 504 608 871 683 886 Abaca 103 106 122 105 110 119 Tobacco 65 57 61 56 57 65

Total Production 13,237 13,259 15,201 15,621 15,187 15,092

1/ Revised estimates. . -

90urce: Bureau of Agricultural Economics o 1-. . '0 PHIILIPPINES

40 SECOND LIVESTOCK IEVELOIPENT PROJECT

Vol.me and Value of imports of Livesteck Products - 1969-1974

(~-~~_------olm------V ------) _-_------_--_-_---Value----70-- FB------_------Vau--- 1969 1970 1971 1972 1973 1974 1969 1970 1911 1972 1973 1974 CIF 1974 ------Numbers------(US $ '000)------_ ------121 117 24 8 253 43 698 A. Live Anlmels 14 236 428 1. Cattle 425 130 31 - 15 224 1l3 109 16 _ 1 8 .. . 2. Sheep and C0ot, 18 2 6 - 20 3 3 ,,. - 239 197 269 3. Swine 13 40 21 22 1,312 643 4 7 7 4. Other 2,003 476 94 31 - I I - …------Metric Tans------3.916 2,366 4,549 5,161 B. Meat and Meat Preparationa iT 6.220 ons4------98_____ 3,90U 8,833 5.177 S,tUO 1919 2,108 4.377 4,975 1. Meat, f:esh, chilled -r fro.en 3,917 2,347 3 433 2,901 1.85 3.782 2,784 2.116 2,30 1,870 1,716 1.374 1,495 3,279 3,633 a. -eat of Cattle 2,403 1,616 1,46 1,074 634 2,260 2,345 75 57 61 83 91 99 b. neat of sheep or lomb 342 184 135 191 98 51 116 92 350 3,480 380 667 843 c. meat of swine 436 248 1,127 1,117 864 1,057 139 79 183 136 150 340 400 d. other 736 299 705 519 248 41 184 2 2 2. Meat- dried, salted, smlsked or cooked 26 5 ... 1 1 1 14 3 1 ... 6.035 3.058 3.293 1.995 58 173 184 3. Meae- canned and meat preparation6 7.819 3.868 3,958 Z.003 43 121 2,713 2,904 1.728 29 76 84 a. corned beef 6,824 3,661 3,844 1,917 20 73 5,421 345 387 267 29 94 100 b. other 995 207 114 86 23 48 614 74.464 81,94 C. Dairy Productn and Eggs 42,353 32.471 40220 47607 45,198 2_7811 31,743 37.970 35.565 60,484 66_346 1. Milk and Cream 123,184 90,346 82.828 70,552 56.280 65,974 37.184 20,140 37,473 40,678 a. dry skim 28,439 26,625 28,851 46,689 37,238 46,487 7,808 6,609 8,746 22,960 7,681 6,773 2.897 770 l1 b. evaporeted 53,551 31,448 25,308 8,975 2,460 1 13,443 1,864 1,503 302 - - - -. conden.ed 8,335 6,566 4,731 804 - - 2,288 8,878 12,151 9,056 10,601 17,225 19,707 d. powdered 22,793 16,134 16,459 8,129 9,016 12,095 10.413 2,779 2,570 2,755 4,054 5,784 5,960 e. other 10,066 9,573 7,479 5,955 7,566 7,391 3,232 2,402 4.984 4,936 4.718 5385 5 77 2. B.rcer aod Bsot-ceryat 3'1l9 4,469 6.029 4.485 4,391 3,823 2.o55 1.402 2,Z60 2.102 Z.504 4.074 3. Cheese and Card 3,731 3.708 4,46 2.989 3,942 3.981 1.763 29 20 15 18 13 14 4. Eggs01/ 9 88 14 7 4 4 26 0i27 1.213 Z.584 2.393 4,52 ,234 5. Other 2/ 817 886 1,555 2.914 2,7Z8 3,959 751 51,531 47.617 9.447 87.804 TOTAL LIVESTOCK PROOUCTS 51.307 37,765 45.844

0ot nS the oh.ll - liqid, fr-.en or dried. - 1ntl-&ding honey - nostly altted compounds and ixtares.

Soure - Bure=u of the Censun and Statistics - Foreign Trade St.atistic of the PhilipPines PHfIIPPINES

0 tSECOND LIVESTOCKDEVLOPMENT PROJECT

Livestook and Poultry Popul1ationan of January1, 1973 ('00head)

Livestock Poultry-" Region_- _ Carabao Cattle Hog / Goat Chicken Duck

PHILIPPINES 4,937 2,099 8,627 1,248 4,965 2,906 Ilocos 151 72 192 37 476 23

Cagayan Valley 446 96 1,012 18 1,947 112 CentralLuzon 540 220 1s037 231 7,954 300 SouthernTagalog 486 303 1,360 123 13,053 250

Bicol 445 186 7145 67 2,303 504 WesternViaayas 648 157 923 167 4,142 68

CentralVisayas 363 176 884 58 4,248 89 EasternViJayas 404 17 1,004 8 2,074 423

WesternMindanao 251 181 130 56 2,108 30 NorthernMindanao 343 189 816 59 2,243 275 SouthernM4indanao 860 504 526 427 9,416 831

1/ Populationon-fanm only

Source: Departmentof Agriculture, Bureau of Agriculture Economics: ANNEX2 Page 1

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Pig and Poultry Production

A. Pig Production

The National Herd and Demand

1. The national pig herd in 1975 has been estimated at about 9.7 million head, and estimatesof the slaughteringfigure in 1974 range from 6.5 to 7.5 million. All the major breeds are representedand a small number of boars are imported annually from New Zealand, Australia and the U.S.A. These figures are in rough agreement with estimates of pork production and consumptionfor 1974 - 350,000 tons and 8.3 kg/head. Assuming that per capita consumptionremains constant and population grows at 2.8% per annum, a conservativeestimate of additional annual demand for pork would be about 9,300 tons, which is equivalent to about 160,000additional pigs (or the production from about 23,300 sows).

2. DBP is currentlymaking about 2,000 piggery loans per year and financing about 7,500 sows. The figure represents about 34% of the annual growth in the sow numbers required to meet expected demand for pig meat if per capita consumptionremains unchanged and the population growth rate remains constant. The proposed project would finance the purchase of an average of 10 sows each for about 616 pig farmers per year, a total of 6,160 sows/yearor about 80% of DBP's current financingand about 26% of the required minimum annual growth in sow numbers based on the assumptions above.

The First Livestock DevelopmentProject

3. The main objective of the first livestock developmentproject (appraised in 1971) was to channel credit, coupled with technical services, to smaller producers in the hope that, by demonstratingthe ability of this class of farmer to produce agriculturalcommodities, a fundamental change would take place in official thinking. At that time, many people in the Philippines assumed that "bigness"and economic efficiencywere synonymous and that small producers were generally incapable of efficient production. The first project has been successful in this respect, judging from the average size and type of loans under the project and the size and type of loans made by the Development Bank of the Philippines (DBP) from its own resources. For example, 605 loans, averaging 11 sows per loan, were made under the project from April 1, 1974 to March 31, 1975, while ANNEX 2 Page 2

DBP financed a total of about 2,300 piggery loano (including project loans) averaging about four sows per loan. Since 1973 it has been DBP's policy to charge only 9% interest for loans of less than V 5,000 (comparedwith 12% for DBP/IBRD loans) and this has maintained a higher average size for loans under the first project than would be the case if uniform interest rates were charged.

Husbandry

4. The Bureau of AgriculturalEconomics estimates that approximately 98% of the pigs are produced from herds of less than 50 head. The remainder are on large farms, recently developed and varying enormously in production efficiency. In general, breeding and fatteningare combined, but there is some feeding of purchased weaners, particularlyby small backyard producers. The raising of pigs is a well developed traditionaloccupation among Filipino small farmers and villagers, and although individual enterprisesare small, there is considerableexperience in pig handling and management. Many of the small to medium sized producers are efficientand provide good housing, management and hygiene.

5. The year round hot humid climate of the Philippines reduces pig housing requirements to a minimum, permitting the use of simple open-type shelters to be-used as protection from sun and rain and the dividing up of pigs into manageable groups for feeding and husbandry. Excessive heat can reduce feed intake and growth but this can be avoided by using an inexpen- sive water sprinkling device that allows the pig a "shower."

6. The tendency to allow too much floor space per pig still exists in the Philippinesalthough progress has been made since appraisal of the first project in 1971. At that time, DBP financed 14 to 16 m2 of floor space per sow, but this reduced to 12 m2 in 1973 and to 8.5 m2 in January 1974 for farms fattening 80% of the pigs produced and to 6.4 m2 for farms fattening 20% of pigs produced (weanersare about two months old at time of sale). These reduced space allowances represent savings of about 50% on the investment required to house a sow, compared with the standards prevalent in 1971.

Diseases

7. Although all of the common diseases that affect pigs are present, they can be prevented and controlledby vaccination,hygiene, and appropriate veterinary medication. The required vaccines and veterinary medicines are readily available throughout the country, distributedby drug companies and feed millers, who in addition generally provide veterinary advice to farmers. Hog cholera is the most common disease and outbreaks occur if sows are not vaccinated regularly. The importance of regular treatment for worms is not appreciated by all farmers, but if it is not provided, infestation can result in reduced returns. ANNEX 2 Page 3

Recestly, outbreaksof foot and mouth disease have occurred in Luzon and Cebu Islands, but the threat to the pig industry as a whole is probably not too serious. Its incidenceand occurrence,however, must be kept under constant review by DBP when defining p-iority lending areas for pigs.

Feeds

8. Feed accounts for about 80% to 90% of pig productioncosts in the Philippinesand to improve returns, feed conversionefficiency must be improved. The feed cost of producinga kg of pig meat is determinedby the purchase price of feed and the conversionefficiency, and considerableim- provement in both these areas could be achieved by purchasingraw materials and mixing on the farm. On-farm mixing was encouragedunder the first project and it is at present widely practiced. It will be encouragedeven further under the proposed project by includingfeed storage in the investment models.

9. A feature of Philippineagriculture is the large quantities of by-products (such as rice and corn offals, copra meal and molasses) available at low cost for animal feeding. This, of course, is a atrong incentive to their overuse in commercial purchased feeds, but the formulation of balanced high energy rations necessary for intensive pig production using mainly these domestic ingredientsis difficult.

10. The quality of pig rations, both in terms of protein and energy, can be improved considerably. With the range of by-productsavailable, good low cost balanced rations could be produced if attention is given to incorporatingthe correct proportionsof high energy and protein feeds (e.g., corn and soya bean meal). Although adequate feed evaluationin- formationis not available to enable full use to be made of the varied domestic raw materials in pig rations, accumulated evidence from on-farm feeding experiences indicates that savings of up to about 20% in the cost of pig rations are possible with home mixing when expert advice on nutrition is provided.

Breeding

11. Feed conversion efficiency is influenced, not only by feed quality, but also by the genetic capabilityof the pig to convert feed to meat. Great genetic variation exists between pigs in this important trait and is worldwide evidence that considerable improvement can be achieved by using performance-tested boars. The rate of progress achieved in feed conversion efficiency by performance testing, in turn, depends on selection intensity. With a selection intensityof 1 in 10, an improvement of 0.05 can be expected per round of testing. A small improvement in feed conversion efficiency from 4 to 3.9 kg feed/kg liveweight gain would increase profit per pig by about 10% in the Philippines.

12. Under the first project, a consultant on pig breeding visited the Philippines and prepared a report which has been reviewed by Government and ANNEX 2 Page 4

other interested organizationsand its recommendationshave been accepted as a basis for a future national breeding scheme. The proposed scheme will concentrateon performance-testingboars and it is expected that management and control will be vested in a council composed of members representing Government,University of the Philippines,and pig farming organizations. It is expected that the financing of the proposed scheme will be shared by Government and pig farming organizationsbut final agreement on this had not been reached at the time of appraisal.

B. Poultry Production

The National Flock and Demand

13. There were about 95 million birds in the Philippineswhen the latest official estimate was made in 1970. Surveys show that 90% of the poultry are on farms with less than 500 birds so that the poultry industry may be characterizedas one having a large number of small producers and a small number of large commercial units. It is estimated that nearly 3 million householderskeep poultry, of which 1.2 million are non-farm units. Poultry meat production in 1972 was about 109,000 tons.

14. The National Economic Development Authority (NEDA) has estimated per capita consumption of poultry meat and eggs at 2.8 kg and 3.2 kg respectively iu 1972. Assuming that per capita consumption remains constant and that population is growing at 2.8% per annum, the additional annual demand for poultry meat and eggs would be about 3,100 tons and 3,800 tons respectively. This is equivalent to about 2.85 million broilers and about 360,000 layers. At present DBP is financing about 90 broiler loans (about 3,000 bird capacity) per year (includingDBP/IBRD loans) and 35 layer loans (about 1,600 birds), which is equivalent to about 1.38 million broilers and about 57,000 layers. Therefore, current DBP lending represents about half of yearly incrementalgrowth for broilers and about 16% for layers. Under the proposed project, about 83 broiler loans (additional4,000 batch capacity) and about 50 layer loans (additional4,000 layers) would be financed each year for three years. The annual incremental production would be about 1.6 million broilers and about 185,000 layers, representingabout 57% and 51% of the estimated total annual incremental growth, respectively.

Husbandry

15. In rural areas, the traditional raising of native birds is widely practiced. A few are kept to supply the household with meat and eggs, and any surplus production is sold. Output is low, but the birds are scavengers and production costs are negligible.

16. Commercial poultry farms, with flocks ranging from a few hundred birds to many thousand, are found throughout the Philippines and generally follow intensive confinement methods of management. White leghorn types in cage units are used for egg production, while hybrids and, in some cases, leghorns are used for meat production. A small number of large integrated ANNEX 2 Page 5 poultry firms have developed recently, operating units that range from 30,000 to 100,000layers or broilers. On the commercial farms, modern methods of production are used and management standards are satisfactory.

17. Breeds used on commercial farms are derived from imported grand- parent and parent stock. Franchise agreements are held with most of the major poultry breeding establishmentsin the USA, and about half of a million day-old chicks are imported annually - white leghorn types for egg productionand meat-type hybrids for broiler production. The importance of the native stock, however, is reflected in the fact that only 25% of the poultry meat supply is produced by commercialbroilders, even though about 75% of the layers are pure-bred imported breeds.

Diseases

18. All the common diseases affecting poultry are present. Mortality from Newcastle disease is high dewpite preventive vaccination of an estimated 30 million birds annually, and avian pest is the most serious hazard for broiler units. Since prevention and control measures, includingvac- cination and medication,are available for all diseases and parasites, these problems present no major obstacle to expansion of poultry.

Feeds

19. As in the case of pigs, the cost and quality of feed is of prime importancefor egg and broiler production. The above discussion of feed quality, cost and home mixing in relation to pigs is equally relevant to poultry. The genetic component of feed conversion efficiency is taken care of by importationof specialized foundationstock, and the existing hatchery and multiplicationfacilities within the Philippines are considered adequate to meet existing and foreseeabledemands. The ratio of feed cost per kg to price received per kg of broiler meat and eggs is favorable to the producer and allows a high level of profitability.

IntegratedProduction

20. The development of integrated production on a contract basis between producers and five large feed milling firms has been officially encouraged to promote rapid developmentof the broiler industry. At present, an estimated 60 to 80% of the commercial broilers are produced under contract to these firms or by the milling firms in their own bbroiler production units. Each firm has its own type and form of contract but all contractsnow operating are biased in favor of the "integrator." Typically the feed mill, or integrator,supplies chicks, feed and some veterinary supplies and services and the producer undertakes to provide housing, labor and management and returns the broilers at eight weeks to the integrator. Typi- cally, the producer receives about t 1 per bird returned. The feed millers own and operate processing plants and usually sell broilers wholesale to supermarketsand other outlets. ANNEX 2 Page 6

21. The major criticism of "contract"production hinges on the underlying elements of economic compulsion and monopoly, which, in effect, leaves the medium-sizedand large producer no alternatives. The millers control the supply of broiler feeds and in time of shortages or disasters, they give preference to their own contract producers. Therefore, the independent producer's feed supply is more uncertain or at least he thinks so. The integratorshave also taken over most of the hatcheries so that the supply of chicks for the independentproducer is also more risky. The integrator also controls the processing facilities. It is essential for the broiler producers to sell when broilers reach the required weight, and since broilers are produced in batches so that houses can be disinfected,all birds are marketed on the same day. The case for integrationbetween the producer and the processor is therefore compelling because the processor also requires a reasonably even supply of birds. There is, however, no good reason why the broiler producer should not have freedom of choice in procuring chicks, feeds and veterinary supplies, but he cannot because inputs and processing and linked.

22. Although Government initially encouraged integrationto ensure that the rapidly growing demand for broilers was met, thereby maintaining reasonable consumer prices, senior government officials and the DBP are at present concerned that integrationmay have gone too far. DBP has in fact made representationto the Bureau of Investments on the matter and argued that the producer should be free in procuring inputs. Under the present circumstances,the policy of limiting DBP/IBRD lending to small independentproducers is correct. These producers can then sell to individual dealers, shops, and the like, and, since their batch output is relatively small, they do not need a contract with a processor. Up to now, the integrated sector of the industry was almost entirely confined to the Manila area, the main market outlet, but there is ample scope to develop small independent producers countrywide to meet the growing demand in towns and villages. There are indications, however, that the integrators will in the future concentrateon other large centers of population. Lend- ing under the proposed project will concentrate on the small to medium sized producer.

23. Government should give serious considerationto an alternative method of developing the broiler industry, based on integration of the producer and the processor on a contract basis. Most broiler producers are anxious to mix their own feeds and they should be free to do so as well as to buy broiler rations from the feed millers. By joining associations, they are eligible to purchase feeds from the National Grains Authority, which ensures their supplies without a feed mill contract. Similarly, there are sufficient independent chick suppliers to ensure an adequate supply. The main bottleneck is at the processing level, but the Manila Food Terminal, Inc. could overcome this by entering into processing contractswith producers since it already has ample capacity in its large Delta meat processing and cold storage facility. ANNEX3 Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Cattle and Buffalo Production

Introduction

1. The Philippines has a long tradition of large domestic ruminant husbandry particularlywith carabao (water buffalo) which are the main sources of draft power for the predominant small rice farmers. Cattle are also used for draft but are more important as beef animals. Dairy production is insignificantand comes mainly from low yielding carabao which are sometimesmilked mainly for family or local village consumption. There is virtually no traditionof commercial dairying with high producing dairy breeds. In January 1973, there were an estimated 4.9 million carabao (about 70% of the domestic ruminant population) and 2.1 million cattle in the country about 80% of which were calculated to be distributed equally between the two largest islands of Luzon and Mindanao with the Visayas accounting for the balance.

Carabao

2. The carabao is found in the traditional small farmer sector in family herds which range from about 2 to 5 in size. The primary use of these animals is for draft and rarely if ever are they grown and slaughtered specificallyfor beef. However, carabao are killed when they are too old for work or breeding purposes and the beef from these animals comprises 60-70% of the Philippines total beef production. Because of its age carabao meat is generally of lower quality than that from cattle. Consequentlyit is lower priced and is consumed mainly by the medium to low income groups.

3. Little has been done to date to explore the possibility of increasing the turn-off of beef from the national Carabao herd although it is generally agreed that there is potential for doing so. Information is required however on the production performance of local carabao and coefficients under different management systems. Steps have now been taken to obtain such data. Under the latest draft Cattle Development Program it is proposed to set up a carabao research commodity team under the direction of the Philippines Council for Agriculture Research (PCAR). Also Government recently made a submission to UNDP for assistance in establishinga Carabao Research and Development Institute. However, it should be realized that the carabao is primarily a draft animal and although beef output from existing herds could undoubtedly be increased, the Carabao as a beef ANNEX 3 Page 2

producing animal is very unlikely to compete with potentially more efficient beef cattle. It is with the latter that greatest emphasis should be placed in formulatingnational plans for increasing beef production.

Beef Cattle

4. The beef cattle industry is characterizedby low productivity with a national weaning rate of about 50%. With few exceptions,beef cattle are managed under traditionalsystems which are characterizedoften by inefficientland use and poor management. The industry is stratified into four main productionsystems: (i) hill beef farming; (ii) integrated cattle and coconuts; (iii) backyard or small farm cattle raising; and (iv) commercial feedlots. Except for a few purebred operationsmost cattle are a mixture of "native" cattle and a number of Bos indicus breeds, notably Nellore and more recently American Brahman and Indu-Brazils. Only limited use is made of artificial inseminationand the impact of any breed improvement programs has been generally poor.

5. The improved Zebu breeds are well adapted to the hot humid climate of the Philippines. Amount and distributionof rainfall is favorable for pasture developmentwith the exception of the western edge of the archipelago. Average monthly rainfall in this area ranges from under 0.4 cm during January-Marchto over 30 cm during June-Augustwhen dry matter content of the lush grass is too low for efficient weight gains.

6. The low reproductiveefficiency of the breeder herds plus the small national breeder base is a major constraint to expansion of domestic beef production, and the presently supply of feeder cattle is insufficient to meet the demands of the backyard fattening and the small but expanding feedlot operations. Clearly the first priority must be to increase breeder performance and numbers before domestic beef production can be increased significantly. Fundamental to this is the need to improve the nutrition of the national breeder herd. Numerically the backyard operation is the most important cattle enterprise (with more than 75% cattle of all classes) but probably represents the most difficult area in which to increase productivity. rhis is due to technical problems and present inadequacy and difficulty of providing technical services to numerous small enterprises. Good opportunities exist for improving the nutrition and reproduction coefficients of breeder herds run under coconuts and also on hill farms, primarily through the introductionof improved pastures.

7. The cattle health situation in the Philippines is relatively favorable in comparison to many tropical areas and is not a serious constraint on production. Rinderpestand contagious bovine pleuropneuaonia are non-existent. The Governmentofficially declared the Visayas and Mindanao as foot-and-mouthdisease free areas in May, 1972 but outbreaks have occurred again in 1975. Animal disease surveillanceis simplified by the island structure of the country and predominanceof animal movements in a South to North direction. Vaccines and treatments for the common diseases are readily available to producers and are widely used. ANNEX 3 Page 3

Hill Beef Cattle Farms

8. There are hill farming areas in most parts of the country, but the main areas are in northern Luzon, Mindoro, Masbate and Mindanao. Only about 12% of the national cattle herd is run on hill farms but the industry is a very importanttraditional source of feeder cattle for the backyard cattle raisers, most of hill farm off-take being sold as yearlings. The area of land under this use is uncertainbut the total available area of hilly to rolling grasslandis 3.4 million ha. Of this amount, about half is publicly owned. Much of this land is in remote inaccessibleareas. About a quarter of the hill land is leased from the Governmentfor up to 25 years on some 1,500 Pasture Lease Agreements under the Forestry Reform Code. Over 80% of these leases are for areas between 100 to 1,000 ha. These Agreements require the farmer to make certain improvementsbut in the past were seldom followed or enforced. A recent revised Agreement contains even more stringent requirementswhich it is unlikely farmerswill be able to meet. Hill cattle farming is historicallya low input-outputenterprise. The reasons for this include the past uncertaintyattached to land tenure, the squatter problem, the absence of peace and order in some more remote areas and the lack of technicalknowledge on developmentpossibilities. Typicallyhill farms are between 200 and 700 ha in area and contain minimal facilities (mainlysome fencingand rudimentarybuilding, if any). The land was pre- viously forestedbut followingover-intensive cultivation, the forest has been replaced by "cogon" grass, a collectionof very course natural grasses (primarilyImperata cylindrica,Imperata exaltata, Saccharumspontaneum and Themeda ssp.). Fiber content of these species increasesrapidly as the vegetationmatures with correspondingloss of digestibelnutrients. Thus the range is burned periodicallyto stimulate young vegetative growth for grazing. Centrosemaand other perennial legumes have been successfully establishedby broadcastingseed on the ashes, but the plants are usually destroyedby subsequentburning. Less than 1,000 ha of the hill farm area is estimatedto be under improved pasture. Low input extensive grazing methods are used on these farms and the poor natural pasture without supplements and bad management contribute to low annual weaning rates of about 40-50%. Low productivityis also due to hill beef farming often being a secondaryactivity of commercial and professionalpeople who rarely visit the farm and use their farms as a financialhedge rather than as a productive enterprise. However, there are also a significantnumber of full time hill farmers who are anxious to improve their properties. With intensive developmentof hill farms a three or four fold increase in cattle productivity is technicallypossible and has been achieved by some hill farmers throughpasture improvementand applicationof simple improved husbandry techniques. Typically carrying capacity is increasedfrom 0.3 to 1.3 animal units per ha and weaning percentage lifted from less than 50% to 70%.

9. Land use conflicts remain a problem in some hill farm areas and are a deterrent to investment in developmentprograms. This problem is accentuatedby often up to 25% of the area of individual hill farms being suitable for crop production. The full extent of the problem is not known ANNEX 3 Page 4 but as an example on Masbate island 41% of Pasture Lease Agreements are officially recorded as having a squatter problem. Although hill beef farmers hold long term leases and/or freehold title, long term development of arable land on hill farms for cattle is not advisable since such land is likely to be required for cropping in due course. In future the issuance of Pasture Lease Agreements is to be confined to non-arable "cattle country" as certified by the relevant departments (Natural Resources, Agriculture, Agrarian Reform and National Defense). The extent of such land is not known.

Integrated Cattle and Coconuts

10. The Philippine is the world's largest producer and exporter of coconut products and has about 2.1 million ha under palms. Over 750,000 ha of commercial coconuts, representing40% of the nation's total, are located on Mindanao. The second most important commercial coconut region is Eastern Visayas, with 387,000 ha in bearing trees. Distributionof rainfall in these regions is favorable for pastures. The coconut industry is dominated by smallholdersalthough conflictingstatistics are available on farm size distributionand tenancy. Many farms are 5 ha or less but the majority are probably in the 5 to 25 ha range with possibly 88% of the total under 25 ha. The country's low average copra yield of approximately 0.8 tons/ ha is indicative of the generally poor standard of farm management with for example only about 5% of farms using fertilizer. Under good management using local palm varieties yields of 4.5 tons of copra/ha are possible. Over the past ten years, the production of copra has increased by nearly 50% due to area expansion but yield of copra per unit area has declined. It is estimated that 0.8 million ha (40%) of the coconut area is grazed by cattle or carabao, partly for weed control. Some 10-13% of the cattle population is estimated to be on coconut farms on mostly unimproved coarse indigenous pastures. Main areas are Southern Luzon, Samar, Cebu and Min- danao. Indicated stocking rates are about one half to one animal units per ha compared with a potential of at least 2 animal units per ha on improved pasture. Most herds operate as breeder and fattening units but some farms fatten only, buying yearlings and selling at about three years. Management standards are low and little fertilizer is applied, often resulting in reduced copra yields. However, a few farms have improved pasture which is rotationallygrazed and also achieve increased copra yields with application of fertilizer. Pasture generally consists of para and guinea grasses overseeded with Centrosema. Annual fertilizer applicationsvary from 250 to 500 kg/ha and annual sub-soiling for aeration corrects the effects of trampling. Stocking rates are up to 4 animal units/ ha on well-managed farms and weaning rates of at least 75% can be achieved. Under good management the addition of cattle can double net income per ha. The integrated coconut/cattlefarm, with good management, holds the most promise for efficient cattle production. The potential stocking and weaning rates are higher than can be expected on other production systems, resulting in lower unit production costs.

11. Excellent opportunities exist for upgrading productivityof the existing grazed areas and for opening new areas for integrated beef/coconut ANNEX 3 Page 5

production. Copra production could be more than doubled on the average farm within 7 years and cattle carrying capacity of 2 animal units per ha achieved within two years by pasture improvement and application of fertilizer. The key to a viable cattle/coconut enterprise is the establishment and maintenanceof high quality tropical pasture which enhances coconut productionas well as providing the basis for achievinghigh cattle productivity. The dominant use of tall coconut varieties, the mature age distributionof palms in the Philippinesand the wide palm spacing (10 m x 10 m) particularyin Mindanao,generally makes the coconut farm well suited to tropical pasture developmentand cattle production. During the course of implementationof the first livestockproject three categoriesof coconut farm land were recognizedfrom the point of view of potential for tropicalpasture development. Each of these three categorieswill be developed under the proposed Project. The first category and best land for growing coconuts is also the best land for pastures. These are flat coastal, free draining sandy loam soils with a high watertable where soil moisture is not a constraintfor copra production,and where high yielding grass/legumepastures can be grown without adverse effect on copra yields. The second category of coconut land occurs somewhat inland, on land with rolling topographyand clay soils. The yield potential of coconut palms is lower and due to possible moisture stress high yielding grasses with a high moisture demand are avoided in favor of a straight legume pasture or a lower yielding grass with the legume. The third category representsan extensionof the second category into steeper land which may have been badly eroded and invaded with "cogon." Similar pastures to the second category are grown here but coconut and cattle offtake potential is lower.

Backyard Cattle Production

12. Some 75% of the cattle in the Philippinesare kept by small farmers. The small farmer may either breed and/or train cattle for draft purposes. Fatteningis generallypreferred to breeding because it is more profitable but due to the unreliabilityof supply of feeder cattle some farmers run breeder animals as well. In some areas cattle are used for draft. Backyard cattle are particularlyprevalent in Batangas and Pangasinan provinces and the weekly cattle markets in these areas specializein the sale of yearlings from the hill farms for smallholderfattening. "Batangas"beef from Southern Luzon has a reputationfor quality in Greater Manila, where it is sought by the select meat trade. The animals are handfed with rice bran, home-grown corn, pidgeon peas, ipil-ipiland napier grass or sugarcanetops. The steers are frequentlyused for light draft during the fatteningperiod. They are sold at 18-24 months of age with liveweightsof 325-350 kg. Weekly cattle markets are held in the two provinces. Typicallybackyard cattle raising involves very low inputs (a simple enclosureand/or tethers, some water troughs) and labor is frequentlysupplied by the family.

13. This form of cattle management has considerablepotential for both using under-utilized feed resources and providing additional income ANNEX3 Page 6

for small farmers. Key factors in expansion of smallholder cattle production are: (i) local availabilityof unused feed supply either on public lands (e.g. road verges and waste land) or on private land (e.g. crop residues and waste grass along irrigationditches); (ii) supply of feeder steers; (iii) the provision of technical services, particularlyadvice on improved feeding; (iv) adequate veterinary services; (v) provision of bull service centers or A.I.; and (vi) establishmentof regular municiple markets for livestock. Implicit on these requirements for expansion is the necessity to concentrate effort and selection of particularareas for saturation development. Such development should be proceeded by a survey of local feed resources. Approximately 1 ha of roadside grass will support two animal units. Carrying capacity of crop residue varies widely according to yield and quality but one animal unit requires approximately 2,500 kg of roughage per year. The carabao used for draft purposes has first choice of crop residues and as a general rule, cattle will only be carried by small farmers, in addition to draft animals, in locations where there is a high ratio of non-arable (cattle feed producing land) to arable land or where irrigation provides an excess of unused crop residue. Due to the slow build up of returns from breeder cattle development,backyard breeding operations would require initially a ratio of at least 3 feeder steers to 1 breeder to ensure satisfactorycash flow over the loan repayment period.

CommercialFeedlots

14. Good opportunities could exist for the development of commercial feedlots based on by-productsof the banana and sugar industries, if there were an adequate supply of feeder cattle. As yet this development is in its infancy but with the expansion of the national herd and increased availabilityof feeders it could expand rapidly. Up to 800 gms daily liveweightgain has been recorded with 2-year old steers being fed 15 kilo of reject bananas per day plus urea, molasses and ipil-ipil. In 1973 the Philippines produced 1.01 million metric tons of bananas, exporting slightly under 50% of production. For calendar year 1975 banana exports are expected to reach 700,000 metric tons. With rejection rate averaging about 17% on bananas destined for export, theoreticallyabout 21,000 head of cattle could be kept on feedlot throughout the year. However, the poor supply of feeder cattle in large mobs is a constraint to the development of large scale feedlots and for this reason it is uncertain at present how this industry will develop. Some producers have plans to breed cattle in feedlots but the technical and economic feasibility of this proposal has yet to be established. Possibly a dairy/beef enterpriseswill ultimately evolve. It is conceivable that smallholder units handling 10 to 20 head in a feedlot at one time, have a better opportunity to develop in the immediate future given the poor feeder cattle supply position. Establish- ment of large scale commercial feedlots would significantlyincrease the demand for feeder cattle and as is the case already in some parts of the country, result in price differentialsbeing eliminated between feeder and finished animals. Commercial feedlots were not included as a component of the Project since emphasis is to be given to breeding activities in order to improve feeder cattle supply. ANNEX 3 Page 7

Dairying

15. Present dairy activities in the Philippinesare limited to the occasionalmilking of native cattle and work buffaloes. There are only some seven commercialdairies in particularlyfavorable climatic and marketing locations,with exceptionalmanagement (for example the Magnolia Dairy Farm where 600 Friesians yield about 3,500 kg/lactationand the Cen- tral Mindanao University dairy project). There are few dairy-typeanimals in the Philippines,the total number unofficiallyestimated at 48,150 head in 1971, comprising 29,050 carabaos, 11,700 cows and 7,400 goats. Of the milk cows 2,500 were exotic crosses, mainly Friesan. Native carabaos and cattle are not generallymilked, but when they are, the average yield is only about 1.5 kg per day over a 250 day lactation period. On the other hand, carabaos crossed with the Indian Murrah produce about 4 to 7 liters pdr day over a 270 day lactationperiod.

16. The total consumptionof milk and milk products in 1973 in the Philippineswas estimatedat a whole milk equivalent of 695,535 tons. This waa 14% below the preceding year, 806,105 tons, because imports were down due to substantialprice increases. Per capita consumption from 1970 to 1972 ranged from 20.13 to 30.62 kg and decreased to 17.29 kg in 1973, but total demand for milk products is expected to be about 1 million tons (milk equivalent) in 1980.

17. Governmenthas relied mainly on imported milk products to meet national demand antdthe Philippines currently imports about 97% of its dairy products. Milk and milk products valued at over US$60 million were imported in 1974 and comprised 76% of total livestock product imports. Milk powder was in surplus supply on the world market and large quantities of subsidized powder were being imported, resulting in a rapid growth of the local recombiningand filled milk industry. Milk production, however, was unattractiveat the farm gate prices at this time and there was no incentive to further develop the infant dairy industry. From 1970 to 1973, domestic production ran at about 2,600 to 2,800 tons. This situation has now changed, farmgate prices are higher and Government is anxious to encour- age local production because of the large increase in the present and projected foreign exchange amounts required to finance dairy product imports. Between 1970 and 1974, the retail price of evaporated milk, the main dairy product, increasedby about 70% and condensed milk by about 145%, due mainly to higher import prices.

18. Given the rise in cost of dairy imports from US$30-70 million in the early 1970s to over US$60 million in 1974, good opportunitymight appear to exist for a major dairy development based on an import substitution strategy. However, in coamon with many other humid tropical countries which do not have significantareas of semi-temperatehighlands, the Philippines is not likely to be able to produce large quantities of fresh milk economically in comparison with the cost of imports from temperate regions. Typically the unit costs of finished milk products in such countries are about double the costs of imported milk products. In such circumstancesit is difficult to justify domestic production of ANNEX 3 Page or milk. However, considerableinroads could be made into the milk import bill if there were a widespread increase in smallscale dairy enterprises to serve families and their immediate neighborhoods with fresh milk. The costs of such enterprises,when they use underutilized family labor and crop residues and may be side-line activities of breeding/fatteningfarms, can be significantly lower than large scale dairies. In addition, fresh milk marketed locally for immediate consumption is cheaper to market and fetches a higher retail price than milk which must be processed to permit shipping and storage. During appraisal, fresh milk was retailed in Manila at about 1 18 per gallon, while whole milk powder was selling at t 16 to 20 per kg, which is equivalent to about t 11 per gallon for whole milk. Alternatively,small scale dairying can be developed in the neighborhood of existing milk processing plants with spare capacity, although the price paid for processing milk is likely to be lower than that for retailed fresh milk.

19. The four major constraints on the development of dairying in the Philippines are:

(a) Climate: The humid tropical climate to which high yielding temperatemilking breeds of cattle cannot adapt without serious reduction in yields;

(b) Dairy Breeds: Absence of significant numbers of dairy type animals of the breeds (mainly Bos indicus) and cross-breeds which are adapted to humid tropical climates;

(c) Forage and Supplementation: Tropical and sub-tropical forages, unlike temperate forages, cannot sustain high levels of milk production. Without supplementation, improved tropical pasture cannot support a daily yield in excess of 6 to 8 kg of milk per day, even in early lactation. Without supplementation, it is best to assume that forage will provide maintenance and not more than about 500 kg of cow per lactation. An adequate supply of forage is vital, however, since it is much cheaper per kg of dry matter than concen- trates and it will normally provide 80 to 90Z of the total dry matter consumed. Meal supplementation is required of the order of 2 kg meal per kg of milk up to a yield of 1,000 kg and 1 kg meal per kg milk thereafter. Therefore, milk production under tropical conditions is expansive and the price paid to the producer must be sufficient to support domestic production.

(d) Absence of Dairying Tradition: There is little or no tradition of dairying in the Philippines and, consequently, a strong technical service covering forage production, feeding, breeding, management and dairy husbandry, including clean milk production, must be provided to beginners. Initially this will be possible only on a small scale. Efficient dairy production requires consistentlyhigh ANNEX3 Page 9

management standards and this especially so in the humid tropics where the effectsof the climateare an added problem. (e) Milk CollectionProcessing and Marketing: Up to the present,the main developmenthas been in the filled- milk sectorbased on importedraw materials. However, Governmenthas developeda few well-equippeddairy plantsaround Manila to encourageproduction by small producersbut they are seriouslyhandicapped by inadequate suppliesof milk.

20. Becauseof these problemsthe dairy developmentproposed in the Projectis of pilot natureon only 20 coconutfarms.

AnimalHealth 21. Althoughalmost all the commonlivestock diseases are presentin the country,they are not a seriousconstraint on production.The cattle diseasesituation is relativelyfavorable compared with many tropicalareas and is not a seriousconstraint on production.Disease control is aided by the islandstruction of the country. Veterinarysupplies are available throughoutthe countryand most producersuse modernvaccines and prophy- latic measuresand maintainreasonable standards of hygiene.

CattleProduction Services 22. The Bureauof Animal Industry(BAI) is responsiblefor providing extension and veterinary services to cattle producers. The Bureau of Plant Industry also provides extension advice on related crop matters. The BAI operates an increasing number of breeding/demonstration stations where improved breeds of bulls are available for upgrading. Demonstration plots of improvedgrasses and legumesare also maintainedon some stations. How- ever, the effectivenessof BAI in reachingcattle farmers with the required servicesis poor and the Departmentof Agricultureis aware that substantial improvementsare requiredbefore services to the cattleindustry can be con- sideredadequate. In additionto Governmentthe private sectorprovides adequateveterinary supplies through networks of agenciesthroughout the country. Marketingof cattleis largelythrough traditional channels (livestocktraders and publicmarkets) although the Governmentowned Food TerminalInc. has recentlyentered the market throughits regionaltrading posts and shipmentof cattleto Ma-ila. Inter-islandtransport facilities for cattlerequire improvement, but privateiniatives, stimulated by the presentwide marketingmargins (forboth pigs and cattle),are expectedto resultin the introductionof specializedlivestock boats in the near future.

Goverment Policies

23. The NationalBeef/Carabeef Development Program (1976-86) of November, 1976,proposes increased emphasis on beef production.While the programis ANNEX 3 Page ll primarily directed towards the small farmer, the stratification of the cattle industry is recognized and expansion of hill farming is to be encouraged to provide more feeder stock for backyard fattening. At the same time, to further increase the national breeding base it is proposed to encouragesmall farmers to raise more cows, although fattening is considered to be more profitable. For the smallholderthe components of the program include; establishmentof strategiclivestock markets supported by trading posts connectedwith the Food Terminal Inc. in Manila; provision of livestockextension services built around the Samahang Nayon, and provision of purebred bulls for lease to farmers. It will be the responsibility of the BAI in collaborationwith the Departmentof Local Government and Community Developmentto assist small farmers to start backyard cattle breeding and fatteningprojects. Expansionof backyard operationswill be based on the successfulBatangas pattern. For small farmer breeding projects the proposal is to finance one cow and two feeder steers through medium term loans (up to 7 years) with an interest free grace period of two years for cattle and three years for carabao. These loan terms may prove too stringent. Smallholdercattle/carabao breeding loans are planned to be provided through the Rural Banks from a "FoundationHerd Interest Fund" with an initial appropriationof t 10 million (US$1.33million). The program concentrateseffort in the first 18-24 months in Masbate and Bukidnon/Misamis Oriental. Succeedingregions to receive attention will be Mindoro, South Cotobato, Cagayan Valley, Davao Provinces, Bohol and Bondoc Peninsula. The Project strategy supports the Program'sgeneral objective of expanding beef output through increased investment in large beef cattle farms to provide more breeder and feeder stock for the expansion of smallholder beef production. However, the production parameters on which the Program's projected reulats are based appear optimistic and the detailed arrangements for implementing the Program appear to have been inadequately formulated.

24. For the hill farmer, issuance of new Pasture Lease Agreements (PLAs) will be subject in the future to more stringent development conditions as specified in the revised Forestry Reform Code. All PLA holders who have not complied with the terms of the lease will be given a 12 month grace period to prepare a developmentplan and if needed obtain finance. However, it is not clear that these new provisionsare practical, particularly with respect to the short period allowed for compliance and the prohibitivecost of such developmenton all the hill lands operated under PLAs, even having allowed for some reduction in the PLA area as arable lands within present PLAs are excluded. ConsequentlyGovernment policy on the developmentof hill lands leased under PLAs requires review.

Cattle Developmentin the First LivestockProject

25. In the first project the cattle components (integratedcoconut/ beef breeding/fatteningand hill beef breeding) were particularlyslow in starting, partly because of delayed appointmentof the beef production specialist. However, the cattle componentswere progressingvery satis- factorilywith, as of September, 1975, about 9% (US$600,000)of project farm/ranch funds having been committed to beef cattle enterprises. Funds had been committed for 46 integrated coconut/beefbreeding investmentsand for the development of 114 hill beef breeding farms. Because of the long lead ANNEX 3 Page 11

time required in beef cattle developmentof a full assessmentof the performanceof these farms is not yet possible, but inspection of a sample 'during appraisal indicated that the developmentsare in line with appraisal proposals. It was apparent that closer supervisionof the sub-projects was required in order to provide sub-borrowerswith adequate advice during the developmentphase. Under the first project, technicalassistance was provided to initiate feeding trials using sugar industry by-products (molassesand sugarcane tops) as the basal diet. This work is on-going and the first trials at Victorias Milling Company in Negros have been encouraging,producing daily liveweightgains of 660 gm for a return on investmentof 48%. However, over two thirds of the margin in this analysis was due to the appreciationin value of cattle while in the feedlot and less than one third was due to weight gain. There was no dairy component in the first project.

Proposed Cattle Component

26. The cattle component of the Project would comprise about 800 loans split between 60 for hill farms, 440 for integratedcoconuts and cattle and 200 for backyard cattle. This is 24% of total loans in number and 20% (US$8million) of total project cost. The general strategy is to concentrateon increasingbreeder/feeder numbers through placing greatest eaphasis on coconut farms where the best production coefficientsmay be expected and to make an initial effort to finance and improve backyard cattle enterprises. Dairy developmentwill be limited to 20 small scale pilot operationson coconut farms. A beef production specialist would be provided to assist DBP to implement the program and to improve supervisionof cattle sub-projects. In addition finance is provided for two short term consultants to assist the continuationof the feedlot trials based on crop by-products and for further investigationof backyard cattle production.

27. (1) Hill Beef Cattle: Some 3% (US$1.2million) of the Loan funds would be channeled into the developmentof hill beef breeding farms. The object would be to channel credit into the step in the development of the average hill farm which involves minimum fixed improvementsbut will raise productivitysignificantly, namely (i) pasture improvementon a small por- tion of the farm for special uses to complement the natural pastures; (ii) fencing; (iii) stock watering facilities; (iv) corral facilities;and (v) cowboy accommodation. Sub-loans for hill farm developmentwould be limited to farms which are not affected or not likely to be affected by land use conflicts.

28. Pasture improvementis the cornerstoneof hill farm development and it is important that the first unit of improved pasture be used effectively. Priority use of improved pasture would be directed towards raising the conception rate by providing a rising plane of nutrition for cows after calving. To achieve this, it is estimated that about 10% of the total effective area of an average hill farm would be initially sown to an improved grass/legumepasture. In general terms, the technology ANNEX 3 Page 12 of tropical pasture developmentand management is well understood for the type of environmentrepresented by Philippine hill beef farms, and further research is not required for commercial pasture improvement to progress confidently.

29. The essential features of economic pasture improvementon hill farms are:

(a) the use of improved pasture species which will spread naturallyand replace the existing coarse native "cogon" grass and which could be establishedwith minimum land preparationor by sowing into a burnt sward;

(b) the use of species which can recover from intermittent close grazing and burning;

(c) the preference for sowing an improved grass and legume together rather than simply oversowing a,legume into the "cogon." This precludes the ingress of low yielding grasses which inevitably replace "cogon" with heavy grazing pressure; and

(d) the use of species which will persist and be productive without fertilizer or with minimum fertilizer inputs.

The legumes best suited to this task in the Philippines include Schofield Stylo (Stylosanthesguyanensis), Centro (Centrosemapubescens) and Peruvian Ipil-Ipil (Leucaenaleucocephela). The most important grasses are Alabang (Dichanthiumaristatum) and African Star Grass (Cynodon plectostachyum).

30. Even using pasture grasses and legumes with low phosphorus re- quirement, pasture improvementon some hill farms in the Philippineswill require phosphorus maintenance fertilizer to ensure vigor and persistence of the pasture. However, where fertilizer is required the rate of retura is significantlylower than where fertilizer is not required. Consequently, where continued applicationof maintenance fertilizer is required development of improved pasture on more than 10% of the total hill farm area (sufficient for breeding cows before mating) may be economicallyunjustified at present fertilizer prices.

31. (2) Integrated Coconut Beef Cattle Breeding/Fattening: About 6.52 (US$2.7 million) of the Loan funds would finance the developmentof beef cattle breeding and fattening under coconuts. The rationale for the emphasis on coconut/beef in the Project is based on (i) the expected higher reproductiveefficiency of herds under coconuts and thus more rapid expansion of the national beef cattle herd by concentrationin this sector at present; (ii) the relative ease and efficiency of supervisionand marketing of cattle from coconut areas; and (iii) the possibilityof improving through diversification the risk situation of small coconut farmers. De- velopment would be geared on one hand to increasing production of the ANNEX 3 Page 13 coconutsand on the other hand to the introductionof pasture and infra- structurespecifically for cattle. Cattle productioncoefficients considered achieveableat full developmentare as follows:

Land Category: First Class Second Class Third Class

Carrying capacity (a.u./ha) 2.5 2.0 1.5 Liveweightgain (kg/head/day) .425 .400 .350 Weaning rate (X) 75 75 70

Fixed improvementswould include: (i) constructionof fences, corral and new copra driers; (ii) sowing of improved pastures; (iii) establishmentof pasture and coconut fertilizingroutines; and (iv) purchase of cattle.

32. The tropical legumes most suited to planting under coconuts are centro, kudzu and ipil-ipil. High planting rates (centro-15kg/ha, kudzu- 10 kg/ha and ipil-ipil-4kg/ha transplanted)would be used as seed of these species is cheap and high planting rates help to suppress the early weed growth. On first class coconut land para grass would be favored. On the poorer categoriesof coconut land, Alabang X would be used in combination with the above legumes or pure legume stands would be used. On the poorer soils, maintenancephosphatic fertilizer is expected to be required to maintain pasture vigor and high animal productivity. The model for breeding and fatteningon 20 ha assumes applicationof maintenance fertilizer and a correspondinglyhigh stocking rate (Annex 11). The model for fattening on 5 ha assumes no maintenance fertilizerwith correspondingly lower stocking rates.

33. There is an apparent conflict with the coconut replantingprogram being formulatedunder UNDP auspices using high yielding dwarf hybrids, which are not compatiblewith cattle grazing. This program is planned to commence in 1981 with a target annual replantingrate of 60,000 ha by 1985. The replantingprogram will be organized on a district-by-districtbasis and the conflict here (albeitin the future) is real if a replantirngdis- trict coincideswith areas recently diversifiedby introductionof beef cattle. However, consideringthe income flucutationscommon to coconut monoculturewhich is substantiallyexport dependent,a diversifiedbeef enterprisewill continue to be attractive to farmers with no other source of income. With this in mind, it may be worth consideringreplanting with tall hybrids and adoption of wide palm spacings which permit intercropping with various crops (includingpastures for cattle) rather than aiming to maximize yield by mono-cropping dwarf coconuts.

34. Coconut land tenure does not pose a problem and usually the owner of small coconut farms lives on the farm. However, the farm may also be the place of residence of a contract copra maker who takes 20-30% of the crop for harvestingnuts and making copra. Because of this arrangement, ANNEX 3 Page lb

the share cropper may benefit significantly from copra yield increases on farms financed under the Project.

35. (3) IntegratedCoconut/Dairy Beef: AboutUS$100,000 of the Loan fundswould financethe pilotscale developmentof dairyingon 20 coconut farms. Thesepilot developments will be locatedwith specificregard to marketingthe milk, eitherretailed fresh or to existingprocessing plants. Thereare largeareas undercoconuts on Luzon,within 30 to 60 milesof the importantManila milk market. Under the project,the pilot dairydevelop- ment componentwould be locatedin theseareas, particularly around Lucena. 36. Adequatedairy cattleare availablelocally for the pilot development planned,mainly from the Bureauof AnimalIndustries supply farms. At most, about 100 dairyheifers would be requiredper year for a year period. If a significanteffort is to be made, to developdairying, however, the local supplywould be inadequate.There are two optionsopen, importationor localbreeding. Since the latteris the most attractive, particularlyas the Philippineshave reasonablygood artificialinsemina- tion service,it is proposedthat DBP and BAI encouragethe productionof cross-bredcattle on some existinglarge beef ranches. It is expected that cross-breddairy-type heifers should bring about J 500 more than beef heifers,which would constitutea strongincentive for ranchesto participatein a contractscheme. Semencould be readilyimported and inseminationcarried out by the BAI inseminationservice. Feedssuitable for supplementingforage are in plentifulsupply. Rice and corn by-products and molassesare readilyavailable and the ruminantis particularlyeffi- cientin utilizinghigh-fibre feeds (riceand corn by-products).In the projectionsfor dairyfarms under the Project,it is assumedthat 400 kg dairyfeed would be requiredfor a projectedyield of 1,000kg per cow per lactation. DBP and BAI have agreedto give strong technicalsupport to the dairy farmsdeveloped under the Project. Furthermore,DBP and BAI will arrangecollection if necessaryby one of the small existingplants operatedby BAI or by the plant at Los Banosoperated by the University of the Philippines.Since thereis a good marketfor pasteurizedwhole milk, thereshould be littledifficulty in maintainingthe presentprice of about Y 1.80 per kg to the producer for cow's milk (about US$1.10 per gallon). A farmgateprice of t 1.80 per kg is used in the dairymodels for the Project.

37. (4) BackyardBeef CattleBreeding/Fattening: About US$124,000 of Projectfunds would be channeledinto the developmentof 200 of these smallscale enterprises.This is a smallproportion of the total funds but the financingrequirements of theseenterprises are low (aboutUS$870 per unit of 8 animals,including 3 breedingcows) and the full potential of this type of enterpriseis limitedby the presentinadequate supply of feedercattle. Also, this is essentiallya pilot program,one of the rationalesbeing to developa model for increasingthe breedingeffi- ciencyof the largepart of the nationalbeef herd kept by the small backyardbeef farmer. Specificareas would be selectedin CentralLuzon and SouthernTagalog for concentrationof projectsbased on an appraisal of foddersurpluses at the barriolevel. A short term consultantis also ANNEX 3 Page 15

providedto investigatethe parametersof backyardenterprises and to advise on futurepolicies and developmentpossibilities.

Importationof BreederCattle

38. In terms of numberof breedercattle, the Projectwill absorb approximately13,200 head over the loan disbursementperiod. In any one year, the peak numberof additionalbreeders required will be 4,300head. Only crude estimatescan be made of surplusfemales generated from the nationalcattle herd each year but the incrementalnumber of breeders requiredby the Projectis a very small percentageof possiblenational surplusand since the need for improvementof geneticquality is not a major factor,importation of additionalfemales is not essential.How- ever, for some largerenterprises difficulty may be experiencedin aggre- gatinga line of qualityheifers from the Philippinelive cattlemarkets which traditionallydeal in small numbers. This fact togetherwith a possiblycontinued depressed world marketcould make importationof cross- breed heiferswith 5/8 or more Brahmanblood attractivein specialcases. This possiblityis open to sub-borrowersif they wish and is not precluded by procurementrequirements.

ANNEX 4 Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Pig and Poultry Rations

General

1. Feedmixes used in the livestock and poultry industries in the Philippinesare compounded from mainly corn and corn by-products,rice by-products,sorghum, soyabean meal, copra meal, fish meal, meat and bone meal, wheat bran and pollard and molasses. A large part of the soyabean meal, fishmeal and meat and bone meal used by feedmillers is imported and in 1972 this amounted to 93% of fishmeal, 67% of soyabean meal and 54% of meat and bone meal. Sorghum grain was imported for the first time in 1974 amounting to 20,113 tons and corn imports rose to 110,000 tons. All grains are imported by the National Grains Authority which resells at a small profit.

Protein Constituents

2. Significantincreases in domestic production of fisnmeal and meat and bone meal is not expected to occur and increaseddependence on imports is expected with the expansion of the pig and poultry industries. Inade- quate attention appears to have been given to copra meal as a protein ingredient of feedstuffs. With about 20% crude protein content and its wide availabilitythe meal could be a valuable substitute for imported protein when price rations are favorable. Further investigationof the potential of copra meal in feedstuffs is warranted. Soyabean production is in its infancy with only 2,214 tons produced in 1973/74. A limited area of soyabeans is grown by small farmers for human consumption,but large scale commercial growers are having problems. Yields have been disappointing,averaging 0.8 m.t./ha due to poor quality seed and adverse climatic factors just before and after harvest. Marketing is also a problem as larger buyers are not attracted to the local product because of low quality, the necessity to process soyabeansberore being used for animal feed and the inefficiencyof using the large available processing plants for a small throughput. Resolv- ing these problems is likely to be difficult. A change of Government policy towards providing financial incentives may be required to stimulate development of the soyabean industry. The provision of credit in the project for soyabean developmentwas judged to be premature and in view of the technical problems still to be overcome this is not expected to be a constraint to the expansion of soyabean production. Incrementalsoyabean requirementsfor the Project will therefore be largely imported.

Energy Sources

3. Corn provides the main energy ingredient in feedmixes used for pig and poultry industries. For the large compounders,corn and corn ANNEX 4 Page 2 by-products has constitutedin the past about 50% of the total weight of mixed feeds. About 15% of the corn produced in the past has been used for animal feed. Recently demand for corn has exceeded supply and substantial imports of corn and sorghum have been necessary as shown below:

Corn Imports Sorghum Imports C & F Value C & F Value Year tons (US$'000) tons (US$'000)

1969 25,788 1,560 - -

1970 1,015 9 -

1971 54,764 3,304 -

1972 100,465 8,569 -

1973 96,123 9,871 - -

1974 110,000 15,878 20,113 773

4. Corn production increased by 32% during 1969-74 to 2.29 million tons. This increase has been brought about essentially by an expansion of area under crop and the average yield remains low at 0.8 m.t./ha compared to 2.0 m.t./ha in Thailand. Corn production is in the hands of mainly small farmers who cultivate 10 ha or less and 80% of the grain is used for human food. In addition about 30% by weight of the grains is available for feed as milling by-products. In September, 1973 an ambitious national program of supervised credit (MasaganangMaisan) was launched to increase the supply of corn, sorghum and soyabean. Phase 1 of this program failed to have significant impact but there is more hope for increased production of corn in Phases 2 and 3 in 1975. Reasons for the failure of Phase 1 include: (i) dilution of effort over all regions including those less suited to corn production; (ii) use of seed from unimproved varieties; (iii) poor quality HYV seed; (iv) lack of drying and storage facilitiesand marketing outlets for extra grain when produced; and (v) misuse of fertilizer provided under the program. The program is being improved and yield increases are expected by the Gov- ernment for both white and yellow corn over the next two to three years. The target area in Phase 2 for planting under supervision has been reduced by 30% to 492,000 ha. This is concentratedlargely in Mindanao where the climate is most suitable for growing corn. The seed supply position is better organized with supervised credit being provided only to farmers who obtain seed from the Bureau of Plant Industry (BPI). Unfortunately, the BPI will not be able to supply seed of high yielding varieties to all farmers under the program in Phase 2 and much of the HYV seed available is not resistant to downey mildew (which is the most important disease holding down production in the Philippines). Seed is still being bulked up and it will take a few years to get into widespread commercial use. The germination of HYV seed is sometimes low because of poor drying and storage and the BPI ANNEX 4 Page 3 are hoping to solve this problem by providing air-conditionedstorage units at 22 strategic locations throughout the country. A lack of working capital is a constraint to HYV seed procurementby BPI. Providing credit for special corn seeds and drying and storage facilities through the BPI and for farmers involved in certified seed production could be a specific aspect of the Masa- ganang Maisan program.

5. Through the Masaganang Maisan program, the Government'starget is to achieve an average yield of 2 tons/ha on the 16% of the total corn land under the program. While this is undoubtablyan ambitious target, some increase in production of corn might be expected over the next few years. This may largely offset the increased demand for feedgrains caused by expansion in the pig and poultry industries.

6. Sorghum is a relatively minor crop but has come into more promi- nence since 1971. In 1972-73 productionwas 6,542 tons, which although over 100% down on the previous year still represented far greater production than in earlier years. The Government's target under the Masaganang Maisan program is for 18,200 tons in 1975. Sorghum has reasonably good prospects as a subsititute for corn in downey mildew areas, being resistent to this disease. It also has the added advantage of tolerating slightly harsher soil moisture conditions and is therefore likely to be more suited to marginal rainfall areas than corn. Problems arise with the crop due to difficulty of threshingand marketing. Threshing is particularlya problem for small farmers at the moment due to the unsuitabilityof rice threshers for the job and as yet no large producers are equipped to handle the crop. Apart from the marketing problems, which equally apply to corn, sorghum is not presently preferred by small farmers because the price is not as good as that for corn. In times of scarcity the price of corn rises whereas the price of sorghum remains at the quoted NGA guaranteedminimum. Sorghum is not expected to contribute to a rapid increase in feedgrain production and at the present time it would appear that increased sorghum production will largely come from expansion of area planted by larger farmers who mechanicallyharvest the crop and who arrange contracts for sale to feedmillers.

7. Feedgrain production is likely to be enhanced through General Order 47 which requires large corporationsin the Philippines to produce annually or import sufficient rice or corn to feed their labor force. Alternatively they may produce feedgrains including yellow corn, sorghum and soyabeans. This order could account for an additional 80,000 ha of new land planted or a larger area of existing corn or rice land being intensified in production. While rice is expected to be the crop most affected, insufficientland for irrigated development could mean that a significant area is planted to feedgrains. Because of the relatively low financial returns of corn or uncertainty attached to new crops such as soyabean and sorghum, medium sized non-subsistencefarmers who are not affected by G.O.47 are not expected to be attracted into few feedgrain enterprises. In fact DBP's existing special financing for soyabean, sorghum and corn hiasbeen disappointingin uptake. The credit requirementsof the traditionalsmall corn growers who are likely to remain in the industry ANNEX 4 Page 4 are provided for under the Masaganang Maisan program through the PNB and rural banks. If only by default of the other sectors, the best opportunities for increasing feedgrain productionin the Philippines lies with the traditionalsector. The very large 2.7 million ha corn crop base with a low average yield has room for considerabletechnical improvementsand a very small increase in yields over this wide base could offset the incremental feedgrain shortfallarising from developmentunder the proposed Project.

8. The quality of commercial rations would be improved by the implementation of the seed quality control program component of the Project. ANNEX 5 Page 1

PHILIPPINES

SECOND LIVESTOCKDEVELOPMENT PROJECT

Slaughterhouses

Introduction

1. The project proposal submittedby DBP included a component for the constructionin the outer islands of two large slaughterhouseswith chilling facilities. Funds allocated for the same purpose in the first project are still not committedand there are now some doubts as to whether a major expansionof slaughteringfacilities in the south aimed at shipping carcassesinstead of animals to Manila is the best strategy for the industry. Comparativedata for the shipping of carcasses against that for live animals needs detailed review and the available data needs to be checked by controlledtrials. Furthermore,the extensiveidle slaughter,processing and storage capacity in the Greater Manila areas should be taken into account.

2. There is, however, a need for finance for the replacementof small municipal slaughterfacilities in the provincialcities followingGovernment's decision to improve the very unsatisfactoryslaughter arrangements for local meat consumption. Such replacementfacilities can be self-financing,will improve sanitary conditionsand reduce wastage, particularlythat caused by poor flaying and curing of hides. Funds are proposed for the upgrading and resiting of ten municipal slaughter facilitiesof a relativelysimple kind and DBP agreed to this alternativeproposal.

Municipal Slaughterhouses

3. During appraisal, 12 provincialslaugtherhouses and local meat markets were inspectedas well as the main slaughterhousein Manila and five other private slaughterhouses. The availablebasic data on slaughterhouses is at Appendix I.

4. There is an urgent need for new municipal slaughterhousesthrough- out the Philippines. In general, slaughteringoperations are archaic, un- hygienic and inefficient. Invariablywork is carried out on the floor in very unsanitaryconditions, many buildings lack light and water, and apart from scalding vats there is no equipment. With only a few exceptionsall slaughterhouseoperations, flaying, dehairing,dressing and cutting, are carried out by teams of workers employed by the butchers. The cost of this labor ranges from t 8 to t 20 per head of cattle or carabao and t 5 to t 10 for pigs. Butchers and their labor crowd the limited space and contribute to uncleanliness. The disposal of effluent usually pollutes muunicipal drains, open litchesor rivers. If meat inspectiontakes place the examination is cursory and, so far as condemnationsare concerned,ineffective. ANNEX 5 Page 2

The lack of facilities and of skilled staff ensures that the slaughterhouses in the provincial cities, which serve large sections of the population,do not observe minimum hygiene requirementsand are a serious hazard to public health. Most slaughterhousesare sited in very congestedareas and should be resited away from crowded residentialand commercialareas.

Meat Inspection

5. Although many slaughterhouseshave meat inspectors in attendance there is no apparent examinationof carcasses or viscera. Carcasses are generally stamped as being passed by the meat inspector as a matter of course. Some meat inspectors keep records showing the incidence of disease but there is no evidence of actual disposal by destructionof condemned meat or offal. Under the existing poor conditions which prevail at all slaughterhousesand without any facilities for inspection it would be futile to attempt to enforce routine examination. Furthermore,butchers, who together with their assistants slaughter and dress their own animals, would resist any attempt by the meat inspectors to condemn and destroy either carcass meat or offal.

6. For Public Health reasons it is important to introduce an effective meat inspection service. A good start in this directionwill be made possible by the establishmentunder the Project of the ten new slaughterhouses in which provision is made in both buildings and equipment for the efficient examinationof carcasses and offal. To overcome possible butcher resistance to meat inspection through fear of losses a compensationscheme could be introduced to cover all carcasses (or quarters) which are condemned. Without some form of compensation, the work of the meat inspectors will continue to be ineffectiveand their position in the slaughterhousewill remain untenable. Since meat inspection must be carried out by suitably qualified and responsiblepersonnel a training program will be required in the future if effectivemeat inspection is introduced.

SlaughterhouseFees

7. Municipal slaughterhousesare considered to be revenue raising undertakingsof local governmentswhich have the sole right to establish public slaughterhouses. Operating costs are kept to a minimum and there is no evidence of any maintenance work being carried out. In most instances the municipalityprovides only a covered concrete slab with an improvised scalding vat. The municipal staff usually comprise a fee collector,a meat inspector and one or two cleaners. Typical fees charged are as follows:

Cattle Pigs

Slaughter fee for public consumption 1 5.00 ) 3.00 Permit-to-slaughterfee 2.00 1.00 Corral or stockyard fee 0.50 0.30 Anti-mortem inspection fee 0.90 0.60 Post-mortem inspection fee /a 7.50 3.00 J 15.90 I' 7.90

/a Based on carcass eight of cattle-150 kg, pigs-60 kg. ANNEX 5 Page 3

Slaughterhousecharges vary from province to province but the anti-mortem and post-mortem fees appear to be standard in all areas. In the past the number and range of fees were much larger. Under PresidentialDecree No. 7 dated September, 1972, a large number of fees were abolished, but further consolidationis desirable to allow the introductionof a single standard fee for each type of animal. The slaughterhousesproposed in the project would be self-financingfrom revenues collected.

GovernmentPolicy

8. Recognizing the dangers of the position the National Meat Inspec- tion Commission (NMIC) has issued instructionsto the provincial and municipal authorities to rebuild or renovate the slaughterhousesto bring them to the desired sanitary standards and ensure meat inspection is carried out effectively. The NMIC is authorized to close down any slaughterhousewhich does not comply with this order within a specific date. It appears that at appraisal only the city authoritiesat Iloilo have made any attempt to respond to the NMIC instruction,but their work is held up through lack of funds.

Project Proposal

9. It is proposed that ten new municipal slaughterhousesbe financed under the Project at a total cost of about US$1.9 million. Details of the investmentcosts are set out in Annex 14. Design details are discussed in Appendix 2. Operating costs and debt service is met from revenue and the financial rate of return is estimated to be 17%. Appendix 3 discusses hide quality improvementwhich could be a significant secondary benefit to the proposed slaughterhouseinvestments. ANNEX 5 Appendix 1 Page 1

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Existing SlaughterhouseFacilities and Staffing

1. The Bureau of Animal Industry has compiled details of slaughterhouses with the object of giving provisional accreditationpursuant to an order by the Departmentof Agriculture. The report from all areas are not yet complete but the available informationindicates the need for improved conditions.

Number of Provinces 60 Number of Cities 46 Public SLaugnterhouses 63 Private Slaughterhouses 20 Number of Municipalities 460 Public Slaughterhouses 460 Private Slaughterhouses 18

Total number of slaughterhouses 561

Technical Staff

Veterinarians 49 Meat Inspectors (municipal) 257 Meat Inspectors (BAI) 10 Livestock Inspectors (BAI) 36 Sanitary Inspectors (municipal) 15

Total 367

Location of Slaughterhouses

In or near the market 24% Near residences 32% In open fields or spaces 3% Near the sea or river 4% Not recorded 4% ANNEX 5 Appendix 1 Page 2

Existing Slaughterhouses

Scalding Vats 100% Electric light 39% Water supplies 63% Meat delivery van 4% Toilets for workers 18% Scraping platforms, viscera platforms, inspection tables, boning tables 18% Hanging rails, meat hooks 19% Pulley hoists 3% Gambrels, floor rings, meat trees 19% Scales 18%

Source: BAI ANNEX 5 Appendix 2 Page 1

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Proposed Municipal Slaughterhouses- Design Details

1. The Project would include the construction,replacement or upgrading of ten municipal slaughterhousesto improve existing inadequate facilities.

Design and Contract Arrangements

2. Most slaughterhousesconform to certain principals of basic design, irrespectiveof minor variations in layout and equipment. The modest throughput of the municipal slaughterhousesproposed under the Project call for a simple structure, suitably equipped so that it can function efficientlyand economicallyunder good sanitary conditions. A combinationof technical ex- pertise, knowledge of local conditions,consumer habits and butcher's inter- ests must be applied in the final planning if the slaughterhousesare to operate successfully.

3. Firms specializingin slaughterhousedesign, constructionand operations should be engaged for the preparatorywork. They would be required to prepare preliminary drawings together with the construction and engineering specifications required for tender documents. The designs would be produced in close association with the BAI and NMIC and the provincial health authorities. Turnkey contractswould be awarded. The contract would include not only the constructionbuildings but also the supply of all plant and machinery and detailed engineeringwork. AnciUary facilities, utility services,administration offfices and staff amenities would also be covered by the contract. Contracts for slaughterhouseswould be subject to local competitivebidding, since their small size (about US$155,000 each) and scattered locations and phasing are not likely to be attractive to internationalcontractors.

Location and Site

4. Slaughterhouseswould be sited in a strategic position for livestock procurement,either from the local market or for supplies by road transport, and for access to consumer markets. The location, which should be well away from built-up areas or those zoned for future residential development,must also satisfy other basic criteria. These include proximity to a source of labor and technicalservices, adequate water supplies and easy means of effluent disposal. A constant electrical supply is required. The area for the small slaughterhousesproposed should not be less than 3 ha. However, it is desirable to acquire more land to ANNEX5 Appendix 2 Page 2 allow for: (i) possible future expansion; (ii) the holding of livestock in an emergency;and (iii) to provide ready means for the disposal of effluent, paunch contents and slaughterhousewastes. The belief, accepted generally in the Philippines, that it is an advantage for the slaughterhouse to be located adjacent to a river or the sea is incorrect. The disposal of effluent is discussedbelow.

Water

5. The slaughterhousemust have an adequate supply of water (of drinking water quality) which can be distributedat a good pressure throughoutthe plant and a sufficientsupply of hot water must be availableduring working hours. If a constant and ample municipal supply of water is not available then any hydrologicalsurvey would be a prerequisiteof site selectionand approval. Provision has been made in the investmentcost estimates for a tubewell and piping. Water requirementsare about 300 gallons for each minimal unit throughput. Slaughterhouseswould be provided with a head tank having a capacity of not less than 6,000 gallons. To achieve the desired standardsof chlorinationa small automatic chlorine dosing unit is included in the equipment list for the slaughterhouses.

Disposal of Effluent

6. It is unlikely that water consumptionwill greatly exceeed 300 gallons per animal unit and with the throughputof livestock envisaged, the disposal of effluent would not present any serious problems providing that site requirementsare met and additionalagricultural land is available adjacent to the slaughterhousesite. Since practicallythe whole of the offals and organs are disposed of as edible products there would be comparativelylittle material remaining for processing into by-products and thereforelittle difficulty with excess fats in the sewerage. In the constructionof the slaughterhousewaste traps would be located at strategic points in the drainage system to collect large solids from the effluent. Ideally, the site layout would be arranged so that the land falls away from the "dirty" side of the buildings, that is, the lairage, slaughter- floor and offal cleaning sections, to open land below. Such a situation lends itself to a simple gravity process of effluent disposal, first through a catch basin which would trap fats and solids, then through filter beds and finally to channel irrigation of crops. The slaughterhousedrains would lead directly to a catch basin which can be located a few meters from the premises. The catch basin would be a conventionalover-under gravity flow system with 4 to 5 chambers. A pump would be installedat a discharge end of the catch basin with the suction pipe leading to a pump in the floor of the last chamber. This allows the catch basin to be pumped free of liquids for periodical cleaning. From the catch basin the effluent gravitatesto filter beds which should be located well beyond the buildings. The size of the filter beds would be about 8' x 16' with a surroundingwall about 2' high and with a smooth concrete bottom sloping towardsa discharge pipe at one end. A layer of stones about 2" to 3" in diameter is placed on the floor of the bed followedby a layer of small stones and finally ANNEX 5 Appendix 2 Page 3

a covering of sand a few inches deep. The inlet for the effluent is through a perforatedpipe placed above the center of the bed. Three such beds would be needed to permit them to be cleaned in rotation by changing the sand. The effluent is then channeled to a lower section of the lands for irrigationpurposes. It is possible to raise a variety of crops, particularlyfodder, with the recovered water which could amount to as much as 80% of the total water used in the slaughterhouse.

Buildings

7. The slaughterhousewould be designed and constructed to meet the sanitary standards set down by the Public Health and Veterinary Departments. The main building would be a single-storeystructure of simple design to contain one slaughter section for cattle and carabao and another for pigs. Provision would be made for an efficientmeat inspection system. Carcasses from both slaughter floors would be carried on rails to a hanging hall which is part of the main building. A small area would be partitioned off to serve as a detention bay which would hold doubtful carcasses awaiting further examination by the meat inspectors. The present consuming market is accustomed to purchasingonly fresh meat and for this reason chill rooms and refrigera- tion plants have not been included in the investment costs. However, provision should be made for holding carcasses in the future and therefore a space would be provided in the hanging room area to accommodate a small pre-fabri- cated chill room unit. A loading bay for carcasses and offals would adjoin the carcass hanging hall. A section of the main building, adjoining the slaughter floors would be partitioned off for cleaning and washing the viscera.

8. The brick walls throughout the slaughterhousebuilding would be finished on the inside to give an impervious washable surface. Floors would be of concrete with a minimum slope of 1 to 60 to standard drains, the floors would be finished with a non-slip and impact-resistantsurface. Ample ventilation is required throughout the building and all openings must be screened. Working and inspectionareas must be provided with good light- ing.

9. All intestines, lungs, blood, etc. are sold as edible products and very little remains for processingas by-products,apart from condemned materials. However, it would be necessary to provide for any material that might be availably and a separate building is proposed for this purpose. This would be a shed-type stucture having brick walls with a smooth, impervious finish on the inside and a good concrete floor with adequate drainage leading to the catch basin. The same building could accommodate a small maintenance workshop, the boiler, and laundering facilities. A well ventilated shed would be provided for the salting and storage of hides. Administrationoffices and the amenities section (changing rooms, showers and toilets) would require sound brick buildings suitably finished and equipped. ANNEX 5 Appendix 2 Page 4

10. To minimize fly nuisance and insect infestation,the cattle and carabao lairage and the pig pens holding livestockawaiting slaughterwould be locatedwell away from the slaughterhouse. The pens would be connected to the stunning boxes by a race or crush. The livestockpens would be provided with a roof for shade and have concrete floors pitched towards drains which should be located outside the enclosures. The pens would be surrounded by sanitarycurbs to prevent the spread of manure and liquids beyond the enclosures. Drinking water would be supplied to each cattle pen. A small quarantineenclosure would be required for any animals which are not passed for slaughterfollowing veterinary examination.

Plant and Equipment

11. Details of the plant, machinery and equipmentrequired for the provincialslaughterhouses is set out in Annex 14, Table 1. This equipment list would be used as a guide when calling for estimatesor tenders. It is likely that individualfirms would wish to add to the list or suggest alternativesin accordancewith their own particularmanufacturing program or slaughterhousedesign but offers in this directionwould be carefully reviewed. Complex and costly machinerywould not be required to process the modest throughputof these small plants, moreover, savings can be achieved by local manufactureof many items of equipment. Hanging rails and supportingsteelwork could be fabricatedwithout difficultyand the guillotinedoors, working platforms,paunching tables, offal tanks, paunch and hide trucks could all be constructedin the Philippines.

12. All equipment coming into contact with edible products would preferablybe constructedof stainless steel. Working platformsand other heavy equipmentwould be galvanized. Tubular legs would be used on all tables, platformsand tank stands. Angle iron which collects dirt should be avoided and wood should not be used for any purpose in the production areas. Wash basins and knife sterilizerswould be strategicallylocated in the slaughterand dressing sections of the slaughterhouse.

13. A strict routine of preventivemaintenance must be introducedand adhered to. Manufacturersof plant and equipmentwould give details of the routine maintenancerequired for the items which they supply and they would also furnish a list of recommendedspares which would be acquired with the plant.

14. For the cattle/carabaoslaughter floor a simple bed system of flaying is proposed using mobile dressing trolleys. Back flayingwould be from an elevated position using a manual hoist. The small daily slaughter of 10-20 animals would not justify electricalstunning equipment,electrical hoists or mechanical flaying machines. However, the latter can be readily introducedwhen required. The pig section has a larger throughput and would be equipped with electricalstunning apparatus,mechanical scalding tanks and a dehairingmachine. ANNEX 5 Appendix 2 Page 5

15. The small amount of inedible material which would be available for processing does not warrant the high cost of purchasing or operating pressure melters and centrifugesor expellers. Instead, any rendering which may be necessary would be carried out by prolonged cooking in locally made tanks fitted with open and closed steam coils. A small grinding machine is included on the list of equipment to break up any by-products.

16. Provision is made for the cleaning of intestines and tripes with a conical tripe washer, tables and washing tanks which have been included on the list of equipment, the small quantities of materials to be cleaned does not justify the cost of mechanized plant. All animals passing through the slaughterhousewould be numbered and the viscera would be carried out by the butchers and their staff until such time that the slaughterhouse authority can undertake the work. To maintain good sanitary conditions in the plant as well as the meat delivery van and also for identification purposes, the butcher would be provided with plastic bags to carry the cleaned intestines.

17. Steam would be required to heat water for the dehairing of pigs, to clean the slaughterhouseand plant, to render inedible products and to sterilizeknives, cleavers and other utensils. A small oil-fired boiler using diesel fuel oil would be provided for these purposes. The boiler would be supplied with all necessary valves, gauges, pump and electrical fitting for automatic control.

18. The slaughterhouseproduction staff would be provided with pro- tective clothing. To maintain the garments in a clean condition a washing machine and spin dryer is allowed for in sundry cost items.

Hygiene

19. Each of the slaughterhouseswould be provided with an amenities building fitted and equipped with showers, wash basins, clothes lockers and toilets. Each person reporting for duty would be required to wash his hands, preferably in a solution of sodium hypochlorite,and would be issued with clean overalls, apron and cap.

20. Prior to the commencementsof the day's operations,each section of the slaughterhouseshould be washed down with hot water. Throughout the shift, floors should be constantly swept free of waste and washed down. At the conclusion of the day's work the entire slaughterhouse, floors, walls and equipment should be washed down thoroughly with hot water, to be followed by spraying with a solution of bactericide. Par- ticular attention should be given to drains.

21. Any trays or containers used in processing should be left in an inverted position after washing. All knives, steels, cleavers, etc. should be sterilized in boiling water at the end of the day's work and again before resuming work next day. All waste traps should be cleared daily and at least ANNEX 5 Appendix 2 Page 6 twice a week the catch basin should be emptied of effluent and thoroughly cleaned. The livestock pens and slaughterhousesurrounds must be cleaned daily and sprayed with insecticides. A constant watch should be kept for possible breeding placed for flies or other insects.

Meat Delivery Service

22. Any improvement in the standard of sanitary conditions in the slaughterhouseswould to a great extent be nullified unless equal attention is paid to the methods of transport and distributionof the meat. It is proposed to introduce a meat delivery service at each of the municipal slaughterhousesto transportboth carcasses and offals to the markets. For this service the butchers would be charged a fixed official rate. Full use should be made of the meat trucks which are included in the investment estimates. When the specially constructed trucks are available the transport of meat and offals in open vans, carts or any other unhygienicmeans would be prohibited. ANNEX 5 Appendix 3 Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Hide Quality Improvement

1. The quality of hides produced in the Philippinesis very poor. The Tanners Associationof the Philippinesreported that all locally produced hides would generallypass only as thirds by internationalstandards. Vis- its to 12 provincialslaughterhouses, the large slaughterhouseat Tondo, Greater Manila and the FTI slaughterhousein Greater Manila confirmed this. Consequentlythe country does not benefit fully from its hides industry and must import considerablequantities of finished leather and raw hides. Sub- stantial losses of quality, as well as of actual hides, occur from the beginning of the slaughteringprocess and throughout the production procedures which follow.

2. Identicalmethods of slaughteringand flaying are followed at all slaughterhouses. After stunning the beast is thrown to the ground for slaughteringand at this stage in many slaughterhousesthe first downgrading of the hide takes place. Instead of the normal cut from chin to brisket, the hide is opened up on the side of the neck and the jugular is cut, this allows the blood to be collected in the dewlap and scooped out without loss. Modern flaying techniquesare not followed. With few exceptionsall flaying is carried out at ground level which results in cuts and gouges in the hide. In some instances, fleshing is carried out on the ground and further damage is done to the hide by gouging. In one large slaughterhousethe tail is removed prior to flaying, thus leaving a large V shape gap about 6 inches deep in the valuable back section of the hide.

3. Careless flaying by unskilledworkers using unsuitable tools, is followed by equally unsatisfactoryand careless methods of curing. Few slaughterhouseshave an adequate supply of water and the hides are sold by the butchers to dealers, exslaughterhouse,in an unwashed state. The dealer attempts to preserve the hide by spreading a few kilos of salt over the hides and then leaving them to dry. With an unwashed hide, smeared with blood and paunch contents, hair slop and putrifactionfollows especiallyif curing is delayed, as it so often is. As a result of these procedures only poor quality hides reach the tanneries in Manila. The industry estimates that only 48% of locally produced hides is usable compared with 85% of imported hides. On the basis of the local production (8,600 tons) and import figures (553 tons) for 1973, only a 7% increase in the effectiveyield of locally produced hides would have been sufficient to offset the need to import raw hides. This increase could be achieved by the provision of proper facilities at the slaughterhouse, the introduction of improved flaying techniques together with correct methods of curing. Hide improvement would be one of ANNEX 5 Appendix 3 Page 2 the importantobjectives of the provincial slaughterhousesto be financed under the proposed Project.

4. Plant layout and equipmentwould direct particular attention to the preparationof hides in order that they may command the best possible prices from the tanneries. It is proposed to employ only trained staff using correct tools for removing the hides, however, the results of good flaying techniqueswould be nullified if the butcher and hide trader continue to use poor curing methods. To overcome the existing wasteful practices it is proposed that the slaughterhouseauthority purchase the hide for cash at a fixed sum per piece directly from the butchers; this would be to the benefit of the butcher who presently obtains a low price for an inferior hide and often must wait for payment.

5. Slaughterhousestaff would flesh the hides, in a section of the main slaughterhousebuilding since the fleshings are edible. Washing and salting will be carried out in another building provided especially for hides. Good quality salt for processing hides is readily available. A 2% mix of sodium silocofluoridein the salt will help to overcome possible bacterial changes and discolorationof the hides.

6. The greatly increased return obtainable for improved hides will contribute to slaughterhouseviability. Present price differentialsfor salted hides are as follows:

Cattle Carabao

Firsts 90 - 95 88 - 90

Seconds 70 - 75 78 - 80

Thirds 50 60

On a national basis the additional income from Improved hides could have a marked effect upon the industry apart from import substitution for raw hides. Based on 1974 slaughter figures, if 50% of the hides could be up-graded one stage, their value would be increased by some ) 5.6 million. ANNEX 6 Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Demand, Marketing, Transport and Prices of Livestock and Livestock Products

Consumption

1. The Philippine people are basically consumers of fish (71% of total meat and fish intake) and pork, with pork accounting for 53% of total meat consumed (Table 1). Poultry meat, however, now competes well with pork and has increased its share of total meat consumption from 13% in 1960 to 18% in 1972. Beef meat is traditionallymore restricted to higher income groups but has also increased its share over the past decade. Although meat and egg production has risen steadily the increase has not been able to do more than keep pace with population growth and per capita intake has not significantly increased over the past decade. Indeed, surveys carried out by the National Food and AgriculturalCouncil since 1970 indicate that per capita consumptionhas slightly decreased because of high prices and erosion of real incomes due to general inflation. Action on production and prices is needed is self-sufficiencyin meat and eggs is to be attained.

Marketing

2. The Greater Manila area, with about 4 million people (10% of the total population) and high per capita income, is the most important meat consuming center. In 1974, of total registered slaughtering,Manila accounted for 30% of carabaos, 17% of cattle, 23% of hogs and 41% of chickens (Table 2). Although these figures are not good measures of total slaughter, particularly for chickens and pigs, a large proportion of which are slaughtered in the backyard for home consumption or in abattoirs not officially inspected, they provide an idea of the importance of the Greater Manila area as the main market output. Other cities provide secondary markets, but the main flow of livestock is from the south and north to Manila.

3. The livestock marketing system is still largely traditional. Farm- ers sell livestock by the head at the farmgate to traders and middlemen who provide transportationto the consuming centers for resale to butchers or other middlemen. When not slaughtered for local consumption, the animals are sent to Luzon either for slaughtering or for sale as feeders on one of the auction markets. This usually involves inter-islandsea shipments of up to 1,500 km on general cargo vessels. ANNEX 6 Page 2

Goverment Policies and Price Control

4. The Government has manifested its concern about better livestock product marketing in several ways: the creation of a National Meat Inspec- tion Commission; improvement in several auction markets (Presidential Decree No. 7); a growing interest in a new type of farmers associations (Samahang Nayons) that could become effective marketing channels, and the creation of Food Terminal Incorporated (FTI).

5. PresidentialDecree No. 7 (September 1972) abolished a series of fees and charges imposed and collected by Provincial Governors and City and Municipal Mayors on the production,slaughter, transportationand marketing of livestock and animal products, and created the National Meat Inspection Commission to set up standards in meat handling. The Government also at- tempted to improve informationon livestock auction markets by introducing price posting and grading, and bringing in Government scales. There is, however, some reluctance on the part of traders to use scales, but the disseminationof price informationmay prove useful. Several new livestock markets have been created and more are planned.

6. Price control legislationwas introduced in 1972, primarily to cope with consequencesof typhoon damAge in Luzon. The legal ceilings to retail prices of the low quality cuts of all types of meat were last increased in January 1974. The Price Control Council first determines prices in the Greater Manila area and local councils then fix prices in the provinces taking into account distance to the Manila area and local supply and demand conditions. The legislation is unenforceable,however, since on most public markets there is no selection of cuts. Meat is sold in heaps, including red meat, intestines,offals and bones, and beef and carabeef are hard to differentiate. Limited evidence on one Manila market where there was some grading suggests that ceilings are not rigidly enforced (Table 3). Moreover the legislation does not apply to higher quality cuts, nor to chilled or frozen meat, which excludes all meat sold in supermarkets, to restaurants,and to meat processors and institutionalbuyers, which channel much of the meat consumed.

Food Terminal Incorporated

7. For several years the main thrust of the Government in marketing has been the building, organizationand operation of the Food Terminal In- corporated. FTI is part owned by DBP and DBP's chairman is also Chairman of the FTI board. FTI has huge storage facilities located on a 120 ha area in the vicinity of Manila and has formal links with some 50 'tradingposts' in the provinces. The constructionof the terminal started in 1968 and was completed in 1973. Fiscal year 1974-75 is the first year of regular operation. The Central RefrigerationWarehouse covers a floor area of 2.5 ha and can store up to 12 million kilos of foodstuff. Chilling rooms have a capacity of 56,000 cubic meters and there is 52,000 cubic meters of freezer rooms. At present only 5% of this capacity is used, mostly for fruit and vegetables, ANNIEX6 Page 3

livestock and poultry, fish and marine products. FTI has recently acquired large slaughteringand meat processing facilitiesby taking over the DELTA abattoir, with a capacity of killing and processing up to 1,000 hogs and 500 head of cattle and carabao per day. The facilities,however, require restorationat a cost estimated at about f 9 million (US$1.2million).

8. The objectives of FTI are to reduce large fluctuationsin retail prices in the Greater Manila Area and in farmgate prices in the provinces and to provide consumers with steady suppliers and producers with regular outlets. Trading posts throughout the country buy foodstuffwhich is sent to Manila where it is either immediatelyresold to wholesalers, stored, according to the Greater Manila supply and demand situation, or eventually exported. In 1974, FTI received from its trading posts and slaughtered 81,781 hogs, 7,000 cattle, 17,743 carabaos and 9,000 chickens. When storage is not needed, the animals are resold immediately to wholesalers who can have them slaughtered in the FTI abattoir or elsewhere. On May 15, 1975, FTI was storing 138 tons of eggs, 64 tons of broilers, 24 tons of pork of its own purchases,and 166 tons of eggs, 169 tons of beef and 40 tons of pork belonging to third parties. However, this occupied only about 5% of storage capacity.

9. Out of 45 trading posts, about 15 regularly send livestock to FTI, totalling on average 600 head a day. The main shipping areas are the Visayas and South Cotabato. Trading posts may be constituted by provincial governments,jointly by three municipalitiesin a province, by active and registered cooperativesand Samahang Nayons, and by private corporations or individuals. Applicants must be in a position to generate a minimum volume of business of f 30,000 a month after six months of operation and own or have control of a pick-up or a truck. FTI has so far given preference largely to private individuals,often livestock dealers, on the basis that they already have a network of collection points. It is assumed that competition among dealers in one area is sufficientso that trading agents, who have a secure outlet in Manila through FTI at a good price, will offer farmers a better price than their competitors. Without eliminating inter- mediaries this strategy is thus intended to reduce margins to the benefit of producers and consumers. Trading posts receive advanced payment for 80% of the local price of an animal. They receive the difference between this amount and the Manila price of the animal at disembarcationin Manila when the animal is weighed. Nothing prevents farmers (provided they cultivate more than 20 ha) or farmers' associations from constitutingtrading posts and securing transport of their animals to Manila. Under this scheme farmers would have received in April, 1975 ' 6.9 per kilo liveweight for their broilers, t 7.10 for hogs and for cattle ) 6.10 for Batangas type and f 5.10 for ranch type animals. In practice only large organized farmers are able to take advantage of this price information and of special shipping space arrangements they may secure for themselvesbecause of their size. Small farmers, uninformed and reluctant to leave their farms, always resort to traders. The rationale underlying FTI preference for private individuals may be valid in many cases but there is a danger that the benefits of the operation will not be shared with the producers at all if there is only limited competition among traders in one area, or if for instance, trading ANNEX 6 Page 4

agents are at the same time input dealers. For small producers, a good solution would be a multiplicationof livestock markets to which they could themselves,or their Samahang Nayon, bring their animals and where a repre- sentativeof FTI, either a cooperativeor an official appointee, would be purchasing and taking care of shipments. In marketing broilers, a special difficulty arises from the fact that outlets are tied up with feed and chick supply. Unless FTI enters contract growing, there is little chance that it will ever constitutean alternativeoutlet for producers. Consequently, since FTI needs to rely on regular supplies, it is attempting to secure contracts with producers. Negotiationshave been started for the acquisi- tion of a broiler processing plant or the restorationof the DELTA line and for contractualarrangements with smaller hatcheries and feed millers for the supply of inputs to producers.

10. Another problem at the moment is the difficulty of securing inter- islaud shiDping space. FTI is making special arrangementson commercial vessels but is LIiALteLCj a 6Ernral shortage due to a very rapidly increasing demand. It is estimated that vessels presently handle 4,500 head a snth from South Cotabato but that the area covered by the 5 trading posts in this region has a potential of 8,000 to 10,000 head of swine and beef-cattlea month. There is a general awareness of this problem and plans for livestock boats are being studied by FTI and the shipping companies. DBP, which is heavily involved in finmcing FTI, is also encouragingprivate firms to enter the livestock transportbusiness.

Pig Marketing and Prices

11. The pig population is relatively evenly spread out all over the islands. A large proportion of pigs are raised as scavengers and slaughtered in the backyard for home consumptionor sale on the local market. Non-farm production of pork meat is estimatedat 25-30% of the total. Large commercial piggeries, which have expanded in the last few years, particularlyin Central Luzon and South Cotabato, usually sell directly to restaurants,meat processors and supermarkets and make arrangements themselves for the transport of their animals. Integrated operations, in which pig farmers have contracted outlets with their feed suppliers, are limited to the Manila area (about 10% of commercial piggeries).

12. In 1973-74, 352,000 hogs arrived in Manila by rail or ship from outlying provinces. Some 94% of hogs commerciallyraised in Bulacan, Cotabato, Davaos, Negros, Cebu and Antique are marketed in the Manila area, involving extensive inter-islandtransportation. The number of intermediariesbetween the producer and the consumer can be large and the system works along similar lines as for cattle. A hog weighing 80-90 kilo bought at the farmgate at t 5.80 per kilo liveweight in General Santos is resold alive at t 7.20 in Manila to another trader or wholesaler. Trans- portation costs do not exceed f 55 per head (Table 4) so that total net margin of traders involved averages some f 50 per head, i.e. 10% of sales proceeds. Total margins of all middlemen average t 200 per head. ANNEX6 Page 5

Income of Handlers Out of One Locally Produced Hog (80 kg) Retailed on Central Luzon Meat Markets

1. Proceeds of Retail Sales Pesos

Red meat = 57.6 kg at ' 10/kg 576 Red offals - 6.5 kg at f 8/kg 51 Intestines = 6.4 kg at 1 5/kg 32

Total 659

2. Famgate Price

80 kg at 5.50/kg liveweight 440

3. Expenses between producers and Consumers

Trucking to slaughterhouses 3 Slaughter fees: - corral .3 - ante-mortem .6 - post mortem 4.5 - slaughtering services 4.0 - meat delivery 1.2

Total expenses 14

4. Net Margins 104

13. Farmgate prices for hogs vary according to breeds and regions. For upgraded pigs, they vary between r 5.8/kilo liveweight in South Cotabato to t 6.8 to 7.0 in Central Luzon. The Philippine people have a predilection for 2 month-old weaners which fetch about t 15/kilo liveweight. In December 1970, producers in the vicinity of Manila were receiving be.tween 1 3.5 and 4 a kilo liveweight, but this price had doubled by December, 1974. Pork usually retails at t 11-12 a kilo boneless, and this has also doubled since 1970. Although retail prices were down in May, 1975, partly because of seasonal factors (e.g. school vacations), there has been a general tendency for prices to stabilize since September, 1974. This has been attributed by pig raisers to large quantities of cheap beef imports that compete with pork meat on the Manila "institutional" market. It is also possibly linked with the recent reduction of the rate of inflation. As in the case of beef, and for the same reasons, it does not seem that price control ceilings, unchanged since January, 1974, have had any significant impact on farmgate prices, nor have higher feed costs. Since 1971, the price of feed has increased at about the same pace as farmgate prices. There is no grading nor any cut selection on most meat markets. Imports of pork meat are small and essentially consists of fat trims for bacon production. ANNEX 6 Page 6

Cattle Marketing and Prices

14. Of the total cattle population 42% is located in Mindamo and 25% in Central Luzon and Southern Tagalog. Animals are transportedlive by ship, truck and rail over large distances for slaughter in the municipal slaughterhouses. Cattle trading between islands is a profitable business. Traders buy cattle from barrio agents, town buyers or livestockmarkets and ship them to Luzon for resale to other dealers, or wholesalers. Inter- island shipmentsmay take up to 7 days in normal times and longer during the typhoon season. In 1974 about 56,500 head of cattle and 52,000 head of carabao arrived in Manila at North Harbor or the railway station. Of these 28% were from the Western Visayas (particularlyIloilo), 15% from the Central Visayas and 15% from Southern Mindanao. Most of the animals were to be slaughtered,with the rest being sent by road or rail to livestock markets. Marketing channels for cattle and carabao are characterized by the number of middlemen bet"eeu producersand consumers. Animals usually go through 3 or 4 different hands before reaching the consumer (a barrio agent, a town buyer, a butcher-retailerand very often a sub-retailer). According to a recent survey by the Department of Agriculture,there is a mark-up of t 100 per head at the level of the barrio agent and V 50 at the level of the town buyer on an animal bought from the farmer at about t 1,200. Total net margins between producers and consumers amount to about 1 200-350 per head, i.e. 20 to 30% of farmgate prices or 15 to 25% of the proceeds of retail sales. ANNEX 6 Page 7

Typical Income of Local Handlers Out of One Head of Local Cattle (285-300 kg)

1. Retail Sales Pesos

Hide 65

Red Offals 171

Tongue 12 (1 kg at f 12) Heart 15 (1.5 kg atF 10) Liver 42 (3.25 kg at r 13) Tripes 28 (4 kg at t 7) Intestines 50 (10 kg at 7 5) Spleen, lungs 20 (4 kg at 7 5) Blood 4

2. Farmgate Price

295 kg at 7 4.0-4.5 /a 1,140 to 1,280

3. Maximum Expenses between Farmer and Consumer

Trucking (if any) .5 SlaughteringFees: - Corral .5 - ante-mortem .9 - post-mortem 7.5 - service charge 8.0 Meat delivery 3.4

Total 20.8

4. Net Margin 220 to 360

/a Price usually paid for culled animals.

Source: Mission Estimates.

15. Backyard breeding and fattening is becoming more and more popular in Luzon with fattening operations being particularlyprevalent throughout Batangas and Pangasinan provinces. Most feeder cattle for these farms come from the Mindoro, Masbate and Bukidnon provinces. Fattened animals command higher prices because of the good quality of meat. They are traded at Urdaneta (PangasinanProvince) and at livestock "auction" markets in Batangas and from there are sent to Manila by road or rail to be slaughtered. It has been the Government policy in the last few years to promote such markets aLd create new ones, in order to bring information about prices ANNEX 6 Page down to the producersas much as possible. It is doubtful whether the introduction of Governmentscales, grading and price posting introducedin 1973, has had much impact. However, these markets are handling a growing number of animals. In 1974, about 32,000 animals were sold for slaughteron the 7 Batangas markets, 28,800 for fatteningand 1,750 for breeding.

16. Farmgate prices for cattle have increasedconsiderably since the appraisal of the first livestockproject in 1971. They have almost tripled in Batangas, and generallyspeaking in Luzon, and more than doubled elsewhere.

Farmgate Prices for Upgraded Cattle (Pesos per kilo liveweight)

June 1971 May 1975

Batangas 1.9 to 2.2 6.0 to 6.5 Masbate 1.8 to 2.0 5.0 to 6.0 Davao 1.9 to 2.0 4.2 to 4.7 Cagayan de Oro 1.3 to 1.5 3.5 to 4.0

17. Culled animals sold for slaughterusually command lower prices - from t 3.50 to 4.50. Carabaos are usually sold for t 3 to 3.9 per kilo liveweight. This sharp increase in prices, mainly for high quality meat cattle, is due to general inflation but is also attributed to a sharp increase in demand from supermarketsand restauranttrades followingthe recent dramatic rise in tourism.

18. Prices of beef have more than doubled since 1970, slightly more than the consumer price index (232 compared with 207). In supermarkets, prices range for 1 14 a kilo for forequarterto f 30-40 for selected high quality hind quarter cuts. In 1974 and during the first months of 1975, low price frozen meat was imported from Australia. In 1974, the Philippines imported three times as much beef meat as in 1973 (Table 3, Annex 1), more than half of it (1,600 tons) from Australia. In March 1975, 750 tons were imported,mostly from Australia, at CIF prices averaging t 6.30 a kilo carcass weight, to be compared with local wholesale prices of more than 3 11. Estimatesbased on slaughteringfigures indicate that 750 tons would represent about 40% of monthly beef consumptionin the Greater Manila area and 30% of pork consumption. Because high income groups have a strong preference for fresh meat, the effect of these imports on prices of quality cuts is marginal but Australian frozen meat competes directly with cheap fresh beef and pork meat. Wholesale and retail prices of a kilo of Australian forequartersare reported to be about t 2 under local prices. There are two main reasons for this sudden increase in beef imports - the sharp increase in demand connectedwith tourism and the particularlylow current prices of Australian exports. This last factor should not persist long, as beef world prices are expected to resume their growth in 2 or 3 years. Therefore the long term effect of present low Australian prices on Philippine farmgate prices for cattle should not be significant. ANNEX 6 Page 9

Poultry

19. There are about 110 million poultry in the Philippines,40% of them on non-farm operations. Commercialpoultry raising is heavily con- centratedaround Manila, near the feed mills. The most important producing regions are Southern Tagalog (26% of on-farm chickens), Central Luzon (16%), Southern Mindanao (19%) and the Western Vizayas (8%). Feed is sent to the producing farms which are generally located adjacent to the consuming areas.

20. Specializedegg farms supply an estimated 75% of the nation's eggs. Eggs from small commercialfarms are usually sold to a dealer or wholesalerwho channels them to the retailers, but some producers sell directly to retailersor consumers. Feed dealers capture a significant proportion of the market by advancing credit on feed and then adjusting with egg sales, which usually brings the egg producers lower returns. Large farms either sell all their eggs to a dealer or have a direct arrangementwith the retail outlets, depending mainly on the distance of the farm to the consuming centers. Integrated operators at the moment, who produce 60-70% of the poultry feed, produce about 10% of the eggs. There is no contract growing for egg production. The cost of transportingeggs is not a problem and representsa small proportion of the retail price (about 8% over 100 kilometers).

21. It is estimated that commercial broiler production now accounts for about 30% of the nation's poultry meat. The rest consists mainly of live native birds sold at public markets. Among the commercial units, the tendency is toward the integrationof operations from the feed mill and hatchery to processing plants and retail outlets. Contract growing is becoming more and more important and small non-integratedpoultry farms sometimes have difficulty of obtaining feed and chicks. At the present time, the integrated operationsproduce about 60-70% of the poultry feed, 95% of the chicks and control about 70% of the broiler production. There are 5 main integrated companies. They have direct arrangementswith institutional buyers for marketing their output, or have their own retail outlets.

22. Most eggs on public markets are sold assorted at a uniform price but commercial enterprisesgrade their output. Farmgate prices for medium to large eggs range from 35 to 40 centavos a piece and, for broilers f 6.30 to 8.15 a kilo liveweight in Central Luzon. The retail price relationship between native birds sold alive and upgraded broilers is not clear.

23. Farmgate prices of feed, broilers and eggs have increasedroughly in the same proportion from July, 1971 (appraisalof the first livestock project) to November, 1974. Poultry producers have complained that retail price ceilings, unchanged since January 1974, are now too low in relation to feed retail price ceilings which were increasedin July, 1974 by about 14%. Currently, legal retail ceilings in the Greater Manila area are 40 centavos a piece for eggs and f 7.0 a kilo liveweight and P 8.20 a kilo dressweight for broilers. Most supermarkets and restaurants are not ANNEX 6 Page 10 affected by price regulationssince they do not apply to chilled or frozen birds. Control is easier on graded eggs and fresh broilers than on beef and pork. Nevertheless,ceiling prices are generally not enforced and producers can obtain a fair margin over feed costs. In April-May 1975, retail prices of chicken broilers in the Greater Manila area were about t 8.50 a kilo liveweight on public markets and 11.50 dressweightin supermarkets. In January 1975, eggs were sold at 45 centavos a piece. A proposal to increase current ceilings to 50 centavos per egg and V 9 per kilo liveweight (t 11.25 per kilo dressweight)for broilers is being studied by the Price Control Council, together with a proposal for increases in feed prices of 7-8%.

Dairy Products

24. Only 10% of milk consumed is locally produced fresh milk. There are seven principal commercial dairy farms and these mostly cater for moderate and high income urban people. Most milk is consumed as canned filled, reconstituted,condensed or evaporated milk locally produced from imported ingredients (dry skim milk and butterfat) or local vegetable fats (ediblecoconut oil). The consumptionof dairy products is estimated at between 17 and 20 kilos per capita per year, which is only about 25% of NEDA's recommendednutritional intakes. In 1974 the Philippines imported dairy products for a total CIF value of US$88 million, mainly non-fat dry milk, butterfat and cheese curd for local processing into canned milk and cheese. Import prices have increased substantiallyover the last four years.

25. Producer's,wholesaler's and retailer's prices of canned milk (evaporatedand condensed) are controlled,and so are retailer's prices of its imported equivalent. The cost of producing milk locally is still higher than reconstitutingor filling it from imported dry skim milk- but because of the recent higher import prices the difference has become smaller. The controlled importer's price (includinga 10% ad-valoren duty) is t 64.4 per case of 48 cans of 14 oz. each for imported evaporated milk. Equivalent controlled producers' prices are r 75.8 (filled)and t 84 (reconstituted). Retail ceiling on 14 oz. tins is V 1.40 for imported evaporated milk and V 1.60 for imported condensedmilk, as compared with t 1.88 to t 1.92 for local filled condensed milk, and t 1.63 to V 1.68 for local filled evaporated milk. Fresh milk, however, fetches higher prices of more than t 4 a quart (May, 1975) in supermarkets. Based on these price comparisons, there is opportunity for developing domestic milk production for import substitution.

Transport of Animals vs Carcasses

26. Studies have been carried out in the Philippines in the past few years by the National Food and Agricultural Council (NFAC) recommendingthe construction in outlying islands of slaughterhousesequipped with refrigera- tion and processing facilities for the purpose of shipping carcasses to Manila instead of live animals. However, before any action is taken on ANNEX 6 Page 11

these proposals,a detailed study of comparative costs based on controlled trials of both systems is necessary. These trials should involve careful weighing of animals and carcasses and close supervision of shipments,under the relevant range of circumstances,in order to generate empirical data to substitute for the largely theoreticaldata used in the present studies. Some of the important aspects of such studies are briefly discussed below.

27. Transportationfrom General Santos (the farthest point from Manila) to Manila of live cattle and hogs currently costs f 170 to 200 and P 48 to 56 per head respectively (Tables 4 and 5). Although voyages may take up to a week, only carcass shrinkage, not liveweight shrinkage, representsa loss and with adequate feed and water en route, this should be well under 1% carcass weight to liveweight for both types of animals. The cost of sending carcasses, including handling charges (? 10 per cattle carcass and g 5 per hog carcass), amounts to about I 110 for cattle 1/ and y 45 2/ for hogs per carcass on the few boats with refrigeratedcompartments that operate in the Philippines. Red offals, intestinesand tripes fetch high prices on the Manila market. With regional slaughter of Manila's meat, local markets would be unable to absorb most of these secondary products. Returns from processing them locally into by-productsare low and costs are high, so that it would be necessary to send them chilled or frozen to Manila, together with cattle hides. Transportationof offals would amount to about Y 30 for cattle and i 9 for hogs, which would bring total costs to f 140 for cattle and t 54 for hogs. This approximates the costs of shipping liveweight with good feeding and care to avoid carcass shrinkages. More- over, the processing costs of chilling or freezing and wrapping are not included in NFAC studies. The cost of cold storage at the plant or in Manila and the considerableinvestment cost for chill rooms, cold stores, containers,and refrigerationfacilities must also be included. In addition, there exists in Manila a large idle slaughter and meat processing capacity at the DELTA plant, which could be restored at a cost much less than the likely investment required in new regional slaughterhousesand specialized transport which would be required to ship carcasses to Manila in volume.

1/ 150 kg carcass weight.

2/ 60 kg carcass weight. Tab I

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Consumption of Animal Proteins 1972 (per capita)

% of kg. per capita % of meat proteinsof per year consumption animal origin

Meat

Beef 3.1 (20) Pork 8.3 (53) Poultry 2.8 (18) Other 1.6 (9) Total 15.8 (100) 37

Milk and Milk Products

Fresh Milk 1.0 EvaporatedMilk r.l Powderedand other Dry Milk 1.6 Dry Skimmed Milk 13.1 Other 1. Total 17.5 7

Fish and other Sea Food 39.2 50

EgR8 3,4 5 Total 100 Source: NEDA- The PhilippineFood Balance Sheet 1972

EAP Project.q Department. November 13, 1975 ANNEX6 Table 2

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Animals Slaughte-ed in the Provinces and in the Greater Manila Area, 1974 (Number of heads)

Total Total Greater Marila ?revinces Registered.- Estimated /

Carabao 2,Y,O9 i)19,722 212,231 220,000

Clattle V6,h1p1 21Q,372 265,393 400,000

Hogs 602,335 1,976,360 2,578,695 7,h80,000

Horses ?,239 11,990 14,229 15,000

Goats 3,167 76,791 79,958 420,000

Chickens 7,h91,232 1O,858,346 18,349,578 110,000,000

1/ Total animals inspected by officlal Meat Inspection Services. 2/ Unofficial estimates from animal populat.ionfigures and (for chickens) from NEDA ood balance sheets.

EAP Projects Department November 13, 1975 PHILIPPINES ANNEX6 Table 3 SECONDLIVESTOCK DEVELOEfNT PROJECT

Present and Proposed Retail Price Ceilings and actual Prices - Meat and Eegs - (Greater Manila Area) (P per kg)

Present Prices Price in Present Proposed Manila Farmers' Supermarkets Ceilings Ceilings Market-May,1975 (March,1975)

Broilers - V per kg

Liveweight 7.00 9.00 8.5 Dressed 8.20 11.25 9.0 10.8 to 12.50

Eggs (t per piece) 0.40 (large) 0.50 1/ 43 (medium)

Pork - (V per kg)

Head 5.20 6.40 5.5 to 6.5 n.a. Pork chop 9.20 10.50 n.a. 14 to 15.93 Spare ribs 6.10 7.30 7.0 10.8 to 13.8 Leg 6.30 7.50 7.50 n.a. Belly Liempo 9.40 10.60 n.a. 11.8 to 13.2 Impella 5.70 7.40 n.a. n.a. Bone shoulder 6.20 6.70 n.a. n.a.

Greater Manila Public Markets April, 1975

Carabeef

Shank 6.10 - 9.03 Lean meat 8.50 - 10.42 Neck without bones 7.40 - 9.44 Neck bones with meat 5.50 - 8.54 Spare ribs 5.50 - 8.40

Beef - Ranch type - Batangas

Shank 8.50 to 9.00 - n.a. 13.80 to 15.80 Lean meat 11.UO to 11.50 - n.a. stew = 11.90 to 17.76 Neck bones with meat 7.00 to 7.50 - n.a. Neck with bones 10.00 to 10.50 - n.a. Spare ribs 7.50 to 10.00 - n.a. Short ribs 12 to 14

1/ BAI reports 0.49 pesos in January, 1975p 047 in February and 0.42 in March.

EAP Projects Department November 13, 1975 ANNEX 6 Table 4

PHILIPPINES

SECOND LIVESTOCKDEVELOPMENT PROJECT

CrstofShoipttpfingtCttl

Pesos per head of -

. I,arge Cattlel/

Masbate to Manila General Santos to Manila

Trucking to Pier 15 15 Documents and Fees h 10 Handling 10 10 Freight 34 115 Feed 2 5 Trucking to Abattoir _7 7 Total 72 168 2 Yearlings

Macbate to Manila General Santos to Manila

Trucking to Pier 12 12 Handling 7 7 Freight 34 115 Unloading 7 7 Feed 2 Total 62 146

Cost of Trucking Cattle Pesos per head Manila-Urdaneta 15 (per weaner) to 25 (per large animal)

Batangas-Manila 15 to 25

This figure'does not include any estimate of shrinkage losses. A maximur 1", carcassweight to liveweight shrinkage would incrense total costs by about Y3' per head to 202. On a 300 kilo liveweight animal dressing out at 51%, carcass shrinkage wTouldbe 3 kilos. At wholesale prices of P11.30 a kilo for good quality mo~atcarcas,cs in Greater Manila, shrinkage losses would amount to P3h4

EPP Projects Department November 13, 1975 ANMIEX6 Table -

PHILIPPINES

SECOND LIVESTOCKDEVELOPMENT PROJECT

TransportCost of Pi,gs / kresosper ehad)

GeneralSantos Visayas(Cebu/Iloilo) to Manila to Manila

1l Trucking piggery to pier 2.50 2.50

2. Wharfagefee 0.20 0.20 2/ 3. Freight 22.65 11.04-/ 4, Salaryof convoy 2.00 0.80 5. Convoy boat fare 0.42 0.15

6. Feed en route 14i00i 5.00

7. Handling -(Ki) l o.64 0164 8. Miscellaneous (Documei%tsis ozits mortality) 2.00 2.00

9. Truckingto Abbatoir(Manila pier to FTI pens) 3.50 3.50

TOTAL 47.91 25.83

i/ Does not includeshrinkage losses. Maximumcarcass shrinkage 1 percentof 'carcassweight to liveweightfrom GeneralSantos, i.e. on a 85 kilos liveweight hog,0.85kilos. At 9.6 pesos a kilo,fcrcarcasses in Manila,maximum r-irinkage lossesamount to 8.1 pesos from GeneralSantos and about half of this (4.1) from the Visayas,bringing total cost& to 56 pesos and 29.9 pesos respectively. 1 Average of freightrates from Cebu and nloilo. 3/ 2 kilosper day during 7 days at 1 peso a kilo.

IL/ 2 kilos per day during2.5 days at 1 peso a kilo.

UAPProjects Department November13, 1975 PHILIPPINES ANNEX7 Table 1 SECONDLIVESTOCK DEV.OP1ENT PROJ0T

Pig Breeding/Fattening Model - Inoreasing Herd frm 20 to 40 Sows

Herd Projection

10thout ------lSnd of Year------Project 1 2 3-20 Herd Composition

SDws and Replacements 20 40 40 40 Boars 1 2 2 2 Pigs - under 2 months >1 93 93 93 Pigs - above 2 months 100 150 200 200 Total Pigs 172 285 335 335 Total Births 288 405 576 576 Purchases

Gilts - 20 - Boars 2 1 1 Total Purchases _ XT 5 Mortality

Breeding Females 1 1 1 1 Boars Pigs - under 2 months 32 43 64 64 Pigs - above 2 months 10 10 19 21 Total Mortality 47 Sales

Culled 9DWS 7 7 12 13 Culled Boars - 1 1 1 i*anlings 51 65 102 102 Finisned Pigs 187 187 328 375 Total Sales 245 260 443 491 Technical Coefficients

Conception Rate % 80 80 80 80 Number Born/Farrowing 9 9 9 9 Number of Farrowings/Fertile Sow/Year 2 2 2 Average Number of Farrowings/Female in Breeding Herd 1.6 1.6 1.6 1.b Sow Culling Rate/Year % 33 33 33 33 Boar Culling Rate/Year % 50 50 50 50 Production sold as lanlings % 20 20 20 20 MorLaity % Breeding Females % 2.5 2.5 2.5 2.5 Boars % 1 1 1 1 Pigs - Under 2 months % 11 1 11. 11 Pigs - Above 2 months % 5 5 5 5

EAP Projects Department Fehbripry 23, 1976 PHILIPPINES

LIVESTOCKDEVEIOPHENT PR0JECT

Pig Breeding/FatteningModel - IncreasingHerd from 20 to 40 Sows!' InvestmentProjection

Year 1 Year 2 Total

Unit No. of No of Unit Cost Units Cost Units Cost Units Cost Tf Investments - 7, Tr) (T) Fixed 2 9,576 Farrowing Pens 99m 1,596 6 9,576 - - 6 2 10,726 Dry Sow Pens 99.m 1,532 7 10,726 - - 7 2 9.9m 1,542 1 1,542 - - 1 1,542 Boar Pens 2 Weaning,Growing and 11,960 Fattening Pens 9.9m 1,495 8 11,960 - - 8 2 8,000 Feed Store and Quarters 19.8m 4,000 2 8,000 - - 2 5,071 Water System - 5,071 1 5,071 - - 1 8 7,200 7-month Gilts - 900 8 7,200 - - 6 4,800 6-Honth Gilts - BoO 6 4,8O0 - - 6 4,200 5-month Gilts - 700 6 4,200 - - 1 1,500 Boar - 1,500 1 1,500 - - 2,014 Miscellaneous - - 2,014 - - -

Sub-Total 5j,589

WorkingCapital 45,482 Feed kg 1.11 22,127 24,560 18,849 20,922 Medicines Vaccines, 2 2,717 Supplements / - - - 1,467 - 1,250 520 Klectr city and Wate,3/ - 26 - 400 - 120 2,340 LaborW - 117 - 1,800 _ 540

Sub-Total 28,227 22,832 51,059

117,648 Total Investment 94.816 22,832

TechnicalCoefficients Feed consumption/boar or sow/year = 1095 kg Feed consumption/weaner 0-2 months = 10.5 kg Feed consumption/grower 2-6 months = 188.5 kg Feed consumption/finisher 6-8 moaths = 141 kg Liveweight of finisher at 8 months = 90 kg Labor productivity = 1 man to 20 sow herd

_ ' Loans are made in this project to finance fixed investment and incrementA working capitalup to the sale of the first batch of fatteners financed under the project. 2/ Medicines, Vaccines and Supplements is estimated as 67% of feed costs. 3/ Electricity and Water is estimatedas M26per sow per year. Labor& is estimated at Y117 per sow per year. PHILIPPINES

SEC0ND LIVESTOCK DEVELOPMENTPROJECT

Pig Breeding/Fattening Model - Increasing Herd from 20 to 40 Sows

Sales and Operating Expenses Projection

Without Project Year I Year 2 Year 3-70 Unit No. of No. of No. of No. of Sales Unit Price Units Amount Units Amount Units (t) Amount Units Amount - - 7f0(1'0O) (P'000) 9 I''0) (P'OOO) Culled Sow no O 7 5.6 7 5.6 Culled Boars 12 9.6 13 10 4 no 700 - - 1 Weanling8 1/ .7 1 .7 1 .7 no 180 51 9.2 65 11.7 102 18.4 Finished Pigs-! 102 18.4 no 630 187 1$ 187 117.8 328 206.6 375 Total Sales 236.3 S 135.8 235.3 265.8

Operating EzensAes

Feed kg 2 1.11 92,830 103.0 92,830 103.0 Medicines, Vaccines% 162,547 180.4 185,660 206.0 S pplements - - - - 6.1 Electricity and Water; - 6.1 - 10.7 12.3 - - - .5 - .5 Labor/ - .8 - 1.U - - 2.3 2.3 Purchase 3.8 - 4.7 of Boar no 1,500 - - 1 1.5 1 1.5 1 1.5 Repairs and Miscellaneous-/ - - 2.0 - 2.0 - 3.4 - 4.0 Total operating Expenses 1s= lI 200;6 229.5

1/ Finished Pigs are sold at 90 kg liveveight at V7 per kg. 2/ Medicines, Vaccines, Supplements are calculated as 6% of feed cost. 3/ Electricity and Water are estimated as 126 per sow per year. 4/ Labor is estimated as ?117 per sow per year. 5/ Repairs and Miscellaneous is estimated as 2 percent of feed costs. PHILIPPINES

°CD SEOUNI LIVSbW1JCKDEVELOPMaNT PROJzflT

(D O e1 c CD r 0 Pig Breeding/Fattening Model - Increasing Herd from 20 to 40 sows

\O 0 FinancialProjections --J , (,1? ,000) ' \0C

:3 Wlthout --- Year --- Project 1 2 3-7 8-20 Cash Inflow

1. Annual Sales 132.60 135.8() 235.30 265.80 265.80 2. Producers'Contribution 9.48 2.28 3. Long-termLoan 85.34 20.55

Total ExpectedCash Inflow ITEM 230.62 258.13 265.m

Cash Outflow

1. Invesbments a. Producers'Contribution 9.48 2.18 b. Long-termLoan 85.34 19.66 2. OperatingCosts 113.90 115.40 200.60 229.50 229.50 3. Debt Service/1 Long-termLoan 5.12 29.37

Total ExpectedCash Outflow 113.90 210.22 227.56 258.87 229.,0

Surplus Cash at Year End 18.70 20.110 30.57 6.93 36.30

CumulativeIncremental Herd Value/2 - 41.79 02.2)h 62.24 62.24

/1 Total term Of 7 years including2 years of grace. 12% interestv.a. 72 Valutesas follows:Sowi, P800; Boars, P790; Animals under 2 mont.Ls,P120, Animalsover 2 months, IO05. ANNEX7 Table 5

PHILIPPINES

SECONDLIVESTOCK DEVELOPMNT PROJECT

Pig Breeding/Fattening Model - Increasing Herd from 20 to 40 Sows

Financial Analysis for Total Incremental Investment (General) (1 '000)

Without … Ye------S--^ 59 1-0 20

Investment Costs _ 94.82 22.83 - _

Operating Expenses 113.90 115.40 200.60 229.50

Total Costs 113.90 210.22 223.43 229.50 _

Income 132.60 135.80 235.30 275.80 62.2h4/

Net Income 18.70 (71.42) 11.87 46.30 62.24

IncrementalNet Income - (93.12) (6.83) 27.60 62.24

FinancialRate of Return (General)= 23%

1/ Cumulative incremental herd value at year 20. 1 Sows and Replacements 20 0 0800 16,000 Boars 1 @~ 700 700 Pigs under 2 months 42 x (2/3 of }180) 5,040 Pigs above 2 months 100 x (180 + 1/2 (630 -180o40.500 62.240

EAP ProjectsDepartment November13, 1975 0 90 9,4 PHILIPPINES

0 @ SECONDLIVESTOCK DEVELOFMENT PROJECT

HC+

"O BroilerProdu,tion Model - IncreasingBroiler Capacity from 4.000 to 8,000Birds ,toP Flock Proj ection

C+ Without -- Year------Project 1 _ 2-10

FLOCKCOMPOSITION Broilers (0-8 Weks) 4,ooo 8,000 8,000

FURCHASES

Day-old Chicks paid for 20,000 36,000 40,000 Day-old Chicks delivered 1/ .... 20,400 36,720 40,800

MORTALITY

Broilers (0-8 Weeks) 1,020 1,836 2,040

SALES

Broilers. 19,380 34,884 38,760

TECHNICALCOEFFICIENTS

Age at Parchase - Days 1 1 1 Age at Sale - Weeks 8 8 8 Batches per Year - Number 5 5/4 g/ 5 Mortality- % 5 5 5 Feed Consunption - Starter(0-5 Weeks) kg/bird ... 1.45 .4 Finisher (6-8Weeks) kg/bird .. 1.80 1.80 1.80 C Liveweightat 8 weeks- kg .1.30 1.30 1.30 Feed ConversionRatio .2.5:1 2.5:1 2.5:1

2 percent of number purchasedis supplied free of cost. / Only 4 batcheswere producedin the new buildingsin Year 1. ANNEX8 PHILIPPINES Table 2

SECONDLIVESTOCK DEVELOPMENT PROJECT

Broiler Production Model - Increasing Broiler Capacity from 4,000 to 8,000 Birds

Investment Projection ------Year 1------Unit No. of Total Unit Cost Units Cost

Investments-

Fixed Broiler House (double deck) 175.68m2 30,718 1 30,718 Feed Store and Quarters 29.28m2 5,919 1 5,919 Brooding Hovers 1,000 birds 819 4 3,277 Drinking Fountains 1 gal. 512 100 512 Feed Barrow - 819 1 819 Water System _ 10,140 1 10,140 Miscellaneous - - 2,014

Sub-total 53,399

'WDrkingCapital (1 Batch)

Day-oldChicks No. 2.10 4,000 8,400 Feed Starter kg/bird 1.51 5,916 8,947 Finisher kg/bird 1.30 7,344 9,575 Medicines, vaccines and supplements2/ - - - 1,111 ElectFicity and water 3 / _ - 355 Laborw - - 288 Miscellaneous - - 1,00l

Sub-total 29,683

TOTAL Investment 83,082

1/ Loans are made in this project to finance fixed investmentsand working capital to cover the purchase of Chicks; Feed; Medicines, Vaccines, Supplements; Electricity and 1Wter, and Labor associated with the production of the first batch of broilers. 2/ h4edicines,Vaccines, Supplements are estimated at 6% of feed cost. 3/ Electricity and Water are estimated at 2% of feed cost. / Labor is calculated at the rate of ? 36/1,000 birds/month. EAP Projects Department November 13, 1975 ANNEX8 PHILIPPINES Table3

SECONDLIVESTOCK DEVEOPfENT PROJECT

Broiler Production Mbdel - Increasing Broiler Capacity from 4,000 to 8,000 Birds

Sales and Operating Expenses Projection WithoutProject ---Year 1------Year 2-10-- Unit Unit No. of Amount Units Amount Units Amount Price Units (P ) (P-OOO) (P-OOO) (P-000) SALES - Broilers -...... (kg) 6.50 25,194 163.76 45,349294.77 50,388 327.52 Feed Bags2/ ...... ea 2.00 1,193 2.39 2,148 4.30 2,387 4.77 DroppingsX ...... (kg) 0.10 16,575 1.66 29,835 2.98 33,150 3.32

Total Sales 167.81 302.05 335.61

Operating Expenses

Day-oldchicks ...... No. 2.10 20,000 42.00 32,000 67.20 40,00084.00 Feed Starter ...... (kg) 1.51 29,580 44.67 47,328 71.47 59,160 89.33 Finisher ...... (kg) 1.30 36,720 47.74 58,752 76.38 73,4i0 95.47 Medicines,Vaccines, w - - 5.5 - 8.87 - 11.09 Supplements Electriqcty and Water5 ... - - - 1.78 - 2.84 - 3.55 Labor o...... oooooo.. - - - 1.73 - 2.88 - 3.46

Repairs and Miscellaneousl/- - - 3.86 - 8.96 - 8.96

Total Operating Expenses 147.32 238.60 295.86

1/ Broilers are sold at 8 weeks weighing on average 1.3 kgs. 2/ Each bag of feed weighs 50 kgs. The recovery rate of bags is estimatedat 90 per cent. The number of bags sold [Kgms.of feed x 0.90 ! 50. # Droppingscalculated at 25 per cent of feed consumed. 4/ Medicines, vaccines and supplements are claculated as 6% of feed cost. 5/ Electricity and water are calculatedas 1% of total feed cost. W Labor is calculated at the rate of P 36/1000birds/month. 7/ Repairs and Miscellaneous is estimated on the basis of 10% of Machinery and Equipment, 10% of Poultry Buildings and 5% of Bodega and Quarters.

EAP ProjectsDepartment November13, 1975 ANNEX8 Table 4

PHILIPPINES

SECONDLIVESTOCK DEVOPHENT PROJECT

Broiler Production Model - Increasing Broiler Capacity from 4,000 to 8,000 Birds Financial Projections (P f000)

Llthout ----- Year ------Project 1 2 3-7 8 9-10

CASH INFLOW: 1. kAnmalSales 167.81 302.05 335.61 335.61 335.61 335.61 2. Producer's Contribution - 8.31 - - - - 3. Long-tern Loan - 74.77 - - _ _

Total Expected Cash Inflow M. 33335 6 335.615. TJr.

CASH OUTFLOW:

1. Investtments a. Producer's Contribution _ 8.31 b. Long-term Loan - 74.77 - - - -

2. OperatingCosts 147.32 238.60 295.86 ?95.86 295.86 295.86

3. Debt Service/i - - 18.19 18.19 - -

Total Expected Cash Outflow 147.32 339.87 314.05 314.05 295.86 295.86

SURPLUSCASH AT YEAR END 20.49 45.26 21.56 21.56 39.75 39.75

/1 Loan term of 7 years, including 1 year grace, 12% interest p.a.

EAP Projects Department November13, 1975 ANNEX8 Table 5

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENT PROJECT

Broiler Production Model - Increasing Broiler Capacity from 4,O000to 8,000 Birds

Financial Analysis (General)

Wlthout ------Year------Project 1 2-10 Investment Cos ts - 83.06 - OperatingCosts 147.32 238.60 295.86

Total Costs 47.32 321.68 295.86

Income 167.81 302.05 335.61 Net Income 20.49 (19.63) 39.75

IncrementalNet Income - (40.12) 19.26

FinancialRate of Return(General) = 46%

EAP Projects Department November 13, 1975 '1 t_j. I-ocl0 PHILIPPINES

CONDLIVESTOCK DVELOPMENT PROJ!pT

Egg Production Model - Increasing Hen Capacity from 2,000 to 6,000 Birds (D Flock Projection

B D 2 B D 1 Year Year 2 Year 3 Year 4-10 [Ouse

#1 7-- 6t7 600 533 47 _0-220 l1* 1g0W

#2 533 47 - 6o 53. 2250 2000 181 -

600 533 46 2~ 0-0_ #3 604 I

#3~ ~ ~~ ~ ~ ~ ~ ~~~~~~~~~2 qo 20Q_ 18tO , d501622

667 600 53 4_22¶7 18t00 1670 1-o

IXotes: ---- * Gro g Period Lging Period pbU, Of-G 3D 5

* flew batches of chicks introduced. PHILIPPINDS

CD7 SECONDLIVESTOCK DEVELOPMRNTPROJECT

o o f Production Modal Ihereasingn Hen CapacityEirds frem 2 0Q to Flock Rrojection - -at end of year------.n0NWithout Project 1 2 3__10

9 Flock Composition

Point-of-Lay Birds 667 2000 2000 2000 Layers 1133 1133 3400 3400 Total 1835 Average knnual Laying Flock 1700 1700 3533 5100 Purchases

Day-old Chicks 1,500 3,000 4,500 4,500

Mortality

Chicks and Growers 166 333 500 500 Layers 400 400 80C 1

Total Mortality 566 733 19300 1,700

Sales

Culled Birds 934 934 934 2,800 Eggs 372,000 372,000 773,727 1,116,900

Technical Coefficients

Age at Purchase - days 1 1 1 1 Laying Period - months 18 18 18 18 Age at Sale - years 2 2 2 2 Average Percentage of .Hens Laying/day 60 60 60 60 Feed Consumption Chick: 0-6 weeks - kg/head 2 2 2 2 Grower: 6-26 weeks - kg/head 10 10 10 10 Layer: 26-104 weeks kg/year,bird 40 40 40 40

Mortality

Chicks and rGrowers- ; of c.ics bouE'±+ 11 11 11 11 Layers - % cf averagQ annual laying f'oc;. 23.5 23.5 22.6 23.5 z M PHILIPPINES

(D O -0 SECOND LIVESTOCK DEVELOPMENT PROJECT

i\) 0 F~~~ ~~ ~ ~ _C_

\,OCD Egg Production Model - Increasing Hen Capacity from 2,000 to 6,000 Birds

Investment ProJections

23 Year 1 Year 2 2TYLAL Unit No. of No. of No. of Total Unit Cost. Units Cost Units Cost Units Cost

Investments /1

Fixed 2 Brooder/Grower 77.50 m 13,473 1 13,473 _ 1 13,473 Laying House 86.16 2 19,419 2 38,838 1 19,49 3 58,257 Bodega 115.2 m2 2,328 2 4,656 1 2,328 3 6,984 Workers Quarters 20.00 m 6,06h 1 6,o64 - - 1 6,064 Water System - 1 10,143 - - 1 10,143 Miscellaneous - - 2,014 - - - 2.014

Sub-Total 75.188 21.747 96.935

Working Capital Chick Purchase D/o Chicks 2.70 1,500 4,050 3,000 8,100 4,500 12,150 Feed kg 1.33 16,992 22,599 33,984 45,199 50,976 67,798 Medicines, Vaccines, Supplements /2 - - - 454 - 907 - 1,361 Electricity and Water £3 _ 2 3 - 435 - 653 Labor LL - - 39 - 718 -107 Miscellaneous ------1009

Sub-Total 28.771 55 359 84,0h8

Total Investment 10.,87?7 ?? lO5 180,983

1/ Loans are made in this project to finance fixed investments and incremental working capital to cover the purchase of chicks, feed, medicines, vaccines and supplements, electricity and water and labor up to the point where the first batch of growers begin to lay. b M 2/ Medicines, vaccines and supplements are calculated at 2% of feed cost. ca 3/ Electricity and water are calculated at 1% of feed cost. so 4/ Labor is calculated at the rate of one man per 4000 hen capacity at the rate of P180 per month or P5h per 100 layers capacity per year. Capacity is increased by 1,333 for 6 months in year 1. 0 PHILIPPINES

SECOND LIVESTOCK DEVELOPMENT PROJECT

Egg Production Model - Increasing Hen Capacity from 2,000 to 6,000 Birds

Sales and Operating Expenses Projections

Years 3 -10 e+ Without Project Year 1 Year 2

Price/ No. of No. of No. of No. of Unit Unit Units Amount Units Amount Units Amount Units Amount (TF0-00) ( t'i0-00) (0'000) ' (fe00-0)

Sales

1,116,900 424.42 Eggs No. 0.38 372,000 141.36 372,000 141.36 773,727 294.02 2,800 19.60 Culled Hens No. 7.00 934 6.54 934 6.54 934 6.54 63,750 6.38 Droppingsl/ Kg. 0.10 21,250 2.12 25,500 2.55 48,070 4.81 4,590 9.18 Feed Bags-/ No. 2.00 1,530 3.06 1,836 3.67 3,461 6.92 459.58 Total Sales 153.08 154.12 312.29

Operating Expenses

4,500 12.15 Day-old Chicks No. 2.70 1,500 4.05 1,500 4.05 1,500 4.05 Feed 51,000 67.83 Starter/Grover Kg. 1.33 16,992 22.60 16.992 22.60 16,992 22.60 204,000 281.52 Layer Kg. 1.38 68,000 93.60 68,000 93.60 141,320 195.02 4.35 - 6.98 Medicines, Vaccines, Supplements3 - - - 2.33 - 2.33 - 2.08 - 3.35 Electricity and Water4/ - - - 1.12 - 1.12 - 2.16 - 3.24 Labot5/ - - - 1.08 - 1.08 - 10.30 - 12.45 Repairs and Miscellaneous6/ - - - 3.53 - 3.53 - 387.52 Total Operating Expenses 128.31 128.31 240.56

1/ Droppings calculated at 25% of feed consumed. 2/ Each bag of feed weighs 50 kg. The recovery rate of bags is estimated at 90%. The number of bags sold = No. of kg of feed - 50 x 0.90. x 3/ Medicines, Vaccines, and Supplements are calculated as 2% of feed cost. m |- 4/ Electricity and Water are calculated as 1% of feed cost. per 100 layers capacity per year. 5/ Labor is calculated at the rate of 1 man per 4,000 layers capacity at t 180 per month, or P 54 Buildings and 57 of 6/ Repairs and Miscellaneous are estimated on the basis of 10% Machinery and Equipment, 10% of Poultry Bodega and Quarters. PHILIPPINES

CD00 SECONDLIVESTOCK DEVELOPMENT PROJECT 0

Egg Production Mbdel - Increasing Hen Capacity from 2,000 to 6,o00 Birds Financial Projections 'J1. (g '00X)

Without -- YEARS------9-10 CASHINFLOW Project 1 2 3-8

1. Annual Sales 153.o8 154.12 312.29 459.58 459.58 _ 2. Producer's Contribution - 10*39 7.71 - 3. Long-term Loan 93At9 69.40

Total Extected Cash Inflow T53h0W 258.00 1Th9.4__9 1.3W

CASH OUTFLOW

1. Investments a. Producer's Contribution - 10.39 7.71 b. Long-term Loan 93.49 69.W _ 387.52 2. Operating Costs 12B.31 128.31 240.56 387.52

3. Debt Service 1/ Long-term Loan - - 5.60 39.62

Total Expected Cash Outflow 128.31 232,19 323,27 427.11

SURPLUS CASH AT YEAR END 2!4.77 26,81 66413 32-44 72.06

WJMULATIVE INCREMENTAL FLOCK VALUE 2/ 6.66 22.53 22.53 22.53

I0 1/ Loan term of 8 years, including 2 years grace. 12% interest p0 a. 2/ Values as follows: Layers, i 7; Point-of-Lay Birds, j 5. 0

'1 X4. PHILIPPINES 0 I-' -- SECO;NDLIVESTOCK DEVELOPMET PRtOJECT

° d Egg Production Model - Increasing Hen Capacit,yfrom_2,000rto-6,000_Birds Financial Analyjsis for Total IncrEmental Investment (General) w ~ ~~ ~~ ~ ~~~~~,('000- Without YARS ____ Project T------

Investment Costs _ 103.88 77.11

Operating Costs 128.31 128.31 2h0.56 387.52

Total Costs 128.31 232.19 317.67 387.52

Income 153.08 154-12 312.29 459.58 22.5

Net Income 24X.7 (78.07) (5.38) 72.06 22.5

Incremental Net Income - (102.84) (30.15) 47.29 22.5

Financial Rate of Return (General) = 25%

1/ Cunulative Incremental Flock Value at year 20: 2.267 layers at t 7 per bird and 1,333 Point-of-lay Birds

at #5 per bird. CDI4 Ao'b ANNEX10 PHILIPPINES T;bef 1

SECONDLIVESTOCK DEVELOPMENTPROJECT

Hill Bee' Cattle Farm Model - 400 ha-

Herd Projections

Without ------nid of Year------Project 1 2 3 4 5 6 7-20 Herd Composition

Bulls 3 3 5 5 5 6 6 6 Breeding Cows & Replacements 80 80 104 111 123 122 121 121 Calves Weaned 14 14 20 21 21 22 22 22 Heifers (1-2 yrs.) 13 13 14 19 20 20 21 21

Total Animals 110 110 143 156 109 170 170 170 Total A.U. 96 96 123 135 148 148 148 148 Purchases

Bulls 1 1 3 1 1 2 2 1 Bred Heifers (1-2 yrs.) T 20 5 6 - - -

Mortality

Bulls ------1 - Breeding Cows & Replacements 3 3 2 3 3 4 4 4 Heifers (1-2 yrs.) 1 1 - 1 1 1 1

Total Mortality 4 4 2 4 4 5 6 5 Sales

Cull Bulls 1 1 1 1 1 1 1 1 Cull Cows 10 10 7 9 10 17 17 17 Weaned (< 1 yr.) 22 22 24 41 51 58 57 57

Total Sales 33 32 32 51 62 76 75 75 Technical

Calves Weaned (%) 45 45 55 60 65 65 65 65 Mortality - Adults (%) 4 4 3 3 3 3 3 3 Cow Cull Rate (%) 12 12 9 9 9 14 14 14 Bull Replacement Rate (%) 20 20 20 20 20 20 20 20 Unit Carrying Capacity: - Improved pasture (A.U./ha) 0 0 .7 1.0 1.3 1.3 1.3 1.3 - Unimproved pasture (A.U./ha) .27 .27 .3 .3 .3 .3 .3 .3

Total Carrying Capacity (A.U.) 97 97 124 136 148 148 148 148

Area Improved Pasture (ha) 0 40 40 40 40 40 40 40 /1 Effective area = 320 hectares.

AP Projects Department November 13, 1975 O m CD PHILIPPINES

(D O fi (D ~~~~~~~~~SECONDLIV13STOCKDEVEL0PMTNT PPaOJECT CDOco

\v CD 1fHill Beef Cattle Farm Model - 1400 ha 4 Investment Projections

Year I Year 2 Year3 Year 4 TOTAL Unit Investment Cost No. Cost No. Cost No. Cost No. Cost No. Items Unit 2L_ Units Units £gL Units ( Units Units j!Cost

Fixed

Alabang X/Legume Pasture ha 760 40 30,400 ------40 30,400 Fencing- Im 3,710 4.5 16,695 3 11,130 - _ _ 7.5 27,825 Water no 800 2 1,600 2 1,600 - 4 3,200 Housing no 5,0oo - - 1 5,000 - 1 5,000 Corral no 5,000 1 5,000 - - - - _ 1 5,000 Hand Sprayer no 400 2 800 ------2 800 Bull Cart no 1,500 1 1,500 ------1 1,500 Heifers no 1,500 - - 20 30,000 5 7,500 6 9,000 31 46,500 Bulls no 3,000 - - 3 9,000 - - - - 3 9,000 Carabao no 2,000 2 4,000 ------2 4,000 Miscellaneous 5% - - - 3,000 - 2,840 - 375 - 450 - 6,665

Sub-Total 62,995 59,570 7,875 9,450 139,890

Incremental Wbrkinz Capital

Anima'r Health /1 AU 20 - - 27 540 39 780 52 1,040 ine 2,360 Salary man/yr 2,000 1 2,000 1 2,000 1 2,000 1 2,000 4 8,000 Miscellpneous 10% - - - 200 - 250 - 280 - 300 1,030

Sub-Total 2,200 2,790 3,CD6 3,31o 11,390

Total Investment 65,195 62,360 10,935 12,790 151,280

I/ Includes dips, drench, vaccine and phosphorus supplementY 70/AU/yr. z >i PHILIPPINES

SECOND LIVESTOCKDEVELOPMET PROJECT

0 .o0 Model - ha HJ ° Hll Beef Cattle Farm 400 Operating Expenses 0 and ~Sales

Without 20 Category Project IL 2 3 5 6 7 e 1' ~~~~~~~~~~~~~~T-T f 4f Cattle Sales:-

Cull Bulls 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Cull Cows 12,000 12,000 8,400 10,800 12,000 20,400 20,400 20,400 Wegners 14,520 14,520 18,720 31,980 39,780 45,240 444,6o60 66,36o Total S.les 28,020 28,020 28,620 _4280 53,280 67,140 66,36o

Operating Expenses: 7,600 7,600 Labour _ 5,600 5,600 5,600 5,600 5,600 7,600 2,960 Animal HealthY 1,920 1,920 1,920 1,920 1,920 2,960 2,960 6,000 3,000 Bulls 5/ 3,000 3,000 - 3,000 3,000 6,000 3,600 Repairs & Maint.5_ 1,400 1,1400 2,700 3,600 3,600 3,600 3,600 2,016 1,716 ?tLSCe11aneOUS6/ 1,192 1,192 1,022 1,412 1,1412 2,016

Total Operating 13,112 13,112 11,242 15,532 15,532 22,176 222176 18,876 Expenses

cul bulls Y 1500 1/ Price animal/head: cull cows ?1200 660 weaners before development 0 weaners after development ' 780

2/ Head Cowboy p 3,600/year Other Cowboys I 2,000/year

3/ 120/A.U.

5/ 5% initial cost of equipment and structures 6/ 10% of operating expenses. PHILIPPINES

* t SEOONDLIVEMSCK DEVELDPMENTPROJECT

~ o Hill Beef Cattle Farm Model - 400 ha

2FinancialProJection

Without ------Year------Project 1 2 3 2 4 6 7 8 9 10-11 12-20

Cash Inflow

1. rnmual Sales 28.02 28.02 28.62 44.28 53.28 67.14 66.36 66.36 66.36 66.36 66.36 66.36 2. Producer's Contribution 10% - 6.52 6.24 1.10 1.28 ------3. This T,oan/ - 58.68 56.12 9.84 11.51 ------4. Other Loans _------

Total Expected Cash Inflow 28.02 93.22 90.98 55.22 66.07 67.14 66.36 66.36 66.36 66.36 66.36 66.36

Cash Outflow:

5. Investments - Producer's Contribution 10% - 6.52 6.24 l.lO 1.28 ------This Loan - 58.68 56.12 9.84 11.51 ------Other Loans ------6. Operating Costs 13.11 13.11 11.24 15.53 15.53 22.18 22.18 18.88 18.88 18.88 18.88 18.88 7. Debt Service: Interest - - 3.52 U1-4.1 1.4-37 33.12 33.12 33.12 33.12 33.12 33.12 - Principal

Cash Outflow 13.11 78.31 77.12 36.88 42.69 55.30 55.30 52.00 52.00 52.00 52.00 18.88 Total Expected == steS ==== a===== s======-======-==- =e=== -- ====

14.36 14.36 47.48 Surplus Cash at Bid of Year 14.91 16.91 13.86 18.34 23.38 11.84 11.06 14.36 14.36 67.94 67.94 67.94 Cumulative Incremental Herd Value/2 - - 37.48 51.66 67.06 68.A11 67.94 67.94 67.94

/1 11 year lonn including 4 years grace. Interest at 12%p.a. V1,000; NPeaners?780. /2 Cattle valued as follows: Bulls Y1,500; Cows yl,200; Heifers 1-2 yrs o~I- CD @PHILIPPINESCD

gX SECOND LIVESTOCK DEVELOPMENTPROJECT

Hill.Beef Cattle Farm 11odel.- 400 ht4

z Financial Analysis for Total Incremental Investment (General) (ID'000)

------Years ------Without Project 1 2 3 4 5 6 7-20 20 TOTAL

Investment Costs - 65.20 62.36 10.94 12.79 - - - -

Operating Costs 13.11 13.11 11.24 15.53 15.53 22.18 22.18 18.88 -

Total Costs 13.11 78.31 73.60 26.47 28.32 22.18 22.18 18.88 -

Income 28.02 28.02 28.62 ).4.28 53.28 67.14 66.36 66.36 67.94

Net Income 14.91 (50.29) (44.98) 17.81 24.96 44.96 44.18 47.48 67.94

IncremantalNet Income - (65.20) (59.89) 2.90 10.05 30.05 29.27 32-57 67.94

D.C.F. 15% - (56.72) (45.28) 1.91 5.75 14.93 12.64 80.61 4.14' +17.98

D.C.F. 20% - (54-31) (41.56) 1.68 4.84 12.08 9.81 50.29 1.76 -15.41

FinancialRate of Return- 18%

1/ Incremental Herd Value

3 Bulls @ P1,500 = 4,500 41 Breeding Gows and Replacements @ Y1,200 = 49,200 8 Weaned Calves @ 1780 = 6,240 8 Heifers (1-2 yrs.) @ yl ,000 8,000 67,940 PHILIPPINES e c- SECONDLIVESTOCK DEVELOPMENT PROJECT

Integrated Coconut/Beef Cattle Fattening Model .5Lha. '.0-41 a Herd Projection

Cs. Without --- d of Yea r------co, Project 1 2 3 4 5-20

Herd Composition

Feeder Cattle 1_2 yrs - - 7 8 8 8 Animual Units

Purchases

Fbeder Cattle 1-2 yrs _ _ 7 8 8 8

Mortality

Feeder Cattle 1-2 yrs - -

Sales

Fat Cattle 2-3 yrs - - - 7 8 8

Technical Coefficients

Purchase liveweight (kg) - - 150 150 150 150 Selling liveweight (kg) - - 300 300 300 300 Liveveight gain (pm/head/day) - - 400 400 400 400 Average Fattening Period (Months) - - 12.5 12.5 12.5 12.5 Carrying Capacity - A.U./ha - - 1.4 1.6 1.6 1.6

Total Carrying Capacity - A.U's - - 7 8 8 H H PHILIPPINES

1,t& SECONDLIVESTOCK DEVELOPMENT PROJECT I% o IntegratedCoconut/Beef Cattle Fattening Model - 5 ha

-J 0 Investment Proiection

ITEMS ~~~~~~~~~~~Year1 Year 2 Year 3 Total ITEMS Unit Number Cost Number Cost Number Cost Number Cost Unit Cost Units Units Units Units

Fixed

Pasture Establishment - ha 760 5 3800 - - - 5 3800

Fencing 1km 3710 - - - - 1.1 4080 1.1 4080

Drainage 2/ m. 1.25 1000 1250 500 625 500 625 2000 2500

Copra Drier no. 970 - - - 970 - - 1 970

Miscellaneous (10%) 505 160 470 - 1135

5555 1755 5175 12485 WorkinR Capital

Feeder Steers (1-2)3/ no. 1000 - - 7 7000 1 1000 8 8000

Animal Health a.u. 6 - - 7 42 8 48 15 90

Fertilizer - Coconuts 4/ sack 95 22.5 2138 22.5 2138 - - 45 4276

Miscellaneous (5%) - - - 106 - 459 - 52 - 617

Sub-total 2244 9639 11o0 12983

Total Investment 7799 11394 6275 25468

1/ Includes fertilizer 2 sacks/ha of 14-14-14. 2/ Assumed that 2 ha on each farm would require drainage. 3/ 160 kg at r 6.25/kg. 4/ 1 sack: 50 kg 1.5 kg/palm 0-0-60 plus 0.75 kg/palm 46-0-0 for 100 palms/ha. PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Integrated Coconut/Beef Cattle Fattening tiodel - 5 ha Sales and Operating Expenses

Without ------YEARS------SEPtoAect 1 2 3 4t 6 7 8 9 10 11 -20 SALES p - 1 1 1

Copra V 3,560 3,560 4,250 4,250 5,200 5,670 6,140 6,615 7,090 7,560 7,560 7,560

Cattle - _ - 12.600 14.400 14y400 14.400 14.400 14,400 14,400 14.400 14.400

Total Sales 3.560 3.560 4.250 16850 19.600 20.070 20,540 21 015 21.490 21.960 21.960 21.960

OPERATING EXPENSES

LaborN Copra making 20% 712 712 8'50 850 1,040 1,134 1,228 1,323 1,418 1,512 1,512 1,512

Animal Health4/ - - - - 48 48 48 48 48 48 48 48

Repairs and Maintenance - - 250 250 250 250 250 250 250 250 250 250

Fertilizerl/ - Coconuts - - - 2,138 2,138 2,138 2,138 2,138 2,138 2,138 2,138 2,138

Feeder Cattle Purchase - - - 7,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000

Miscellaneous (2%) 14 14 22 205 229 231 233 235 237 239 239 23S

Total Operating Expenses 726 726 1 10,443 11L705 11.801 11.897 1,94 12 091 1, 12.187 121187

1/ (a) Copra price t 0.95/kilo. Copra yield without project - 749 kg/ha rising to 895 kg/ha in Year 2; 1,094 in Year 4; 1,193 in Year 5; 1,293 in Year 6; 1393 in Year 8; and 1592 in Year 9 end thereafter. (b) Labor :orcattle - part-time estimated at 10 weeks at t 40 per week. 2/ Steers (2 - 3 years) sold at t 1800/head in years 3 - 20. Salvage value in year 20 is assessed at 1 1500 per head. 3/ Share-farming arrangement - 20% gross sales. Requirements for cattle minimal. 4/ t 6.00/A.U. 51 Fertilizerfor coconuts 45 kg/ha. None recomnended for pasture. PHILIPP11IES

SECOND LIVESTOCK DEVELOPMENT PROJECT

Integrated Coconut/Beef Cattle Fattening Model - 5 ha (O ( Financial Projectiors

Without ------YEARS ------_------CASH INFLOW Project 1 2 3 4 5 6 7 8 9 10 11-20

1. Annual Sales 3.56 3.56 4.25 16.85 19.60 20.07 20.54 21.02 21.L19 21.96 21.96 21.96

2. Producer's Contribution (10%) ------

3. Thts Loan 11 - 7.80 11.39 6.28 - - - - _ _ _

4. Other Loans ------_ _

Total Expected Cash Inflow 3.56 11.36 15.64 23.13 19.60 20.07 20.54 21.02 21.49 21.96 21.96 21.96

CASH OUTFLOW

5. Investments:

- Producers contribution (10%)- - - - - _ _ _ _

- This Loan - 7.80 11.39 6.28 - - - _ _ _ _

- Other Loan ------_

6. Operating Costs 0.73 0.73 1.12 10.44 11.71 11.80 11.90 11.99 12.09 12.19 12.19 12.19

7. Debt Service: - Interest - - .47 1.62 2.68 6.19 6.19 6.19 6.19 6.19 6.19 - -Principal I -

Total Expected Cash Outflow 0.73 8.53 12.98 17.50 14.39 17.99 18.09 18.18 18.28 18.38 18.38 12.19

SURPLUS CASH AT YEAR END 2.83 2.83 2.66 5.63 5.21 2.08 2.45 2.84 3.21 3.59 3.58 9.77

CUMULAT]VEINCREMENTAL HERD VALUE 2, - 10.50 12.60 12.00 12.00 12.00 12.00 12.00 12.00 12.0o 12.00

1/ Total term of loan 10 years; grace period 4 years. 12% interest, p.a.

2/ Value of steers, p 1,500. ANNEX11 Table5

PHILIPPINES

SEODNDLIVESTOCK bEVEIOPMENT PROJECT

Integrated Coconut/Beef Cattle Fattening Model - 5 ha

Financial Analysis - Total Incremental Investment - (General) Net Incremental Ndt

Costs Income Income Income D.C.F. D.C.F.

Year 0 .73 3.56 2.83 - 22% 21% 1 8.53 3.56 (4.97) (7.80) (6.40) (6.44) 2 12.51 4.25 (6.26) (11.09) (7.45) (7.57) 3 16.72 16.85 .13 (2.70) (1.49) (1.52)

4 11.71 19.60 7.89 5.06 2.28 2.36 5 11.80 20.07 8,27 5.44 2.01 2.10

6 11.90 20.54 8.64 5.81 1.76 1.85 7 11.99 21.02 9.03 6.20 1.54 1.63

8 12.09 21 .49 9.40 6.57 1.34 1.43 9-19 12.19 21.96 9.77 6.94 5.71 6.31

20 12.19 33.96 21.77 18.94 .36 .42

+15.oo +16.10 -15.34 15-53

- .34 + .57

Financial Rate of Return = 22%

EAP Projects Department November 31, 1975 ANNEX ll Table 6

PHILIPFINES

SECQiD LIVESTOCKDEVZLORPE2T PROJECT

Integrated Coconut/Cattle Breeding/Fattening Model - 20 ha Herd ProJections

Without ------At Did of Year------Project 1 2 3 4 5 6 7 8-20

HERD COMPC0ITIC1

Bulls 1 1 1 1 1 1 1 Breeding Cows and replacements 9 28 25 25 26 27 27 27 Calves weaned - 5 17 11 12 12 12 12 Heifers I 2years - - 3 5 5 4 1 Steers 1-2 years _ _ 8 8 6 8 8 R

Total Animals 10 34 54 50 50 52 52 52

Total Animal Units 10 29 37 39 38 40 40 I40 PURCHASES

Bulls 1 - - - 1 - - - Heifers 1 - 2 years 9 19 - - - Steers 1 - 2 years _8 _

10 19 8 - 1 - - -

MORTALITY

Bulls - - Breeding cows and replacements - - - 1 1 1 1 Heifers 1 - 2 years Steers - 2 years

Total Mortality - - l - 1 1 1 1 SALES

Cull Bulls - - - - 1 - - - Cull Cows - - 2 3 3 3 3 3 Weaners - - - 5 6 7 8 8 Steers 1 - 2 years - - 2 - Steers 2 - 3 years - - - 8 8 6 8 8 Heifers 1 - 2 years _ _ _ 4

Total Sales 4 20 18 16 19 19 TECKICGL Co0FICaENTS

Oalves weaned % - 60 60 65 70 75 75 75 Mortality - Adult % - 2 2 2 2 2 2 2 Cull Rate - Breeders % - 5 7 10 12 12 12 12 Bull % - 20 20 20 20 20 20 20 Carrying Capacity (A.U.) 13 10 30 40 40 40 40 40 40

Area Improved (ha) - 10 20 20 20 20 20 20 20

EAP Projecte Departokent November 13, 1975 PlIlLIPPINES

'1 C-' .1i @SECOND LIVESTOCK DEVELOPMENTPROJECT

Model - 20 ha M ¢ Integrated Coconut/Beef Cattle Breeding/Fattening un Investment Projections

Ct Unit YER1YEAR 2 YEAR 3 TOTAL No. Units Cost St Investment Item Unit Coat NO. UnCN Cost No. Unitsi

FIXED 10 7,600 _ 20 15,200 Grass/legume pasture 1/ ha 760 10 7,600 - 2.5 9,275 Fencing km 3,710 2.5 9,275 - - 1 2,000 Water System No. 2,000 1 2,000 - 1 400 Improved Copra Drier No. 400 1 400 - - _ 1 2,000 Corral No. 2,000 1 2,000 _ _ 1 3,000 Bulls No. 3,000 1 3,000 - - 19 28,500 _ _ 28 42,000 Heifers 1 - 2 No. 1,500 9 13,500 1,805 - - 3,695 Miscellaneous (5%) 1.B90 37,905 77.570 Sub-Total 39.665

INCREMENTAL WORKING CAPITAL - 8 8,000 8 8,000 Feeder Steers (I - 2 years) No. 1,000 - - - 29 580 37 740 76 1,520 Animal Health A.U. 20 10 200 25 1,000 52 2,080 Cowboy's Salary 2/ Man weeks 40 9 360 18 720 10 1,100 20 2,200 30 3,300 Fertilizer - Pastures Sack 3/ 110 - - 8,550 90 8,550 270 25,650 - Coconuts Sack 95 90 8,550 90 540 997 1,987 Miscellaneous (5%) 450 42:537 Sub-Total 9L560 11,490 21,487 120.10? TOTAL INVESTMENT 49 225 49,225 21,487

0N 1/ Includes establishment fertilizer. 2/ Part-time o

3/ Sack = 50 kg; Fertilizer for pasture is broadcast fertilizer for coconut is dug in around bziseof palm. D

CD * PHILIPPINES

SECONDLIVESTOCK DEVELOPMENTPROJECT

Integrated Coconut/CattleBreeding/Fattening Model - 20 ha

Sales and Operatine Expenses

Without ------Project 1 2 i 4 5 6 7 8-9 10 11-14 1 16-20

SALES

Copra /l 19,000 19,000 22,800 26,680 31,220 34,960 38,475 38,475 38,475 38,475 38,475 38,475 38,475 Cattle L2: Cull Bull - - - - - 1,500 - - - 1,500 - 1,500 - Cull Cows - - - 2,400 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 Weaners - - - - 3,900 4,680 5,460 6,240 6,240 6,240 6,240 6,240 6,240 Steers (1 - 2 yrs) - - - 2,000 ------Steers (2 - 3 yrs) 1_.400 14.400 10.800 14.400 14.400 14.400 14.400 14,400 14.400

Total Sales 19.000 19.000 22.800 31.080 53 120 59.140 58.335 62,715 62,715 64.215 62,715 64.215 62,715

OPERATING EXPENSES:

Labor 3 - Copra Making 3,800 3,800 4,560 5,336 6,644 6,992 7,695 7,695 7,695 7,695 7,695 7,695 7,695 - Cowboy - - - - l,j60 1,710 2,080 2,080 2,080 2,080 2,080 2,080 2,080 Animal Health 4 - - - - "80 760 800 800 800 800 800 800 800 Bull Replacement 5 - - - - - 3,000 - - - 3,000 - 3,000 - Repairs and Maintenance L6 420 420 1,080 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 Fertilizer L7 - Pastures - - - - 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 - Coconuts - - - - 8,550 8,550 8,550 8,550 8,550 8,550 8,550 8,550 8,550 Miscellaneous (5%) 211 211 283 322 1.012 1.216 1.121 1.121 1.121 1.271 1.121 1.271 1.121

Total Operatine Expenses 4.3 4 1 SL3 6,758 21.246 2$.528 .6 23.546 23.546 26.696 .6 26.696 21.46

L1 Copra sold at 9 0.95/kg; copra yield of 1,000kg/ha without project rising to 1,200 inYear 2; 1,404 in Year 3; 1,643 in Year 4; 1,840 in Year 5 2,025 in Year 6 and thereafter. Cull bulls 9 1,500, cull cows 9 1,200; weaners 9 780; steers (2 - 3 years) 9 1,800. (a) Share 20% of gross copra sales. (b) Part-time labor: 34 weeks in Year 4; 42 in Year 5; and 52 from Year 6 onwards at 9 40 per week. L4 Animal Health estimated at 9 20 for A.U. & Bull is replaced every 5 years. Z6 Estimated at 5% of initial cost of structures and equipment. /7 Pastures - 20 sacks at 9110/sack broadcast. Coconuts - 90 sacks at /95/sack dug in aroLundbase of palms. One sack = 50 kg.

ba, PHILIPPINES

SECONDLIVESTOCK DEVELOPMENTPROJECT S z0U Integrated Coconut/CattleBreeding/Fattening Model - 20 ha

Financial Projections

S Without ------YEARS------Proiect 1 2 6 2. 10 11-14 15 16-20

CASH INFLOW.

1. Annual Sales 19.00 19.00 22.80 31.08 53.12 59.14 58.34 62.72 62.72 62.72 64.22 62.72 64.22 62.72 2. Producers Con- tribution (10%) - 4.93 4.94 2.15 ------3. This loan L1 - 44.29 44.46 19.34 ------4. Other loans ------

Total Expected Cash Inflow 19.00 68.22 72.20 52.s7 53.12 59,14 58-34 .72 6 272 62.72 64.22 62.72 64.22 62.72

CASH OUTFLOW:

5. Investments

-Producers Con- tribution (10%) - 4193 4.94 2.15 - _ -This loan - 44.29 44.46 19.34 - - -Other loans ------6. Operating Costs 4.43 4.43 5.94 6.76 21.25 25.53 23.55 23.55 23.55 23.55 26.70 23.55 26.70 23.55 7. Debt Service

-Interest - - 2.66 7.98 11.81 26.29 26.29 26.29 26.29 26.29 26.29 - - - -Principal I

Total Expected Cash Outflow 4.43 53.65 58.00 36.23 33.06 51.82 49.84 49.84 49.84 49084 52.99 23.55 26.70 23.55

SURPLUS CASH END OF YEAR 14.57 14.57 14.20 16.34 20.06 7.32 8.50 12.88 12.88 12.88 11.23 39.17 37.52 39.17 r

CUMULATIVEINCREMENTAL @ HERD VALUE/2 - 12.30 39.00 55.76 53.08 53.06 55.26 55.26 55.26 55.26 55.26 55.26 55.26 55.26

L1 Total term of loan 10 years; grace period 4 years; 12% interest p.a. £2 Values as follows: Bulls, ' 1,500; Cows, t 1,200; Steers and Heifers (1-2 years), r 1,000; Weaners, p 780. PHILIPPINES 0 w SECONDLIVESTOCK DEVELOPMENTPROJECT

P g Integrated Coconut/Cattle Breeding/Fattening Model - 20 ha

\o9Financial Analysis for Total Incremental Investment (General)

Inv. Oper. Tbtal Net Incr.Nst D.C.F. D.C.F. Costs Coats Costs Income Income Income 20%

'0thoutProject - 4.43 4.43 19.00 14.57 - _ _ Year 1 49.22 4.43 53.65 19.00 (34.65) (49.22) (4)..00) (42.82) 2 49.40 5.94 55.34 22.80 (32.54) (477.U) (32.69) (35.62) 3 21.49 6.76 28.25 31.08 2.83 (11.74) ( 6.80) (7.72) 4 - 21.25 21.25 53.12 31.87 17.30 8.34 9.90 5 - 25.53 25.53 59.14 33.61 19.04 7.65 9.46 6 - 23.55 23.55 58.34 34.79 20.22 6.77 8.74 7 - 23.55 23.55 62.72 39.17 24.60 6.86 9.25 8-9 - 23.55 23.55 62.72 39.17 24.60 10.48 15.06 10 - 26.70 26.70 64.22/1 37.52 22.95 3.72 5.67 11-14 - 23.55 23.55 62.72- 39.17 24.60 10.31 17.34 15 - 26.70 26.70 64.22/1 37.52 22.95 1.49 2.82 16-19 - 23.55 23.55 62.727 39.17 24.60 4.13 8.63 20 - 23.55 23.55 117.98/294.43 79.86 2.07 4.87 +61.82 +91.74 -80.49 -86.16 I.R.R. * 16% :I71g7 +5.58

7fIfncludes sale of cull bull in years 10 and 15. 7! Includes salvage value at the close of the project 27 Breeding Cows @ /1,200 = /32,400 1 Bull @ /1,500 = / 1,500 12 loaned Calves @ / 780 = / 9,360 4 Heifers 1-2 yrs @ l1,000 = 4,000 8 Steers 1-2 yrs @ /1,000 / 8 000

oF-J 0CD te PHILIPPINES

SECOND LIVESTOCKDEVEIOPMNT PROJECT

Integrated Coconut/bairy/Beef Model - 10 ha

Herd Proiection

- ---___----_------Atend of Year------Herd Opmposition 1 2 14 5 6 7 8-20

Breeding Cows and Replacements 10 20 17 17 17 17 17 17 Calves Weaned - 3 6 6 6 6 6 6 Heifers 1-2 yrs. - - 3 3 3 4 4 4

Tbtal Animals 10 23 26 26 26 27 27 27 rce Snt _-e n= nr: =e = = Thtal A.U. 10 20 20 20 20 21 21 21 Purchases

Heifers 1-2 yrs. 10 11 ------

Mortality

Breeding Cows and Replacemen z - - 1 1 1 1 1 1

Sales

Cattle : Gull Cows - 1 2 2 2 2 3 3 lbaners - 3 6 5 6 7 7 7 Heifers 2-3 yrs. _ - - 3 3 2 2 2

Total Cattle - 4 8 10 11 11 12 12

Milk (kg.) - 4,800 10,800 12,000 12,000 13,000 13,000 13,000

Technical Coefficients

Calves Wbaned % - 60 60 65 70 75 75 75 Mortality -Adult% - 3 3 3 3 3 3 3 Cull Rate - iro-rders ', 10 10 lo 10 cU- 1 20 20 Carrying Cap'city (A.U . 10 21 21 21 21 21 21 21 Area Improved (ha.)/l 5 10 10 10 10 10 10 10 J 2 Av. Yield/Lactating Cow/Tear (Kg.) - 800 900 1,000 1,000 1,000 1,000 1,000 @ K

& Improved pasture carrying capacity 1 AU/ha end yr.1; 2.1 AU/ha from Year 2. o c X PRILIPPINIES

C.°,SECON-D LIVESTOCKDEVEIOPMENT PROJECT CD ro o

F- t:J Integrated C Mdel 10 ha \0 tD \,t c-

Unit --- Year 1------Year 2------Total---- Cost No.of Cost No.of Cost No.of Cost Investment Items Unit _QL Units (JO) Units (0) Units (0)

Fixed Grass/LegumePasture /1 ha. 760 5 3,800 5 3,800 10 7,600 Fencing km. 3,710 2 7,420 - - 2 7,420 Water System no. 2,000 1 2,000 - - 1 2,000 Improved Copra Drier no. 400 1 400 - - 1 400 Corral and Milking Shed no. 4,000 1 4,000 - - 1 4,000 Heifers 1-2 yrs no. 2,000 10 20,000 11 22,000 21 42,000 Dairy Utensils and Miscellaneous (5%) - - - 1,881 - 1,290 - 3,171

Sub-Total 39,501 27,090 66,591

Incremental Working Capital Artificial Inseminption no. 20 10 200 21 420 31 620 Animnl Health A.U. 20 10 200 20 400 30 600 Labor man/yrs 2,(X)0 0.5 1.000 1 2,000 1.5 3,000 Fertilizer - Pastures sackL2 110 - - 5 550 5 550 - Coconuts sack 95 45 4,275 45 4 ,275 90 8,550 knimalFeed a kg. I - - 3,600 3,600 3,600 3,600 8 Miscellaneous (5%) - - - 2 4 - 560 - 44

Sub-Total 5,959 11,805 17,764

Total Investment 45,460 38,895 84,355

/1 Includes establishment fertilizer a Sack = 50 kg. Fertilizerfor pasture is broadcast. Fertilizerfor coconut is dug in around the base of the palm. INO /3 500ke. mixed feed/lactatinp cow qnrn 100 kp'/wpaner ret?ined or sold. t: tJJ

PHILIPPINES CD O .- C-. CD N)° SECOOMDLIVESTOCK DEVELOPMENT PROJECT

- Integrated CoconutADairy/BeefModel - 10 he

Sales and Operating Expenses Projection

WAthout ------Years------_-_ Project 1 2 3 4 5 6 7 8-20

Sales Copra /1 9,500 9,500 11,400 13.340 15,610 17,480 19,238 19,238 19,238 Cattle /2 - Cull Cows - - 1,200 2,400 2,400 2,400 2,400 3,600 3,600 - I*aners - - 2,340 4,680 3,900 4,680 5,460 5,460 5,460 - Heifers (1-2 yrs) - _ 3,000 3,000 2,000 2,000 2,000

Milk 3 - - 8,640 19,440 21,600 21,600 23,400 23,400 23,400

Total Sales 9 ,5009500 2, 46,510 49,160 53,696 53,9

OSperatingExpenses Labor - Copra Making /4 1,900 1,900 2,280 2,668 3,122 3,496 3,848 3,848 3,848 - Cowboys - - - 4.000 4,000 4a0ooo 4,00 h4,000 ooo Animal Health - - 400 400 400 420 420 420 Animal Feed /5 - - - 7,200 7,050 7,150 7,675 7,675 7,675 Fertilizer - Pastures - - - 1,100 1,100 1,100 1,100 1,100 1,100 - Coconuts - - - 4,275 4,275 4,275 4,275 4,275 4,275 Artificial Insemination - - - 400 380 380 380 380 380 Rspairs and Maintenance /6 210 210 880 880 880 880 880 880 880 Miscellaneous/7 105 105 158 1,046 1,060 1,084 1,129 1,129 1,129

Total Operating Expenses 2,215 2,215 3,318 21,969 22,267 22,765 23,707 23,707 23,707

/1 Copra-is sold at 70.95/kg. Yield without the project and in Year-ITITOOO kg/ha; 1,200 kg/ha in Year 2; 1,404 in Year 3; 1643 in Year 4; 1,840 in Year 5; and 2,025 from Year 6 onwards. x 2 /2 Cull cows sold at /1,200; loaners,/780, and Heifers (1-2 years) at 1t0ooo. 73 Milk is sold at /1.80/kg. 74 Share farming arrangement - 20% of gross sales. 75 500 kg. mixed feed/lactating cow and 100 kg/weaner retained or sold. Price of feed is /1.OO/kg. 76 5% of initial cost of structures and equipment, fencing, water system. corral and milking shed. 77 5% of Operating Expenses. PHILIPPINES

SECONDLIVESTOCK DEVEOPMENT PRWOECT 0> Integrated Coconut/DairyiBeef Cattle Model - 10 ha

Financial Projections

Without …------Year------____ ------Project 1 2 4 5 6 7-10 11-20 Cash Inflow

1. Annual Sales 9.50 9.50 23.58 39.86 46.51 49.16 52.50 53.70 53.70 2. Producer's Contribution - 4.55 3.89 - - - - - _ 3. Long-term Loan - 40.91 35.01 - - - - - _

Total ExpectedCash Inflow 9.50 54.96 62.48 39.86 46.51 49.16 52.50 53.70 53.70 Cash Outflow

1. Investments:

a. producer'scontribution - 4.55 3.89 - - _ _ _ b. long-termloan - 40.91 35.01 - - - - - 2. OperatingCosts 2.22 2.22 3.32 21.97 22.27 22.76 23.71 23.71 23-71 3. Debt Servicq!.(long-term loan) - - 2.45 7.01 9.11 18.L7 18.lt7 18.1I7 -

8 Total ExpectedCash OutfLow 2.22 l7.68 44.67 28.98 31.38 41.23 42Q. 42018 23.71 SurplusCash at Year End 7.28 7v28 17.81 10.88 15.]3 7.93 10.32 11.52 29.99

CumulativeIncremental Herd Value- - 12.00 26034 28@0C? 28.08 28.08 29.08 290O3 29.08

1/ Total term of loan 10 years incluiiingh years grace, 12,,interest p.a. 2/ Values as follows: Co-Ts, Y'1,200; WeanedCalves. t 780; Heifers (1-2years), / 1,000.

cr Fi o >j

6 > EE~~~~~~~~~~ILIPPINES 0 O SECONiDLIVESTOCK DEVELOPMENT PROJECT cto Integrated Coconut/Dairy/Beef Model - 10 ha

Ct FinancialAnalysis for Total IncrementalInvestment (General) (D (~~~~~~~~~~~'~~~~000)

C+~~~~~~ihu Without…Yas------Years------Project 1 2 3 4 5 6 7 8-20 2U Total

Investment 4$5S60 38.90 ------Operating Costs 2.22 2.22 3.32 21.97 22,27 22.76 23.71 23.71 23.71 -

Total Costs 2.22 470 68 42.22 21.97 22.27 22.76 23-71 23.71 23.71 - Income 9650 9650 23.58 39.86 46.51 49.16 52.50 53.70 53.70 -

Net Income 7.28 (38.18) (18.64) 17.89 249 2h 26.40 28.79 29.99 29.99 -

IncrementalNet Income - (45h46) (25.92) 10.61 15696 19.12 21.51 22071 22.71 29.081/

DOC.FO at 20% - (37.87) (17-99) 6.14 8.17 7.69 7.21 6.3L 28.73 .76 +9.18

DOC.F. at 25% - (36-37) (16.59) 5$43 6.90 6.27 5.65 h.77 18.01 .35 -5.58

FinancialRate of Return = 23%

1/ Salvage Value of Herd

(D>4

Po CD 0 PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT no D Backyard Cattle Breeding and Fattening Model

o fHerd Proj¶ection

Without ------At End of Year------Pro,ject 1 2 3 4 5 6 7 8 9 10 11-20 Herd Composition Breeding Cows and Replacements - - 1 1 1 1 1 2 2 3 3 3 Calves Waned - - - 1 - 1 - 1 1 2 2 2 Heifers 1-2 years - 1 - - - - 1 - 1 - 1 1 Steers 1-2 years - 3 3 3 3 3 3 3 3 3 2 2

Total Animals 4 4 5 4 5 5 6 7 8 8 8

Total Animal Units - h ,2 A6 6 6 6

Purchases Heifers 1-2 years - 1- - Steers 1-2 years - 3 3 3 2 3 3 3 3 2 1 1 Bred Heifer ------1

Mortality Cows and Replacements ------

Sales Cull Cows ------1 - Weaners ------Animals 2-3 years - - 3 3 3 3 3 3 3 -3 3 3

Total Sales 3 3 3 3 == = 33 e

Technical Coefficients through Project Life Calves weaned (%) - 60 YArtality - cows (%) - 3 Cull Rate - cows (%) - 10 Steer liveweight gain (gms/day) - 300 Steer purchase liveweight (kg) - 160 @,6.25/kg. Steer sale liveweight (kg) - 274 @t6.Ookg. = 1,644 ANNEX13 Table 2

PHIIIPPINES

SEOONDLIVESTOCK DEVELOPMENT PROJECT

Backyard Cattle Breeding and Fattening Hodel

Investment Cost

Unit Year 1 Investment Cost No. Cost Item Unit (1) Units

Fixed

Ipil Ipil Seed (HYV) kg 10 1 10 Corral no 500 1 500 Maiden Heifers 1-2 yrs no 1,200 1 1,200 Miscellaneous (5%) 85 Sub-Total 1.795 Working Capital

Bull Service Fee no 20 1 20 Feeder Steers 1-2 yrs no 1,000 3 3.,000 Animal Health AU 15 4 60 Concentrate Feeding /1 kg 0.45 960 432

Sub-Total 3, 512

Total Investment: 5,307

Ll 2 kg rice bran/AU/day for 4 months.

EAP Projects Department November 13, 1975 Z t' PHILIPPINES

X Xo SECONDLIVESTOCK DEVELOPMENT PROJECT

Backyard Cattle Breeding and Fattening Model \.0 CD dSalesand 2eratin Expenses Pro,jections

Without ---- Year-- Project 1 2 3 4 5 6 7 8 9 10 11-20

Sales Cattle - - .4932 4,932 4,932 4,932 4,932 4,932 h,932 4,932 6,132 4,932 /6 Total Sales 4,93294,932 4,932

OpeeratSteer 2 1-2 yrs - - 3,000 3,000 2,000 3,000 3,000 3,000 3,000 2,000 1,000 1,000 Bred Heifer - - - - - 1,500 - Animal Health/3 - - 60 60 60 75 75 75 90 90 90 90 Bull Service Fee 4 - - 20 20 20 20 20 40 40 60 60 60 Concentratefeeding E - - 432 432 432 540 540 540 648 648 648 648 Miscellaneous - - 5o 50 50 50 50 50 50 50 50 50

Total OperatingExpenses 3,562 3,562 2,562 3,685 3,685 3,705 3,828 2 848 3,348 1,848

Sales_of_Cattle_based_onaverage weight of 274 kg liveweightat A/kgi.e. 01,64h/ head. & Purchase of Feeder Steers based on 01,O0O per animal. /3 Animal Health based on /15/AU. 7 Bull Service Fee is 020 per female. Concentratefeeding is based on 2 kg rice bran/AU/day f or 4 months at IO.L5/kg* At year 20 the salvage value of the herd is an additionalp 8,000.

CDtI> D °.0 PHILIPPINES tD SEOONDLIVESTOCK DEVELOPMENT PROJFCT

\,O CD Backyard Cattle Breeding and Fattening Model

Financirl ProJections C+ (~~~~~~~~~~~~~~P)

Without ------Year------Project 1 2 3 4 5 6 7 8 9 10 11-20 Cash Inflow

1. Annul Sales - - 4,932 4,932 4,932 4,932 4,932 4,932 4,932 4,932 6,132 4,932 - 2. Producer's Contribution ------3. This Loan/i - 5,307 4. Other l,oans - - - ExpectedCash Inflow - 5 4,932 4,932 4,932 4,932 4,932 4,932 h,932 4,932 6,132 4,932 Total _ = a ======_======t======_== Cash Outflow: 5. Investments - Producer's contribution - - - - - _ _ - - _ _ _ - This Loan - 5,307 _ _ _ _ - Other Loans - - _ _ _ _ _ - _ _ _ _ 6. OperatingCosts - - 3,562 3,562 2,562 3,685 3,685 3,705 3,828 2,848 3,348 1,848 7. Debt Service - InterestW - - 318 1,163 1,i63 1.163 1,163 1.163 1,163 1,163 - PrincipalJ

TotalExpected Caah Outflow 5,307 3,880 4,725 3,725 4.848 h.8L8 4.868 4.991 4,011 3.348 1,8L8 a...nO " .Su ...... a...... - 3,0814 Surplus Cash at End of Year -- 1,052 207 1,207 814 814 614 (59) 921 2,7814

CumulativeIncremental Herd Value /2 4,000 3,200 4,900 4,200 4,900 5,200 6,100 7,100 8,000 8,000 8,ooo

7a 9 year loan, 2 years grace, interest 12'5.p.a. /2 Values as follows: Cows, P 1,200; Heifers, P 1,200; Steers, P 1,000; Calves, P 60. LzM

PHILIPPINES ro C) SECONDLIVESTOCK DEVELOPMENT PROJECT

He, Backyard Cattle Breeding and Fattening Model

CD FinancialAnalysis for Total Incrementalinvestment (Genera) (+ t000)

Without ------Year------Project 1 2 3 4 5 6 7 8 9 10 11-19 20 SmallholderBreeding and Fattening

Sales - - 4.93 4.93 4.93 4.93 4.93 4.93 4.93 4.93 6.13 4.93 12.93a

Operating Costs - - 3.56 3.56 2.56 3.68 3.68 3.70 3.83 2.85 3.35 1.85 1.85

Investments - 5.31 ------

IncrementalFinancip'1 Balance - (5.31) 1.37 1.37 2.37 1.25 1.25 1.23 1.10 2.08 2.78 3.08 11.08

DiscountedCash Flow - 30% - (4-08) .81 .62 .83 .33 .26 .19 .14 .20 .20 .69 .06

DiscountedCash Flow - 35% - (3.94) .75 .56 .71 .28 .20 .15 .10 .14 .14 .42 .02 FinancialRate of Return = 32% /1 Includessalvage value of herd of f 8,ooo. 3 Cows at pl,200 3,600 1 Heifer at 0 1,200 1,200 2 Steersat r1,000 2,000 2 Calves at F 600 1 200 ANNEX 14 Table I

PHILIPPINES

SECOND LIVESTOCK DEVELOPHENTPROJECT

Municipal Slaughterhouse Model - (Daily Throughput 10-20 Cattle/Carabao. 60-100 Pigs)

Investnent Costa

------Year 1------Total Total Tota END F.E. Compon..nt Investo,ent Stein Unit Unit Cost No. of Units Coat Uoits Coat F`Stqninelt 2tO (Pesos) (flO) Pi) A. Site Worka

2 7 4,D00 28.0 4,000 28.0 Sit. clearing-/ M2 Access road M 20 600 18.0 600 18.0 _ 2 Security fence, 2 i high, with gutes M 68 260 17.6 260 17.6 2 347 62 1.448 Sub-total A 63.6 63 6 8,480 17 1.448 B. Buildings

2 Slaughter floors, cattlR , pigs H 482 280 134.9 280 13479 Hanging & dispatch aret 482 120 57'8 120 57.8

Offal cleaning area 2 482 100 48.2 100 4S 2 Hide shed and stores M2 406 36 14.6 36 14.6 Administration & ne-t inepectors offices M 557 40 22.3 40 22.3 Change roons, showers, toilets M2 457 40 18.3 40 18.3 Building surrounds in concrete H 71 520 36.9 520 36.9 Boiler house & by-products M0 405 55 22.3 55 22.3 Cattle/carabao pens, with race to slaughterhouse .2 177 120 21.3 120 21.3 Pig pens with race to slaughterhouse M2 203 180 36.5 180 36.5 Sub-total B 413.1 15,080513.1 21 11.637 C. Utility Servicee

HWater, tub. well & puqp/ No 30,800 1 30.8 1 30.8 tubewell Head tank with No~~~~~~~~~~H12,300 1 12.3 1 12.3 stand 1 423 1 423 Chlorination -nit No 4,300 1 4.3 1 4.3 Gulvonoied pipee & fittings No 4,600 1 4.6 1 4.6 Effluent catch basin No 8,200 1 8.2 1 8.2 Filter beds with concrete channel to irrigated lands No 6,700 1 6.7 1 6.7 Electrical, wiring & fittings No 13,800 1 13.8 1 13.87_S3 Electri-1, wiring & fittings 80.7 10,756 5 Sub-total C ~~~~~~~~~~~~80.7 37 -3.9-35

D. Plant & Enoip2Senti'

Cattle/corabsosec tion - Guillotine door, race/.tnoiS pen No 2,100 1 2.1 1 2.1 Stunning Pen No 6,800 1 6.8 1 6.8 Captive bold pistol with ncrtridg-a No 2,000 1 2.0 1 2.0 Manual hoiets complete with brake, wire rope N. 825 4 3.3 4 3.3 and ewivelhook N 2 . . Bleeding rail with hangers and supporting steelwork No 5,200 1 5.2 1 5.2 Bleeding rollers with chain and back hook No 567 3 1.7 3 1.7 Beef dressing trolleys, 2 fited & 2 ewivel cators., rubber tyredA_ No 1,350 4 5.4 4 5.4 Dr.esing gambrele NO 223 4 0.9 4 0.9 Dreseing rail, to cover dressing floor hanging hall, detention bay & dispatch area No 6,300 1 6.3 1 6.3 Supporting stoelwork for drensing rail No 8,300 1 8.3 1 8.3 8000 dreesingrollers No 34 80 2.7 80 2.7 Carcass splitting saw, complete with transfrtner, etc. No 9,400 1 9.4 i 9.4 Steps for carcass splitting operator No 900 1 0.9 1 0.9 Beef trees, collapible., for splitting carcasses No 230 2 0.5 2 0.5 Paunch dropping table, otainlean steel Ho 9,400 1 9.4 1 9.4 Operators pluotforne, various sizes No 733 3 2.2 3 2.2 Overhead track scale, capacity 350 kg No 9,900 1 0.9 1 8.9 Offal rack. for inspecting red offals No 2,000 1 2.D0 1 2.u Head inspection truck, rubber tyred wheels No 1,900 1 1.9 Table., 6'x 3', stainless steel top, 20 galvanized 4.0 2 4.0 rube legsand stand No 2,000 24.2 40 Wheelbarrow forhide.,paunc. contents (robber tyred wheele) No 425 4 1.7 4 1.7 Wash hand basins, stainless steel, complete with knife 4.0 1 4.0 bones No 4,000 1

Pig section - Guillotine door, race/stuoning area No 2.100 1 2.1 1 2.1 Pig stunning equipoent, traneforser. 2 pairs electrothslettongs No 3,000 1 3.0 1 3.0 Sow stunning equipaeet, captive bolt pistol and cartridges No 750 1 0.8 1 0.8 Pig/saw bleeding shackles, loose rings, chain & hook type No 130 4 0.5 4 0.3 pig/sow bleeding hoist block, push travel No 4,400 1 4.4 1 4.4 Pig/sow scalding tank complete with hand lifting cradle, N. stew heated 12.000 1 12.0 1 12.0 Dehairing -achine, complete with iotur,stean heated No 16,700 1 16.7 1 16.7 Pig/sow gatbrelling table, galvenized No 1,900 1 1.9 1 1.9 Pig/so dressing hoist block fined madel No 4,100 1 4.1 1 4.1 Gambrels 21" with akid top & back hook No 26 120 3.1 120 3.1 Pig splitting saw, complete with transformer, etc. No 7,800 1 7.8 1 7.8 Pig/eow dressing rail including bleeding, hanging, dispatch areas & supporting steelwork No 16,200 1 16.2 1 16.2 Offal rack for inspecting red offala No 950 1 I O I 1.0 Tables 6' x 3' stainless steel top, 2" galvanized6 tube legs & stand No 2,000 3 6.0 2 6.0 Overhead track scale capacity 350 kg No 9,900 1 9.9 1 99. Hash hand beains, etainless creel, oplete with knife hones, sto heasted No 3,950 2 7.9 2 79 A5NNEX14 Table 1 Page 2

Investment Cost. (Costioaed)

Total Total Total 1US$ F. E. Coo.poteet Unit Uoit Coot No. of Unit. Coot Unite Coat Equivalent F E 100 (pe...o) (PIlos0 (t0-00)

Itemo ,osawo to both sections - Paunch trucks, golvazfoed, rubber tyred wheels No 625 8 5.0 8 5.0 Waste bins vith lids, galvonioed No 90 8 0.7 8 0.7 Sowfoleovee oterilizer boots, electrically heated No 1,900 1 1.9 1.9 Staeking trays alasfose asodieed No 85 20 1.7 20 1.7 Grindotone Ne 1,507 1 1.5 1 1.5 "NeYsell" eonomoy eproys, flexible hose No 400 5 2.0 5 2.0 Soo.p pa. .col. No 800 1 0.8 1 0.8 Skitning koive- No 35 12 0.4 12 0.4 Boning knives 6" No 35 36 1.3 36 1.3 "Steak knives" 10" No 40 12 0.5 12 0.5 Batcher belts No 38 24 0.9 24 0.9 Butcher knife toses NO 62 24 1.5 24 1.5 Steels, round N. 71 24 1.7 24 1.7 Hand saes. .ith spare blades No 55 6 0.3 6 0.3 Cleavers No 120 6 0.7 6 0.7 Cottiog boards No 100 12 1.2 12 1.2 Offal cleaoisg -eatioo. Tripe waoher, onital type N. 2,700 1 2.7 1 2.7 Offal washiog tanks 5'o 25"x 2' with stand NO 1,150 4 4.6 4 4.6 Offal cleoning tables 6'x 3', galvanioed NO 825 4 3.3 4 3.3 7/ By-produots soction- Blood coagulating tano 4'. 3's 2' with ratod N. 800 1 0.8 1 0.0 Tallow rendering tanko 3's 2k's 2' with stood No 750 2 1.5 2 0.5 Beodering tooks.,seat, boseseal N. 850 2 137 2 1.7 Grinding -athirofor seals No 4,200 1 4.2 1 4.2 Hids shed & Ioadies bey - Ilotfors scale capacity 250 kg NO 3,650 2 7.3 2 7.3 Sub-total D 236.2 236.2 31,493 62 19,414 9/ E. Boiler-

Automatic package type, about 15 HP, silfired for diesel fuel, oeassebed sorplete with all fittings, feed otoer tank and othor assillory equipment No 47,600 1 47.6 1 47.6 Steampipe fittings and lagging NO 5,000 1 5.0 1 5.8 Sub-total E 53.4 53.4 7T12 SI ,7)7

1I/ Meat delivery truck - Slb-total F No 90,000 1 90,0 1 90.0 11,941 76 9,107 C., Offise Equipment

Furoiture, sundries - Sub-total G No 8,200 1 8.2 1 8.2 1,090 31 343 H. Freight Installation-Sub-total H NO 57,900 1 57.9 1 57.0 7,717 62 4.757

J. Daion and Enjgneerig (at 5%.) - Sub-total 1 52.2 52.2 6,960 50 3.480

(a) Sub-total Civil Works (A + 8 + C) 74,316 23 17,020

Contirge-ies, Phyoital 10% 15.7 7,432 - 1,702 Total (a) 613.1 81,748 23 18,722

(b) Slb-total Eqoipment tD + E + F + G + H) 445.7 59,361 66 39.392

Contiogeocies, Physi-al 10% 44.6 5,936 - 3,93 Total (b) 490.3 65,297 66 43,331

Cootiogenies., Physical 10% 5.2 696 348 Total (t) 57.4 7,656 3,828 TOTAL INVESTMENT COST (a + b + c) 1,160.0 154,701 42 65,533

1/ Cost of land tot included as existing slaughterhouse is occupying a 6t All visecrs including intestines snd blood are disposed of as edible products. valuable site within the township. Provision is mode for ths butchrs to clecn the viscera prior to morketimg. 2/ Prevision made far future installation of ohillroose. 7t The minisso by-products plant is provided to render nay condetesd eaterisls also to 3/ Mbticipal water sopplies ore geo.rolly liaited hesnt poovision for toagulate snd dry blood not taken op by the butchero. independent supply. atiinted well depth is 160'. 8f Hides will be purshaned direct from butchers end dry selted. 4/ All etcept specialited machinery, panot nd equipment soy be 9f The alternative to a boiler wo-ld be electrically heated plsnt such as the pig sanuf-at-red IO.aIly, o.oaetially freo imported aatsrivls. asaIding took and Htorilfoeta.Newavar ths boiler ad stam oqeipet is re- -sosmdmd 5/ In view of the mnll throughput of largf anImals provision boa to eaintain good sanitary conditions in the slaughterhouse. bees mode fer n simple bed fiaying ayotem using mobile beef tOf Th. body of the meat delivery truck will be mode lecally. trolleys and mnnual hoists. For the some reason, mcbhanital Ill Freight uhergee based os 157. cost of ipertid equipment,hbsl.s. covero ioatsllatite, flayers have bees omItted but these could be readily itosatled cotts of ongiseer, oschaoitt and laborers for 3 months verk. if required (electrical type).

EAP Pro)ects Department Septeeber 24. 1975 "0 0< o o ooooOOodOUO

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1 flqOl

5. SECOND LCVESTOCK DEVELOPIENT PROJECT

M9Ihnicipal Slaughterhouse Model

Financial Projections

1 2 3 4 5 6 7 8 9 10 11-20

Cash Inflow

1. Reven-es 608.0 665.0 723.0 781.0 840.1 899.2 959.3 1,019.5 1,079.6 1,139.8 1,139.8 2. Investments

. Eq.ity (257%) 288.9 ------b. Long-te.- Lo.n 866.7 - - _ _ _ -

Total Erpected Cash Inflow 1,763.6 665.0 723.0 781.0 840.1 899.2 959.3 1,019.5 1,079.6 1,139.8 1,139,8

Cash Outflov

1. Investment

a. Equity (25%) 288.9 ______b. Long-term Loan 866.7 - - -

2. Operating Costs 528.4 565.7 596.1 633.2 675.4 709.9 747.2 784.6 818.8 853.7 853.7

3. Debt 8ervice 52.0 104.0 104.0 210.8 210.8 210.8 210.8 210.8 210.8 -

Total Erepted Cash Outflow 1,684.0 617.7 700.1 737.2 886.2 920.7 958.0 995.4 1,029.6 1,064.5 853.7

Surplus Cash at year end 79.6 47.3 22.9 43.8 (46.1) (21.5) 1.3 24.1 50.0 75.3 286.1

It Loan ters of 10 yers., including 4 years of grace, 127,interent, p.o. PHILIPPINES

SECONDLIVESTOCK DEVELOPMENTPROJECT

Municipal Slawthterhou-e Model

Profit sod Loss Proje.tions

1 2 3 4 5 6 7 Y 9 10 11-20

Income

Revenuex 608.0 655.0 723.0 781.0 840.1 899.2 959.3 1,019.5 1,079.6 1,139.8 1,139.8 emanaee

Operating 528.4 565.7 596.1 633.2 675.4 709.9 747.2 784.6 818.8 853.7 853.7 Interest long-ters lon - 52.0 104.0 104.0 104.0 91.2 76.8 60.8 42.8 22.6 -

Depreci.tion- _ 56.4 56.4 56.4 56.4 56.4 56.4 56.4 56.4 56.4 56.4

Total ftpeo*e 528.4 674.1 756.5 791.8 835.8 857.5 880.4 901.8 918.0 932.7 910.1

Operating Io_m. 79.6 (9.1) (33.5) (10.8) 4.3 41.7 78.9 117.7 161.6 207.1 229.7

Adjeutunt to Profit and (Loss)

/ S.5n of total fixed investment over 19 yaers (year 2 to 20). PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

e Ohaninipal- lau ihenhoune Model - (Daily Throughput: 10 - 20 Cattl/Carabhao, 60 - 100 Pigs

Financia1 Analysis

Revenue Year I Year 2 Year 3 Year 4 Yeer 5 Year 6 Year 7 Year 8 Year 9 Years 10 - 20 Nuaber of Animals Processed: /1 Cattle/Carabao 3,600 4,000 4,400 4,800 5,200 5,600 6,000 6,400 6,800 7,200 L2 Pigs 21.600 23 ,000 24,500 26,000 27,600 29 2 00 3 0 3 00 34.300 36,000 Unit Unit Value ------TOTAL VALUE------FEESL3 (Pesos).V. (.000)

Corral, Holding Pe.e: Cattle/Caraobo Heed 0.50 1.80 2.00 2.20 2.40 2.60 2.80 3.00 3.20 3.40 3.60 Pigs - 0.30 6.48 6.90 7.35 7.80 8.28 8.76 9.27 9.78 10.29 10.80

Ante-Martia: Cattle/Ctrabhe - 0.90 3.24 3.60 3.96 4.32 4.68 5.04 5.40 3.76 6.12 6.48 Pigs 0.60 12.96 13.80 14.90 15.60 16.56 17.52 18.54 19.56 20.58- 21.60

PFst-Mortem & Slaughter Fees Cattla/Carabh. 7.50 27.00 30.00 33.00 36.00 39.00 42.00 45.00 49.00 51.00 54.00 Figs - 4.50 97.20 103.50 110.25 117.00 124.20 131.40 139.05 146.70 154.35 162.00

Slaughterhsuse Servine Changes: Cattle/Carobs- 8.00 28.80 32.00 35.20 38.40 41.60 44.80 48.00 51.20 54.40 57.60 Pigs - 4.00 86.40 92.00 98.00 104.00 110.40 116.80 123.60 130.40 137.20 144.00

Meat Delivery Service: Cattle/Carab-o, Crnass - 2.40 8.64 9.60 10.56 11.52 12.48 13.44 14.40 15.36 16.32 17.28 Fig., Carnass - 0.60 12.96 13.80 14,70 15.60 16.56 17.52 18.54 19.56 20.58 21.60 Cattle/Carabha, Viscera - 1.00 3.60 4.00 4.40 4.80 5.20 5.60 6.00 6.40 6.80 7.20 Pigs Viscera - 0.60 12.96 13.80 14.70 15.60 16.56 17.52 18.54 19.56 20.58 21.60

SALE OF HIDES No 85.80 306.00 340.00 374.00 408.00 442.00 476.00 510.00 544.00 578.00 612.00

TOTAL REVENUE 608.04 665.00 723.02 781.04 840.12 899.20 959.34 1,019,48 1,079.62 1,139 76

TOTAL OPERATING COSTS 528.42 565.66 596.09 633.22 675.39 709.86 747.17 784.59 818.80 853.73

Margin, Revenue Oer Operating Costs 79.62 99.34 126.93 147.82 164.73 189.34 212.17 234.89 260.82 286.03

1 Daily thnaughput increased fron 10 to 20 head over a period of 10 Y.asr /2 Daily throughput Increeed fran 60 to 100 head over a period of 10 years 3 All fees and servIce charges ar in aeeeadi with official ragulatioca, totals incresaed yearly in lis Arth throughput. L4 Based en average nurrent prices sbtainmd fron tnneries for first/second grades. Payable - sllughterhouse. (Production of -eat end bone ne. l fran condeened material a a neSligible end not innluded). ANNEX14 Table 6

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJEGT

Municipal Slaughterhouse Model _ Daily Throughput 10 - 20 Cattle/Carabao, 60 - 100 Pigs

Financial Analysis for Total Investment

Total Revenue Total Cost Net Income

1. 608.04 1,684.02 (1,075.98)

2. 665.oo 565.66 99.34

3. 723.02 596.09 126.93

4. 781.04 633.22 147.82

5. 840.12 675.39 164.73

6. 899.20 708.86 189.34

7. 959.34 747.17 212.17

8. 1,019.48 784.59 234.89

9. 1,079.62 818.80 260.82

10. 1,139.76 853.73 286.03

Financial Rate of Return = 17%

EAP Projects Department November 13, 1975 ANNEX15 PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

DBP Administration, Technical Services, Equipment and Research

Investment Prolections -Year ('OOO) ----- Total 1 2 3 4 Total Years Project Cost 5-11- (P' 000) -(Us 00) DBP Administrative Charges

Salaries 520 520 520 520 1, 430 3,510 Processing 40 40 40 40 110 270 Travel 45 45 45 45 128 308 Stationery, etc. 20 20 20 20 55 135 Other allowances and miscellaneous 25 25 25 25 70 170 Sub-total m m i;731, 4 39 ;

Project Vehicles

Field vehiclesi/ 270 - - _ 270 540 MotorcyclesZ/ 160 160 - - 320 640 Gas, oil and repairsi/ 43 59 59 59 325 545 Sub-total 73 9 7915 77 Technical Services

Technical specialists4/ - 730 - - - 730 Short term consultants5/ 225 225 225 - - 675 Support staff 6 / 200 200 200 200 1,100 1,900 Subsistence and miscellaneous 100 100 100 70 385 1,755 Sub-total 2 1,2557 2 270 75-67

Applied Investigational WbrkZ/ 375 375 375 - - 1,125 150

Sub-total 2,023 2,499 1,609 979 4,193 11,303 1,510 Physical contingencies (5%) 101 _125 80 49 210 565 75

TOTAL 2,124 2,624 1,689 1,030 4,400 11,867 1,600

1/ Five jeeps during DBP main disbursement period (years 1-41) and five replacements during repayment period (years 5-14). 2/ Fifty mnotorcyles during DBP main disbursement period and fifty replacements during repayment period. 3/ At 10% of capital cost, Z/ Nine man/years for a cattle specialist and a monitoring specialist. ;/ Two man/years for consultants on pig nutrition, poultry nutrition, by-products feeding and backyard cattle breeding/fattening. Expected that each of the four consultants will be employed for about three short periods over a three year period. (Travel and subsistence is included.) 6/ Ten man/years, initially assigned to work with technical specialists. 7/ Applied investigational work on pig and poultry feeds and feeding to be carried out under contract by a suitable institution. Items financed will include laboratery and other investigational equipment, feeds, livestock, labor and salary grants.

EAP Projects Department February 19, 1976 ANNEX 16 Table 1 PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJCT -

DBP Agricultural ProjectsDepartment Staffing (As of May, 1975)

OFFICE OF THE MANAGER

1 Manager 1 Asst. for Branches& AgenciesMatters 1 AdministrativeAssistant 1 Messenger 4

FISHERIESGROUP CROP GROUP

lAssistant Manager 1 AssistantManager 2 Division Chief 2 Division Chief 3 Head Project Supervisor 2 Head Project Supervisor 2 Head FinancialAnalyst 2 Project Analyst 2 Project Supervisor 3 Project Supervisor 2 ProjectAnalyst 1 Asst. ProjectAnalyst 3 Asst. Project Supervisor 2 Crop Appraiser 1 Asst. FinancialAnalyst 1 Forester I Naval Architect 1 FinancialAide 1 Marine Engineer 1 Record Clerk 2 Marine Surveyor 16 4 Fishery Appraiser 2 FinancialAide PLANS & PROGRAMSGROUP 1 Record Clerk 27 1 AssistantManager 2 Sr. TechnicalAsst. LIVESTOCK& POULTRY GROUP 1 TechnicalAsst. 2 DivisionChief 1 AssistantManager 3 SectionHead 3 Division Chief 1 AgriculturalEconomist 4 Head Project Supervisor 1 Statistician 3 Project Analyst 1 Asst. AgriculturalSpecialist 3 Project Supervisor 6 ResearchAide 3 Asst. Project Supervisor 3 Statiscal Aide 12 Livestock Appraiser 1 Record Clerk 4 FinancialAide 22 1 Record Clerk 34 MANAGEMENTSERVICES GROUP

CEREALS & FEED GRAINSGROUP 1 Assistant Manager 3 Division Chief 1 Assistant Manager 1 Technical Asst. 2 Division Chief 2 Section Head 3 Head Project Supervisor 1 Head Project Supervisor 3 Project Supervisor 2 ProjectAccountant 2 Asst. Project Supervisor 1 Project Supervisor 2 Asst. ProjectAnalyst 5 Account Examiner 7 Cereals Appraiser 1 Incharge in Adm. Services 2 FinancialAide 8 AssistantAccount Examiner 22 ANNEX 16 Table 1 Page 2 -2-

MANAGEMENTSERVICES GROUP

2 Loan ApplicationExaminer 3 Accts. Examiner Aide 1 Record Supervisor 4 AccountingClerk 2 Sr. Action Clerk 3 Action & File Clerk 1 ReleasingClerk 4 Record Clerk 7 Clerk Typist 1 Messenger 53

T O T A L - - 17B

EAP Projects Department November 13, 1975 PHILIPPINES DEVELOPMENT BANK OF THE PHILIPPINES ORGANIZATION CHART

COMMISSION DEPARTMENT ON OF AUDIT JUSTICE

r CHAIRMAN

SUPERVISING SUPERVISING SUPERVISING [ SUPERIVISIN. l GOVENOR GOVERNOR GOVERNORt l l GOVERNOR

|EXECUTIVE EXECTIVE OFFICER OFFICER

| | INDUSTRIAL INSUSTm AL I |DEVELOPMENI | ACQUIRIE ASSETS | PROJECTS I PROJECTS AUDITING AND RURAL BANKS MANAGEMENT TREASURER COMPTROLLER DEPARTMENDEPARTMENTEIDTMENT III DEPARTMENT DEPARTMENT DEPARTMENT

BRANCHES AND AGRICULTURAL CATERAL SECURITIES ELECTRONIC INDU TRIAL 0 MUNITY PROJECTS DEVELOPMENT COLLATEAL MANAGEMENT DATA PROCESSING ACCOUTING PROJECTS DEPARTMENT DEPARTMENT PROJECTS MANAGEMEN EPRMNT DEPARTMENT DEPARTMENT DEPARTMENT 1I DEPARTMENT

U ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~32BRANCHES

LEGAL OFFICE OP BUSINESS PERSONNEL DIT GENERAL MEDICAL AND CEPARTMENT DE DEPARTMENT THE SECRETARY RESERC ADMINISTRATION IDESPA DEPARTMEPRTMNTEERICE DEPARTMENTDETA l 23 AGENCIESN W snE-EB3 DEPARTMENT l DEPARTM ENT D DEPARTMENT

World B..k-9981

PHILIPPINES SECOND LIVESTOCK DEVELOPMENT PROJECT Organization Chart DBP Agricultural Projects Department

Office of the Manager

Plans & Programs 221

&Pulr Feedgrvices l

Beef Cattle Pig Poultry Division Division Division

Note: Numbers refer to staff as of May, 1975 World Bank-15163

ANNEX17 Page 1

PHILIPPINES

SECONDLIVESTOCK DEVELOPMENT PROJECT

Technical Services

Full Time Consultants

1. The First Livestock Development Project emphasized the provision of technical services to (a) strengthenDBP as an institutionfor chanelling credit for livestockdevelopment to small and medium sized producersand (b) to provide borrowers with sufficienttechnical and managementadvice and supervision to achieve efficientproduction. Under the project, DBP reorganizedits AgricultureProjects Departmentto establishseparate groups which specializein the different types of activity, such as Live- stock and Poultry, Cereals and Feedgrains,Crops and Fisheries. The Live- stock and Poultry Group has been strengthenedby the provision of technical services, and the performanceof the three specialistsprovided has been generally satisfactory. The funds for the three specialistswere included in the first loan but the Governmentobtained New Zealand bilateral assistance for this and the funds have been reallocatedfor farm loans. It is possible that bilaieral assistancewill again be obtained for the technicalservices in the Project but the Governmentagrees with the Bank's proposal to include funds in the loan for these essentialservices in case bilateralsources do not materialize. These funds can be reallocatedif bilateralaid is provided.

2. The quality and motivationof DBP's managementand staff has contributedsignificantly to the success of the first project. Good appraisal proceduresare now followed in the Livestock and Poultry Group based on thorough herd/flock,investment and financialprojections. The quality of loan approval based on examinationof a fairly large sample of loan files and checked against actual on-farm developmentindicates a satisfactory standard of appraisal and the adoption of realistic technicaland financial coefficients.

3. However, DBP's follow-up supervisionof livestock loans is inadequate in quality and quantity and a major objectiveof the technical services provided under the Project would be to remedy this. To establish good routine appraisal procedures,it was essential that the specialists in the first project become actively involved in appraisal work on a day- to-day basis. This workload, togetherwith their other functions,does not, however, allow sufficient time for much supervisionof such loans after appraisal. Therefore,because of the importanceof good loan supervision to DBP and their borrowers,the Project will pay particularattention to this aspect and technicalservices will concentrateon loan supervision (includingregular monitoringof the livestock loan portfolio). DBP is anxious to improve the standard of sub-loan supervisionand monitoring ANNEX 17 Page 2 and the Project would provide to assist DBP two specialistsfor one year (on cattle productionand on monitoring)to follow onthe work of the present three specialistson the first projectwhen their terms expire in November, 1976. In addition BAI would provide additionaltechnical services for DBP sub- borrowers (para 3.17). Suggestedterms of reference for these specialists are in Appendix 1.

4. The technicalspecialists would spend most of their time working the field with DBP's appraisalstaff. Particularattention would be given to trainingof DBP staff, especiallyto upgradingthe appraisers'technical knowledge and developingfinancial and technicalindicators that reflect efficientproduction and management. It is expectedthat, on average, two farm visits would be required for most subloans in the first year and this might be reduced from there on. Innovativesubloans (backyardcattle and dairy) may requiremore than two visits in the first year. Priority should be given to drawing up a simple recordingsystem to be kept by the farmer, reflecting importanttechnical and financialcoefficient. During a farm visit, the appraiser/supervisorshould review technicaland financial performanceindepth and fully discussmatters with the farmer. Since pig and poultry enterprisesare usually clusteredin an around urban areas and villages,a supervisorcould manage up to 400 farm visits per year if supervisiononly is involved. Motorcycleswould be provided to DBP's appraisal/supervisorystaff under the project to improvefarm visit capability. Attention would be given to planning a schedule of farm visits to ensure each supervisorachieves the target visits. In addition field days would be organized regularlyon sub-borrowersfarms to demonstrate managementand technicalaspects to groups of sub-borrowersand potential sub-borrowers. DBP would assign about three counterpartsto work at any one time with each technicalspecialist to ensure that maximum benefit is obtained from the specialists'expert knowledge. In addition to helping organize proper supervisionof sub-loansthese DBP technicianswould provide on-going refresher training for branch techniciansin technicaland economic aspects of livestockproduction. Under the guidance of the two specialists, three DBP technicianswould also liaise with the BAI the PhilippineCouncil of AgriculturalResearch, with the Universityof Philippinesand other appropriateagencies. This will provide the essentiallink between related activities in other agencies and DBP's considerableinvolvement in the livestocksubsector.

Short Term Consultaats

5. Under the first project, a consultanton applied nutritionwas provided to advise on the feasibilityof utilizingmolasses and sugarcane for cattle productionand on the investigationalwork that would be needed to establisheconomic feasibility. Pilot work is still in progress but sufficientevidence is now at hand to suggest that these by-productshave an importantrole to play in livestockproduction. The main constraintis the scarcity of feeder cattle, particularlyin the sugarcaneproduction areas. Work now in progress should establish the economic feasibilityof keeping a breeding herd in a feedlot,with or without milking (at least ANNEX 17 Page 3

once a day), on a feeding system using sugarcane,molasses, urea and ipil- ipil (Leucaenaleucocephala). Because of the importantimplication of this work, provisionwould be made for three short-termvisits by a consultant under the Project to continue the work. The backgroundpilot investigational work to date and future implicationsif successfulare fully describedin a report prepared by the consultantwhich has been submitted to DBP and IBRD. The consultantwould particularlyconcentrate on the developmentof this activity by small farmers in the sugar growingareas.

6. A further developmentsince the first project was appraisedhas been the growth of a small feedlot industrybased on reject bananas of which there are large quantitiesfrom the banana areas of Mindanao. The consultantin applied nutritionwould also provide technicaladvice on this new enterprise.

7. The evaluationof local feeds and the upgradingof rations for pigs and poultry is of particular importance in the Philippines (Annex 2). The Project would make provision for this by the Government granting funds for applied investigational work to be carried out by a suitable institution. The Project would provide for the employmentof consultants(experts on pig and poultry nutrition)to define the investigationalprogram, to specify the investigationaltechniques and method of reporting. These consultants would be employed on a short-termbasis and each would be required about three times for about three weeks duration,over a two or three year period. Draft terms of reference for these short-termconsultants are in Appendix 2.

8. To assist with the backyard cattle componentthe Projectwould provide a short term consultantto investigatethis type of enterprise. This consultantwould concentrateparticularly on defining the potentialrole of this type of production,recommending management practices (particularly feeding) and determing the best way of providing farmers with essential off-farm services (particularlyfor mating and veterinarycare). ANNEX 17 Appendix I Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

I. Cattle ProductionSpecialist - (DraftTerms of Reference)

Duties and Responsibilities

1. The productionspecialist would be responsibleto the Chief of the Livestockand Poultry Group. His duties and responsibilitieswould include;

(a) to assist in the executionof the coconut/cattle,hill beef and backyard beef cattle components;

(b) to assist the Chief of the Livestockand Poultry Group in establishingtechnical/financial supervision of on- going cattle loans. This would include trainingfield staff for this purpose and establishingprocedures and recordingsystems requirementsto ensure a high standard of loan supervision. The service should provide adequate supervisionand technicalassistance as needed to ensure successful completion of poultry loans;

(c) to assist the AgriculturalProjects Departmentto produce an annual livestockloan portfoliomonitoring report based on review of a random selectionof an adequate number of sub-loan enterprises;

(d) to advise and recommendmajor policy and procedural matters with respect to the cattle componentof the project;

(e) to evaluateand make recommendationson investment projects if requestedto do so. (It is expectedthat such work would be confined to a small number of difficult or unusual projects.)

(f) to provide, inter alia, guidanceon design and specifications of cattle corals,pricing and equipment;advising farmerson cattle productionand management techniques, includinggrassland improvement management, use of supplements,antibiotics, vaccines and veterinarymedicines, feedingmethods for differentcategories of stock;

(g) to assist in the selectionof livestock technicians needed to carry out the coconut/beef,hill beef and backyard beef components; ANNEX17 Appendix 1 Page 2

(h) to assist with the production and revision of pamphlets and manuals for the guidance of livestockappraisers/ supervisorsand sub-borrowers;

(i) to advise the Chief of the Livestockand Poultry Group on the duties and responsibilitiesof the livestock technicianswith respect to the cattle componentsof the Project;

(j) to assist in the training of techniciansin technical and economic aspects of beef cattle production and in the techniquesof preparing farm investmentprojects, both through assistingDBP to run training courses for livestock techniciansand through on-the-job training of groups of about three techniciansat a time - on a totational basis - who will be assigned by DBP to work with the specialists;

(k) to assist in the establishmentof adequate farm accounting system for use by sub-loan beneficiaries;

(1) organize and conduct field days and seminars for interested producers and sub-borrowersto promote the sub-loan program and instruct farmers in modern methods of livestock development;

(m) to investigatemethods of developmentof natural grassland including pasture grass and legume evaluationand response to fertilizer,with particular attention to low input systems;

(n) to determine the most suitable grasses and legumes for sub-borrower conditions, including sowing and cultivation techniques,seeding rates and response to fertilizers;

(o) to formulateand supervisethe introductionof a *cheme for seed multiplicationon suitable sub-borrower farms; and

(p) to liaise on grasslandresearch with the Philippine Council of AgriculturalResearch (PCAR),University of Philippines,Los Banos, other Government agencies and the UNDP Research unit concernedwith pasture development under coconuts.

Qualifications and Experience

2. The cattle production specialist should have the following qualifications: ANNEX 17 Appendix 1 Page 3

(a) a universitydegree in Agricultureor allied Sciences such as Animal Husbandryor Animal Scienceor equivalent experience;

(b) specializedknowledge of cattle productionwhich could include specializedknowledge or trainingin tropical pasture or considerablyexperience(not less than three years) in extensionor developmentwork related to cattle production;

(d) the ability to work with administrativeand management personneland with cattle producers.

Preferenceshould be given to candidateswho have had experienceof cattle productionin the Philippinesor in an environmentsimilar to that of the Philippines.

II. MonitoringSpecialist - (DraftTerms of Reference)

3. The specilistwould report to the head of the Plans and Programs Group of DBP's AgriculturalProjects Department,and in consultationwith the head of the Livestockand Poultry Group of DBP would, inter alia:

(a) assist DBP to establisha permanentsystem which would monitor the physical and financialresults at the producer level of IBRD-assistedlivestock developmentprojects;

(b) review and revise as necessary, the monitoring system; and

(c) train DBP staff to implement,operate and revise as necessary,the monitoring system and arrange for sub-borrowersto keep the records essential for the system.

4. A carefully stratifiedsample of projects representingabout 10Z of the total livestocksub-projects assisted by Bank funds would be selected and monitored. The specialistwould establishobjective criteria and procedures for selectingprojects to representthe more importantlivestock and farming types and enterprisesizes and also cover the more important livestockproduction regions of the Philippines.

5. The specialistwould design a simple farm accounting system suitable for recording the data required from sub-borrowers. Such recordswould show, inter alia: ANNEX 17 Appendix I Page 4

(a) The number and/or value of assets and liabilities as well as details of operations (physicaland financial), before development;

(b) the number, nature, and value of investmentsmade and their timing;

(d) changes in the number and value of physical assets;

(e) the quantity, value, and source of income;

(f) expenses and productioncosts, showing details of important items; and

(g) repayment record on the DBP sub-loan.

6. In the light of experiencethe specialistwill determinehow frequentlyDBP technicalstaff and loan supervisorswould need to visit sub-borrowerswho are keeping monotoring records, in order to maintain the desired degree of accuracy in data collection.

7. The specialistwould assist DBP to define responsibilitiesof DBP personnel with respect to implementationof the monitoringsystem, namely:

(a) the duties of specific livestock techniciansat the head office and branch levels; and

(b) the duties of a suitably qualified and experienced staff member in each branch office who would coordinate and supervisemonitoring in each region.

8. The specialistwould conduct such training sessions as may be necessary (includingpreparing a trainingmanual and drawing up training materials).

9. The specialistwould prepare a detailed manual for DBP staff at all levels to record the criteria,procedures and objectivesof the monitoring system.

10. Prior to the terminationof the appointmentthe specialistwould submit a final report covering the work performed and recommendingto DBP any additionalwork on the monitoringsystem which may require attention. ANNEX 17 Appendix 2 Page 1

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Short Term Consultants- Draft Terms of Reference

I. Pig and Poultry Nutrition Consultants

Duties and Responsibilities

1. The (pig/poultry)nutrition consultant in consultationwith the Departmentof Agricultureand the relevant research institutionswould be responsiblefor:

(a) drawing up an applied research program on pig nutrition to be carried out by the selected institution(s). The program should have the objective of establishing the most economic feeding regimen for different categories of pigs/poultryusing domesticallyproduced feeds to a maximum. The program would include:

(i) evaluationof the feeding and substitutionvalues of low energy cereal by-productsand establishing the limits for their use in pig/poultryrations in conjunctionwith the inclusion of high energy feeds such as corn and cassava meal;

(ii) evaluation of the feeding and substitutionvalues of different sources of protein such as copra, soyabean meal, fish meal and ipil-ipil meal and establishing limits for their use in pig/poultryrations.

(b) preparing a report in consultationwith the cooperating universitystaff personnel clearly defining the program of work. It should specifically:

(i) detail the sequence and design of trials and methods to be used;

(ii) specify the facilities,materials, and personnel required to carry out the trials and their source;

(iii) identify the research staff who will be responsible for the work and supporting staff and varify their suitability and capability for carrying out the work; ANNEX 17 Appendix 2 Page 2

(iv) show the budget for the work program and suggested phasing. (The budget should provide all funds that are considerednecessary to ensure that the work program is carried out to the required standards and considerationshould be given to the need and desirabilityof "toppingup" the salary of the staff member with major responsibilityfor executing the work); and

(v) specify the reportingprocedures in detail and timing for interim and final reports to be prepared by the participatingstaff.

(d) supervising the on-going work by means of short-term visits and preparing supervisionreports for the Departmentof Agriculture. It is expected that supervision will require 2-4 weeks at about 6-12 month intervalsand a total of 3 to 4 supervisionsis envisaged;

(e) preparing a final report on the work carried out. The final report should deal with both the results obtained and a critical examinationof this method of providing for investigationof particulartechnical problems.

Experienceand Qualifications

2. The Consultantshould be an experiencedpig/poultry nutritionist with a specializedqualification in pig/poultrynutrition and/or at least five years experienceof applied pig/poultrynutrition work. Preference would be given to a specialistwith previous relevant experience in the Philippines or in an environmentsimilar to the Philippines.

II. Consultanton the Use of By-Products for Ruminants

Duties and Responsibilities

3. It is expected that the consultantwould be required three times each for periods of about 2-3 weeks over a three year period. In coopera- tion with the Chief of the Livestockand Poultry Group of DBP and the cattle productionspecialist the consultantwould:

(a) continue the pilot investigationalprogram which was undertakenby the "Consultanton Use of Molasses" under the first livestock project, with particular reference to the developmentof feedlots on small farms; ANNEX 17 Appendix 2 Page 3

(b) reviewing the results of feeding trials which have already been carried out on the use of molasses, sugar cane and bananas and suggestingappropriate follow-uptrials and the inclusionof other by- products if consideredappropriate;

(c) review the efforts made under the first project to extend small feedlots based on sugar cane and molasses to small scale cane growers;

(d) continue the investigationin progress into the technicaland financialpotential of establishing breeding herds with or withoutmilking, under feedlot conditionsusing predominantlylocally availablefeedstuffs;

(e) constructfarm budgets based on information accumulatedand prepared interimand final reports includingan assessmentof the impli- cation of the resultsof the work for livestock productionin the Philippinesand make recommendationson the appropriaterole for DBP in connectionwith these types of enterprise.

Experienceand Qualifications

4. The consultantshould be a specialistin ruminantnutrition with experieacein the feedingof sugar cane, molasses, bananasand other by- products.

III. Consultanton Backyard Cattle ProductionSystems

Duties and Responsibilities

5. The consultant would be required on 2 or 3 occassions over 3 years each of from 4-8 weeks duration. In cooperationwith the Chief of the Live- stock and Poultry Group of DBP and the cattle productionspecialist, the consultantwould be responsiblefor:

(a) identificationand classificationof differentsmallholder farming systems in the Philippineswith potentialfor backyard cattle breeding and/or fattening;

(b) preparationof cattle productionmodels for each farming system identified;

(c) establishmentand monitoringof physical and financial inputs/outputson one demonstrationfarm for each model proposed; ANNEX 17 Appendix 2 Page 4

(d) preparationof a report(s)covering the followingitems in depth:

(i) number of cattle and carabao used for breeding,and/or draft, or fatteningin differentfarming systemsand potential for increasingnumber of cattle carriedon available forage resourcesin the differentareas of importance;

(ii) possibilityof increasingthe quantity and quality of forage resource availablefor use by smallholder cattle activities;

(iii) detailed informationon animal performanceexpected;

(iv) detailed cost estimatesincluding fixed equipment, feed, labor and other charges and an estimatedrate of return on investment.

Experienceand Qualifications

6. The consultantwould be a cattle productionspecialist with extensive experienceof small scale cattle productionin the Philippinesor in an environwentsimilar to the Philippines. i aPHILIPPINES

- X SECOND LIVESTOCK DEVELOPESNTPROJECT

Finnncing 'I Phesinghropo-.d of the LendEof Program and Fhostng of Loon Co-,itment------Phasing of Investment (51lo1 P..os) ---- FY79 L0an8 FY77 FY78 FY79 F80 FY81 FY82 FY83-90 Total FY77 FY78

Inveetment - _ _ 108.824 500 650 700 1,850 Pig Breeding/Fattening 23.704 36.523 40.606 7.991

- - 20.771 80 80 90 250 PFoltry: Broilers 6.647 6.647 7.477 - - - - 27.147 50 50 50 150 Layer. 5.194 9.049 9.049 3.855 - 0.950 0.512 - 18.156 20 20 20 60 Cattle: Hill Flrrm 2.608 5.102 5.540 2.444 - - 3.819 50 50 50 150 Coconut/Beef - 5 he 0.390 0.959 1.273 0.883 0.314 _ - 35.358 90 90 90 270 Coconut/Peef - 20 h. 4.603 9.282 12.134 7.277 2,318 - - - 1.686 6 7 7 20 Coconut/D.iry - 10 h- 0.273 0.551 0.590 0.272 _ _ 1.062 40 60 100 200 S-all Scale Beef 0.212 0.319 0.531 _ _ 3.582 0.256 - 216.823 866 1,037 1,147 2,950 Sob-totae (Faror) 42.631 68.432 77.200 23.722 - - 11.610 - 4 6 10 Sl.oghterhou.es - 4.644 6.966 - - 3.582 0.256 - 228.433 866 1_041 1,153 3_060 Sob-total 43.631 73.076 84.166 23.722

- - - - 6.000 Feed QOulity Control Progtnm 2.000 4.000 - 1.030 1.304 0.344 2.752 11.867 Ad.ini.tratioe, Technical Services, Equipment and Research 2.124 2.624 1.689 4.886 0.600 2.752 246.300 Total Investnent 47.755 79.700 85.855 24.752 2.358 0.352 3.483 63.208 Price Contingen.ies 5.173 14.975 27.323 9.544 7.244 0.952 6.235 309.508 Total. 52.928 94.675 113.178 34.296

Pr.posed Financing of In-eatment 17.244 1.425 - - 153.750 IBRD 25.482 52.340 57.259 13.272 5.208 0.906 6.235 115.521 DBF 21.117 28.387 40.396 3.780 0.611 0.046 - 40.237 Beneficiaries 6.329 13,948 15.523 7.244 0.952 6.235 309.508 Total Invest-ent FLn.ncong 59.928 94.675 1 13.l78 34.296 ANNEX 19

PHILIPPINES

SECOND LIVEaTOCKDEVELOPMENT PROJECT

1/ Estimated Schedule of Quarterly Disbursements-

IBRD Fiscal Year Quarterly CumulativeTotal of and Quarter Disbursement Disbursements -US$1000.

FY77

First Quarter (July 1 to Sept 30) 700 700 Second Quarter 700 1,400 Third Quarter 700 2,100 Fourth Quarter 800 2,900

FY78

First Quarter 900 3,800 Second Quarter 1,000 4,800 Third Quarter 1,200 6,000 Fourth Quarter 1,300 7,300

FY79 FirstQuarter 1,4oo 8,700 Second Quarter 1,500 10,200 Third Quarter 2,000 12,200 Fourth Quarter 1,700 13,900

Fy80

First Quarter 1,500 15,400 Second Quarter 1,100 16,500 Third Quarter 1,000 17,500 Fourth Quarter 800 18,300

FY81

First Quarter 600 18,900 Second Quarter 500 19,400 Third Quarter 400 19,800 Fourth Quarter 300 20,100

FY82

First Quarter 200 20,300 Second Quarter 200 20,500

1/ The schedule includes a 6 month allowancefor slippage.

RAP ProjectsDepartment February 19, 1976 PHILIPPINES

SECOND LIVESTOCK DEVELOPMENT PROJECT

Protected Project Cash Flow (With Co.t"ngeoies) < ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(tMIllion)

FY87 FY88 FY89 FY90 FY79 FY80 FY01 FY82 FY8 FY84 FY85 7Y86 1SOUCE OF FU9LB: (7(y77 6/77) PY78

DgP OovePns.-t FNcdo Far

4.700 0.360 ParIs L.os a.d Slsoghterho-sas 18.019 26.205 39.122 11.931 - _ _ _ _ - Feed Quality Cootrol Program 2.000 1.080 - - - - - Ad.iniatrat,oL, Techical Services, Eqnipmnt 0.720 0,770 0.825 0.883 0.945 cod R.ssarbh 1.098 1.082 1.274 1.341 0.508 0.546 0.588 0.630 0.674

0,720 0.770 0.825 0.883 0.945 Sob-total 21.117 28.387 40.396 13.272 5.208 0.906 0.588 0.630 0.674

15RD FPnds For:

- - _ _ _ Fare Dm0. and S1aogtorhoses 24.456 47.898 55.989 17.158 - - - - Feud Qo.liy Cootrol Progyno - 3.000 - - Adntinttration, Ts,hnirel Eervirsa,Oqoiporot - - -_-_ -_ and Rseo-roh 1.026 1.442 1.270 0.086 1.425

- - _ _- - Sob-total 25.482 52.340 57.259 17.244 1.425 - -

Rspasonot of Loans

33.099 24.898 13.390 Pig Broediog/Pottetnig - 1.430 10.208 22.044 33.099 33.099 3.829 2.100 - Poultry: Broilers - 1.601 3.330 5.430 5.430 5.430 5.430 5.063 2.629 - - - Layrer _ 0.318 2.597 5.059 7.316 7.316 7.316 7.316 5.042 5.042 5.042 3.486 1.808 Cattle. Hill Part _ 0.166 0.666 1.394 2.852 4.018 5.042 5.042 1.188 1.180 0.814 0.426 Coronot/Blsf - 5 ho - 0.029 0.125 0.293 0.646 0.939 1.180 1.180 9.781 6.099 1.998 - - Croonrt/Beef - 20 ho - 0.289 1.187 2.634 5.452 7.734 9.781 9.781 9.781 0.457 0.331 0.172 - - Co-nottDltiy - 10 ha _ 0.017 0.069 0.145 0.270 0.370 0.457 O457 0.457 8.232 0.149 _ - - Smll Scale Beef - 0.014 0.074 0.175 0.283 0.283 0.283 0.283 0.283

62.588 52.786 37.296 19.321 12.435 6.082 1.8C8 - Sob-totol (Farms) - 3.863 18.256 37.174 55.348 59.189

2.625 2.625 2.625 2.625 . 1.623 811uglotnshoo-en_ _ 0.247 0.894 1.295 1.803 2.625

21.946 15.060 8.609 0.904 - S.b-ttol1 3.863 18.503 38.068 56.643 60.992 65.213 55.411 39.921

65,801 56.041 40.595 22.666 15.830 9.434 1.787 0.945 Totr1 SOvrce of FPods 46.983 84.391 116.158 68.584 63.276 61.898

APPLICATION OSF Fv9DS

Farm Lassi and llancbterbioeOs

- _ - pioaod by DBP 18.019 26.205 39.122 11.931 4.700 0.360 - - - _ --- Financed by IBID 24.456 47.898 55.989 17.158

- _ - - Slb-totel 42.475 74.103 95.111 29.089 4.700 0.360 - - - -

Feed Qg4lity Cont-ol PerBoa-

Flnanred by Gov-rn met 2.00D 1.000 - - Fi6sDaed by IBRD - 3.000

slb-total 2.000 4.000

Admdistrsi-on. Tebhoiloe Dor_ tei.. EalliVant ard Researelt

0.588 0.630 0.674 0.720 0.770 8.825 0.883 0.945 mont 1.098 1.182 1.274 1.341 0.508 0.546 Piu.aaed by DBP/Ooore _- Financed by I0RD 1.410 1.442 1.270 0.086 1.425 -__ 0.945 0.546 0.588 0.630 0.674 0.720 0.770 0.825 8.883 Rub-total 2.508 2.624 2.544 1.427 1.933

RiePay-ets to DPvosotent by DBF

0.923 0.372 0.140 8.011 ------IBDC-fet-mt F-/- 26.595 4.640 lo 7RRD loan PsymetFe/ - 0.146 4.279 8.715 1°1896 26.595 26.593 26.595 26.595 26.595 36.595 36.595 27.478 5.385 18.540 27.501 27.183 27.225 27.269 27.315 27.365 27.420 Total Application of Ponds 46.983 82.796 102.506 39.371 (25.691) (4.440) 44.736 34.397 38.618 28.816 13.326 (4.649) (11.535) (17.986) Cash errplos(Deficit) - 1.794 13.652 29.213

144.691 140.251 89.395 123,792 162.410 091.226 2843552 199.903 180.368 170.382 Cesalatie Cabh SLoplos - 1.794 15.446 44.659

1/ Theee-f.Orthb of 1% per anone on undi-bur.ad bhtooce. 2/ Aeumiog 14 yP-s Ios inrlodiog 5 years of grace, 8k7. Erteroot on ootstsndlg bolanca.

'.o

ef \, PHILIPPINES

SECOND LIVESTOCK DR7RLOPMENT PROJECT

FinancIal Rates of Return en Total Incremental Investment (General)

°se U~~~~ ~ ~~~~~~~~~~~~~~~~~ith-t------__-______a------6lod-l Pr-j-et 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16-19 20 1. Ilaetra-ed Ce=nnnt/Beef Cattle Fottecing - 5 ha.

Sales 3.56 3.56 4.25 16.85 19.60 20.07 20.54 21.02 21.49 21.96 21.96 21.96 21.96 21.96 21.96 21.96 21.96 33.961' Operating Erpea.e. 0.73 0.73 1.12 10.44 11.71 11.80 11.90 11.99 12.09 12.19 12.19 12.19 12.19 12.19 12.19 12.19 12.19 12.19 Invest- ent - 7.80 11.39 6.28 ------_- - - IntrIeate1 Financial Balaner - (7.80) (11.09) (2.70) 5.06 5.44 5.81 6.20 6.57 6.94 6.94 6.94 6.94 6.94 6.94 6.94 6.94 18.94 Fi RniI.St ofRte- 227.

2. Integrated Coeonct/Beef Cattle Breediag/Fattstnoi - 20 ha.

Smlen 19.00 19.00 22.80 31.08 53.12 59.14 58.34 62.72 62.72 62.72 64.72 62.72 62.72 62.72 62.72 64.72 62.72 117.962/ Operating Eapenasa 4.43 4.43 5.94 6.76 21.25 25.53 23.55 23.55 23.55 23.55 26.70 23.55 23.55 23.55 23.55 26.70 23.55 23.55 Investment - 49.22 49.40 21.49 . - - - - . - . - - - - I-trereetal Fi-nial Balance - (49.22) (47.11) (11.74) 17.30 19.04 20.22 24.60 24.60 24.60 22.95 24.60 24.60 24.60 24.60 22.95 24.60 79.86 FinancIal Oats of Return = 167,

3. Iategratad Cn.nant/DBiry/Beef Cattle . 10 ha

Sales 9.50 9.50 23.58 39.06 46.51 49.16 52.50 53.70 53.70 53.70 53.70 53.70 53.70 53.70 53.70 5370 53.70 82.761 Operating Rrpenses 2.22 2.22 3.32 20.97 22.27 22.76 23.71 23.71 23.71 23.71 23.71 23.71 23.71 23.71 23.71 23.71 23.71 23.71 Inventaent - 45.46 38.90 - - Inr=atal Financial Balance _ (45.46) (25.92) 10.61 16.96 19.12 21.51 22.71 22.71 22.71 22.71 22.71 22.71 22.71 22.71 22.71 22.71 51.79 Floaneial RSte of Retnrc = 237,

4. Beekyard Cattle BOeedia/Fattenie-

Salee _ - 4.93 4.93 4.93 4.93 4.93 4.93 4.93 4.93 6.13 4.93 4.93 4.93 4.93 4.93 4.13 12.93 Opercti.g uxpen es 3.56 3.56 2.56 3.68 3.68 3.70 3.83 2.85 3.35 1.85 1.85 1.85 1.85 1.85 1.05 1.85 Iav-e t-,nt 5.3 . - Intreaaent3 Pinaaetel Balante - (5.31) 1.37 1.37 2.37 1.25 1.25 1.23 1.10 2.08 2.78 3.08 3.08 3.08 3.08 3.08 3.08 11.08 Financiel Bats ef Retarn = 32%

5. 0111 Beef Cattle F.c - 400 ha.

Salas 20.02 28.02 28.62 44.20 53.28 67.14 66.36 66.36 66.36 66.36 66.36 66.36 66.36 66.36 66.36 66.36 66.36 134.301' Operating RBpena.a 03.11 13.11 11.24 1.553 15.53 22.18 22.18 18 88 18 88 18 88 18 80 18.88 18 88 18 88 18088 18088 18 10 Invest-nt 88 88 . 65.20 62.36 10.94 12.79 . - . . - .-- .. lncranntal Fin-nel.. BlncaS - (65.20) (59.89) 2.90 10.05 30.05 29.27 32.57 32.57 32.57 32.57 32.37 32.57 32.57 32.57 32.57 32.57 100.51 Financial RBae of Herone = 187.

6. E.. Pradactiac - IEc-easena i Hn Ca-acit fe-n 2000 to 6000 Birda

Sales 153.08 154.12 312.29 459.58 459.58 459.58 459.58 459.58 459.58 459.58 482.116/ Operating Expenses 128.31 120.31 240.56 387.52 387.52 387.52 387 52 387.52 387.52 387.52 387.52 Invsere.enr - ~~~~~~~~~~~~~77.11 ~- ~ ~- ~ ~ ~~103.88- - - . - Iacre atal Financial Balante - (102.84) (30.15) 47.29 47.29 47.29 47.29 47.29 47.29 47.29 67.79 Pinene. al aRte of Retire = 25%

7. Broiler Predoctien Increasing Br-iler Cpaaeity fron 4000 to 8000 llrde

BaBes 167.81 302.05 335.61 335.61 335.61 335.61 335.61 335.61 335.61 335.61 335.61 Opereting Bepanana 147.32 238.60 295.86 295.86 295.86 295.86 295.86 295.86 295.86 295.86 295.86 Icreerseent - 83.08 ------Inrrem IntalFinancial Balance - (40.12) 19.26 19.26 19.26 19.26 19.26 19.26 19.26 19.26 19.26 FiLe.cial BR teof Retre = 467.

8. Pig Breedtng/FpttsninM Increa1 i-g Herd fren 20 te 40 DSe

Sales 132.60 135.80 235.30 265.00 265.80 265.80 265.80 265.80 265.80 265.80 265.802' 265.80 265.80 265.80 265.80 265.80 265.80 328.04!! Operating Expenses 113.90 115.40 200.60 229.50 229.50 229.50 229.50 229.50 229.50 229.50 229 50 229.50 229.50 229.50 229.50 229.50 229.50 229.50 Inv-atn-t - 94.82 22.83 - - - - . - . -- . Fia-aeial Incresiantal Balante . (93.12) (6.83) 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 27.60 89.84 Finan= ial RBte of Retr = 23%

9. Pravintial Slaaohterhuenss - Daily Canoelty 20 Caitle/Coraaoe/100 Fogs

Balsa _ 600.04 665.00 723.02 781.04 840.12 899.20 959.34 1,019.48 1,079.62 1,139.76 1,139.76 1,139.76 1,139.76 1,139.76 1,139.76 1,159.76 1,130.76 Operating Expenses - 520,42 565.66 596.09 633.22 675.39 709.86 747.17 784.59 018.80 853.73 853.73 853.73 655.73 853.75 053.75 853.753 53.73 I~~~~gaeaa - t.i3~~~~~~~~~~~~~~~~~,5.:60 . - - - . -7 In-re-.ntal Finenelal Bel.n.e _ (1,075 39) 99.34 126.93 147.82 164.73 189.34 212.17 234.89 260.82 286.03 286.03 286.03 206.03 286.03 286.03 286.03 286.03

1/ Includes c-im,ative iersentil herd coas. of t12,000. 2/ Ineiadee cr al tive i-cre-ental herd value af t55,260. i3 Iaeledas -uelatir- i-ntrenral herd value of f29.080. 4/ Incladee c=uletive innre1eental herd value af 10,000. 5/ Includes auslalive iacreaenrnl herd ralue of 16.,940. Bacladas1./ tunlerive inrinsnnal flock nolue of 922,530. 7/ntldee roatlaiCe ninrnana herd value of 162.240. PHILIPPINES

SECOND LIVESTOCK DEVELOPMENT PROJECT

Returns to Producers a

Backyard Pig Breeding/1/ Poultry/ Poultry/ Hill Beef Coconut/Beef Coconut/Beef Coconut Cattle Breeding Provincial Fattening Broilers Layers Cattle Fattening Breeding/Fattening Dairy/Beef Fattening Slaughterhouses (5ha) (20ha) La Investment Costs (US$) 7,800 11,080 24,130 20,170 3,400 16,010 11,250 710 154,700

Net Income (US$) (i) At present 2/ 1,250 2,730 3,300 1,990 380 1,940 970 - - (ii) At full development- 3,090 5,300 9,610 6,330 1,300 5,220 4,000 410 38,150 (iii) Increment 1,840 2,570 6,310 4,340 920 3,280 3,030 410 38,150

Financial Rate of Return on Incremental Investment 23% 462 25% 18! 22% 16%/ 23% 32% 17%

Debt Service (US$) 1,960 2,430 5,280 4,420 825 3,140 2,460 155 28,110

Increment After Debt Service (US$) (i) At constant prices (120) 140 1,020 (550) 95 140 570 255 10,040 (ii) At current pricesl/ 34 1,930 6,170 5,608 1,160 2,770 3,830 385 51,213 4/ Increment After Debt is Repayed (US$)- (i) At constant prices 1,840 2,570 6,310 4,340 920 3,280 3,030 410 38,150 (ii) At current prices-/ 2,131 4,670 12,254 9,869 2,059 7,350 6,740 915 84,893

1/ Investment in 10 sow unit (i.e. half model in Annex 7 which is for I boar unit of 20 sows). 2/ Full developmentvaries from Year 2 to Year 9. 3/ Sales and operating expenses inflated at expected rates of: 1976-10%, 1977/80-8%, 1981 onwards-7%. Figures are for the last year of repayment, varying between Years 7 and 10. 4/ Figures are for first year after debt is repaid, varying from Year 8 to Year 11.

r1 r ANNEX 22

PHILIPPINES

SECOND LIVESTOCK DEVELOPMENTPROJECT

Economic Rate of Return

Adjustments to the Financial Balance

1. Calculationsof the amount of taxes and import duties and labor costs to be withdrawn from the project costs have been carried out on the following basis:

Import Duties (all ad valorem)

(a) Equipment for slaughterhouses: 10 to 50% according to ) items on the foreign exchange component.

(b) Technical services and administration: 70% on assembled motorcycles,100% on assembled field vehicles.

(d) Animal feed: 10% on imported inputs except yellow corn which is free of duty. (Yellow corn represents about one third of the value of imported raw materials in mixed animal feed for pigs and poultry.)

(e) Fuel, gas and oil: there is a 20% duty but it is difficult to isolate and its impact on the project balance is not sig- pificant.

Internal Texes

2. Fxcise taxes on fuel and gas have a negligible impact. A 5% tax on animal feed ex-manufactureris the only substantialdirect internal tax.

Labor

3. Farm and unskilled slaughterhouselabor has been shadow-pricedat 50% of its market value. S n ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PHILIPPINES

SECOND LIVESTOCK DEVELOPMENT PROJECT

9 OunrS-y Economic RtSe of Roturn Colcnlocioos a (Million PEsos)

1 2 3 4 5 0 2~~~#~~~~~~~~~~~6 9 ~ 00 12 13 14 ~ ~13 56~~~~~~~~~~~~~~~~17~~~~~~~ 50~~~~~~~ 19~~~L 20

Incre=eental lnFicoil Benefitr

Pig Breeding/Fattening 0.800 26.715 67.797 112.535 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 123.210 023210 S00.782 Poultry: BSoiler 10.740 20.164 38.930 41.949 41.949 41.949 41.949 41.949 41.949 41.949 ------Lay-r 0.053 0.014 23.339 30.601 43.923 45.972 43.975 45.975 40.973 49.353 ------oe: 0011Forms O.D5 0.02 0.348 0.033 .123 02930155 2.4 42.31L6 2.301 2 300 2 301 2.301 2.301 2.301 2 301 2 301 2.301 2.301 2.301 6.285 Ooco- ot/B!ef - 5 h. - 0.035 0.700 1.502 2.295 2.477 2.548 2.618 2. 2.92.236 2.760 2.260 2.760 2.760 20760 2.760 2.760 2.760 2.760 4.560 Co-onoBo of - 20 ho - 0.456 1.906 6.036 10.479 13.970 15.184 15.606 16.175 16.355 16.355 16 .355 1.355 16.355 16.355 16.355 16.355 16.355 16.355 36,801 C-...oct/Diry - 10 ha 0.084 0.280 0.534 0.710 0.794 0.843 0.874 0.882 0.882 0.882 0.882 0.882 0.882 0.882 0.882 0.882 0.802 0.802 1.464 Small Sc-lo Beaf - 0.197 0.493 0.986 0.986 0.986 0.986 0.986 0.906 1.034 1.058 1.058 0.020 1.058 1.050 1.058 1.058 1.0058 1.058 2.658 Olooghterhoa.e. _ 2.432 6.308 6.882 7.462 8.046 8.638 9.232 9.834 10.435 11.037 11.398 11.398 11.398 1.398 1.398 11.398 8 11.398 11.398

Sb-totol 11.593 62.109 140.101 209.888 234.689 239.461 241.649 242.751 244.001 248.257 157.603 157.964 157.964 157.964 157.964 157.964 157.964 157.964 157.964 244.448

Io-re-eetal Operating C-tse

Labor 0.092 1.346 3.430 4.946 5.938 6.623 6.993 7.175 7.252 7.312 6.592 6.612 6.612 6.612 6.612 6.612 6.612 6.612 6.612 6.612 Feed 4.435 36.264 87.491 137.975 153.576 153.585 153.601 153.609 153.616 153.627 95.449 95.559 95.559 95.559 95.559 95.559 95.559 95.559 95.559 95.559 Ocher 3.150 112775 24.127 32.899 37.332 39.379 39.918 39.779 39.982 40.632 34.570 23.560 23.249 23.249 23.627 23.627 23.659 23.249 23.249 23.249

Sub-total 7.677 49.385 115.048 175.820 196.846 199.587 200.512 200.563 200.850 201.571 136.721 125.731 125.420 125.420 125.798 125.798 125.830 125.420 125.420 12S,420

Pig Breeding/Patteniag 23.704 36.523 40.606 7.991 ------Poohtr7 - Beoile- 6.647 6.647 7 477 3.85 - - Layer 0.194 9.049 9.049 3.0085 ------Catle: 8111 er.a 1.304 2.551 2.770 1.722 0.475 0.256 Ceoon-t/1eef - 5 ho 0.390 0.959 1.273 0.883 0.314 COoocnt/Blaf - 20 he 5.907 11.033 14.904 8.999 2.793 Coconut/DLbry - 10 ha 0.273 0.001 0.590 0.272 - - - - - _ - ______- Small Scale "enf 0.212 0.319 0.531 - Sl-oghterheo.e. _ 6.108 9.282 - _ _ _ - _ - _ _ _ - ______

Sub-tooal 43.631 73.076 84.166 23.722 3.582 0.256

Adeiiaatrlee.n Teohalcal Serolree. oulomear and Reearol 3.280 3.010 2.840 1.030 0.440 0.440 0.440 0.440 0.440 0.440 0.440 0.440 0.440 0.440 - - - - -

Project Piocalol Balonce (42.995) (63.362) (61.953) 9.316 33.821 39.178 40.697 41.748 42.711 46.246 20.442 31.793 32.104 32.104 32.166 32.166 32.134 32.544 32.544 119.028

Adlirt.e..L t0 Fi-ancial Balanc

Leb D.336 0.946 1.749 2.143 2.430 2.690 2.843 2.920 2.933 2.952 2.586 2.586 2.586 2.586 2.586 Ta... 2.386 2.586 2.586 2.506 2.586 2.062 6.714 11.885 13.999 14.120 13.880 13.881 13.881 13.882 13.882 8.831 8.831 8.831 8.831 8.831 8.831 8.831 8.831 8.831 8.931

Proeact E-enenia BSIe-nce (40.597) (55.702) (48.319) 25.458 50.391 55.748 57.421 58.549 59.526 63.080 31.859 43.210 43.521 43.521 43.583 43.583 43.551 43.961 43.961 130.445

1/ E-eldi.g feed qoality aontrol lahoobtooy. IBRD 11869 118. lo- 1.22 124' I25° SEPTEMBER1975 PHILI PPINES CLASSIFICATIONOF PROVINCES YGE1OGRAPHICAL. ' 9 SECONDLIVESTOCK DEVELOPMENT

1.CITY Of MANI VR.WESTERN VISAYAS | PROJEC T la- 35. Akl., ------tl.lL3tCOS 36. Atoue _ . Son Vicente t. Abro 37 Ilodo A 2. lemtonre 3N. rP' Apai Primary Highways 3. looe Sos 39 Negro,O-de-1 Lao9 2 * Railways LaLeUnWo, 40 Ron-bion c3Rl E. ftSo1inr' ) Principal Ports E. EO"t YVI4. EASTERNVISAYAS

7. KIopo 41. Sebhu 1 8 +TogegoTrunk Line Airports IS. CAOAS. K.Il5li. VALLEY AEeyeO 42.43 Csb.No,th-,goa LeJ --- - District Boundaries Nti.CAGAYAN VALLEY 44. South r Lrybb. . 19. ~ ~ 4. SEothe..S...-~.. Regional Boundari'es 1aC 10 4E. NegrotO,i-1n3rie II. 4eoSolew9 t -, . -. International Boundaries f2. Nutn vSi-ve 4 North.r So..., 7 48. WmeternSenIrt JV.CENTRALLUZON San 41 te6§ t3. est3in IX. NORTHERN& EASTERN Fernon e f4. Stoer MINDANAO Sla 1extf 12 1 W5. h4-0 ESiO 49. Ag-eendel Norle TtonS J toi. Pesneog 53. BSk,dnon ' 17. I'es"'ni 51. Leno del None Bugalon gpa 15 Tatgp 52. L.oco del1 u Son J# 1.Zettfibel 53. MisansoOco.ide,neel. 54. Miterso Oriental C1 5 0 0 1 V. SOUTHERNTAGALOG 5d SotiOgodor No- To c c 000 / O/7/)Nl bO O__ _ 2IL Beteitge 55 ooedlSr-' Lu ' '" A/' KILOMETERS 31. Cetite56S...d1 r 22. LOW.. 57. Agusandel S., 199 23. MErendegee sa. cenigoin '16 141 24. terodorKlo,odentel Olongop S Fernatdo 2S. MindsssOiietal X. SOUTHERN& WESTERN 3 8 27 20. hbta-e MINDANAO 13MANIL 051 27. 0-ezon 59. Coteetot 39.20tEte 60, D-o del None Co lfi 140. 1l5 Zam-basn del Norn Togoytoy I Sb Cruz Jose Ponganiban oclf/c .V}.slCOL E2. Z-mboangede1 So, Nosugbsi . ' 'nl-n 29. Afsre SS. solo S -0 ' gO 30. Ceenein None 64. SWoh oast 24" C.-nne,E., 64. S.tho Caat. IntnCruz 3la aspiOcean s2. Ceoteetete 45. D-oe dl Sor Nogo City

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