Filipino Spending and Demand Trends of Prime Food Commodities*

February 2010

Marie Annette G. Dacul
Agribusiness Specialist
Center for Food and Agri Business
University of Asia and the Pacific

Filipino household spending was one of the economy's strong points in 2009. The economy was stimulated as people spent more. Among the factors for increased household spending were the remittances from overseas Filipino workers and government stimulus spending. These increased consumption and offset the losses due to the economic downturn and natural calamities like typhoons.1

Based on the Family Income and Expenditure Survey2 of the National Statistics Office (FIES-NSO), the total Filipino family spending grew by 13% in real terms from P1.2 trillion in 1997 to P3.5 trillion in 2006 while total family income increased by 12% (inflation-adjusted) over the period. As income grew, the share of total food expenditure to family income slightly declined from 36% in 1997 to 35% in 2006. Filipino households, on average, spent about 88% of their total food expenditure on food consumed at home and 12% were spent on eating out. The top five food groups that were eaten at home included cereals and cereals preparation (27%), meat and meat preparations (15%), fish and marine products (13%), fruits and vegetables (10%), and food not elsewhere classified such as sugar, cooking oil, margarine, sauces and other spices and seasoning (9%). Meanwhile, the highest total family expenditure on food went to rice, fresh fish, shells and others, fresh pork and fresh chicken.

This article shows the expenditure and demand trends of prime food commodities typically bought by an average Filipino household. These are rice, pork, chicken and fish. Since sugar is commonly used in most cereal and meat preparations, it was included. Milkfish was also used to represent fish. The food demand drivers for 2010 were also discussed.

1. www.gov.ph, 2009
2. Family Income and Expenditure Survey (FIES), 1997, 2000, 2003 and 2006


Spending by Prime Commodity

Rice cornered the biggest share in total Filipino food spending. On the average, the spending of Filipino household increased by 11% a year at constant prices from P108 billion in 1997 to P275 billion in 2006. Over the 10-year period, the per family rice expenditure was about P11,054 per year at real prices .

Fresh fish, shells and crustaceans were the second highest contributor to total family spending. From 1997 to 2006, family expenditure grew by 11.2% a year in real terms from P55 billion in 1997 to P144 billion in 2006. The spending per family was over half of rice or P5,980 per year.

Fresh pork accounted for the third largest chunk of spending, followed closely by fresh chicken with yearly spending of P3,062 per family and P2,449 per family, respectively. Over the period, annual family spending grew by 12% (P27 billion to P77 billion) and 11% (P23 billion to P60 billion), respectively. Meanwhile, sugar expanded by 10% per year from P10 billion in 1997 to P25 billion in 2006 or an average expenditure of P996 per family.

Figure 1. Total Family Spending by Commodity at Constant Prices (2000=100)

Figure 1: Description of this image follows.
Description

Figure 1. Total Family Spending by Commodity at Constant Prices 1997-2006: Rice cornered the biggest share in total Filipino food spending. On the average, the spending of Filipino household increased by 11% a year at constant prices from P108 billion in 1997 to P275 billion in 2006. Over the 10-year period, the per family rice expenditure was about P11,054 per year at real prices . Fresh fish, shells and crustaceans were the second highest contributor to total family spending.

Source of basic data: FIES-NSO, various years


Demand for Prime Commodities

From 1997 to 2008, demand for the prime commodities expanded moderately, that is, from 1 to 5% annually with milkfish posting the highest growth.

Apparent rice consumption per person increased by about one-third from 1997 (97.1 kg/cap/year) to 2008 (128.1 kg/cap/year) and grew by 2.6% yearly over the period. It remains the staple food of most Filipino family which explains the big share in total family food spending. The increase in per capita consumption is brought about by improvements in income that could have led more lower-income Filipino households to shift from root crops to rice.

Pork (carcass and offals) had the second highest utilization followed by dressed chicken among the five prime food commodities. However, it grew at a slower rate of 1.9% (per annum) p.a. against chicken at 2.1% p.a. In 2008, per capita consumption of pork expanded by 22% compared to 1997 (15.1 to 18.5 kg/cap/year) while that of chicken increased by 24% (7 to 8.6 kg/cap/year). High prices affected the demand for pork, thus, chicken, a substitute, experienced a growth in consumption.

Milkfish is a one of the major species in fishery production. During 1997 to 2008, milkfish consumption per person increased by two-thirds (1.5 to 2.5 kg/cap/year) while annual demand grew by 5.2%. The trend for more healthy food and its relatively cheaper price compared to pork and chicken pumped up local market demand.

Meanwhile, sugar consumption dropped slightly from 3.1 to 2.9 kg/cap/year from 1997 to 2008. The decline in consumption is attributed to many factors such as the shift in household usage to purchased products instead of home-cooked foods and the growing health consciousness among consumers. On the average, consumption was relatively stable (0.6% p.a.) over the past 12 years.

Table 1. Per Capita Consumption by Food Commodity, 1997-2008
Per capita consumption (kg/year) Rice Milkfish Pork Chicken Sugar
1997 97.1 1.5 15.1 7 3.1
2008 128.1 2.5 18.5 8.6 2.9
Growth rate (% p.a.) 2.6 5.2 1.9 2.1 0.6

Source: Bureau of Agricultural Statistics


Food Demand Drivers

Demand for food is based on several factors. The key demand drivers include the growth in income, expansion of the population, and urbanization.

A rise in income results to higher purchasing power. During 1997 to 2006, as total family income grew by 12.4% p.a. in constant prices, food expenditure also expanded at the same pace. The International Monetary Fund forecasts Philippine Gross Domestic Product, used as a measure of income, to grow at 3.2% in 2010.

The continuing growth of the population is also a major driver for the growing demand for food. The population expanded by 2.1% annually to 90.5 million in 2008 from 71.9 in 1997. Based on the census-based projection of the NSO, population will grow by 1.9% per year until 2010.

Relatedly, intensifying urbanization will also propel food demand. The percentage of urban families to the total number of families expanded from 38% in the late 1980s to 48% in the 2000s (NSO). Generally, urban inhabitants have higher incomes and thus, greater per capita spending on food. The busier consumer lifestyles, however, tend to shift consumer preferences towards more convenience-based products such as canned and frozen foods.

There are other factors influencing Filipino food demand trends like prices of the product and its related products, changing dietary patterns, and demographic changes. There is also a growing consumer interest in food safety, food quality, and health and nutrition issues.

These growth potentials present opportunities for the different sectors especially considering that the country generally imports most of these commodities.


References:


* Published in the February 2010 issue of the Food and Agri Business Monitor, a monthly magazine of the Center for Food and Agri Business, University of Asia and the Pacific, Pasig City, Philippines.