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 University of New England

Graduate School of Agricultural and Resource Economics

&
School of Economics

The Philippine Duck Industry: Issues And Research Needs

by

Hui-Shung (Christie) Chang and Clarita T. Dagaas

No. 2004-1 – August 2004

Working Paper Series in

Agricultural and Resource Economics

ISSN 1442 1909

http://www.une.edu.au/febl/EconStud/wps.htm

Copyright © 2004 by University of New England. All rights reserved. Readers may make
verbatim copies of this document for non-commercial purposes by any means, provided this
copyright notice appears on all such copies. ISBN 1 86389 8794
 The Philippine Duck Industry: Issues And Research Needs ∗

Hui-Shung (Christie) Chang and Clarita T. Dagaas ∗∗

Abstract
The Philippine duck industry is dominated by balut (partially hatched embryos)
production and by smallholder production that accounted for more than 75 percent of
the total duck production. However, the commercial sector is gaining momentum in
moving towards a higher degree of vertical integration and contract farming and there
appears to be some increase in the demand for duck meat. At present, almost all of the
demand for duck eggs is met by domestic production while about two percent of duck
meat consumption is imported. As such, imports appear not to be a serious threat to
the domestic supply at present. However, it is envisaged that as trade liberalisation
continues, the Philippine duck industry will face increasing competition from
overseas and other food products. Continuing survival and future growth of the
industry depend on its ability to compete in a free trade environment, which, in turn,
depends on efficiency of the production and marketing systems relative its
competitors. The objectives of this paper are to provide an overview of the industry,
identify industry issues and suggest areas for further research. The key issues
identified in this paper include (1) a possible declining demand for duck products; (2)
the absence of product standards and market information; and (3) the collection and
consistency of BAS data. One suggestion is that expert opinions are needed to
reconcile discrepancies in the published data. In addition, more research is needed on
several areas, including identifying issues facing the smallholders, including the
emergence of large scale commercial duck farms; better understanding of consumer
demand; defining and establishing product standards, and generating more reliable
market intelligence.

Key Words: : duck, poultry marketing, trade liberalisation, balut.

∗
The authors wish to extend gratitude and appreciation to the Australian Centre for International
Agricultural Research (ACIAR) for providing the funding for the research project entitled “Future
prospects for smallholder Philippine poultry producers: ducks and native chickens”, to which this
paper is a part. Thanks are also extended to M. Malabayabas and all other team members for providing
reference materials and data and to Angel Lambio for very useful comments on an earlier draft of the
paper.
∗∗
Hui-Shung (Christie) Chang is a Senior Lecturer in the School of Economics and the Graduate
School of Agricultural and Resource Economics at the University of New England. Clarita T. Dagaas
is based at the Institute of Animal Science College of Agriculture University of Philippines-Los Banos
Contact information: School of Economics, University of New England, Armidale, NSW 2351,
Australia. Email: hchang@pobox.une.edu.au

2
Introduction

In 2002, the Philippine poultry industry generated 40.3 billion Philippine pesos (about $US
806 million, based on an exchange rate of 50 Philippine pesos in a dollar), which accounted
for 11 percent of total value of agricultural production (BAS, 2003a). The Philippine poultry
industry had been protected from imports through tariffs and other non-tariff measures in the
past. However, since the accession to the World Trade Organisation (WTO) and signing of
regional trade agreements (Asia Pacific Economic Cooperation and ASEAN Free Trade
Area) in the mid-1990s, imports of poultry meats (mainly frozen chickens and ducks) and
other meat products (particularly frozen beef) have increased substantially. It is envisaged
that as trade liberalisation continues, the Philippine poultry industry will face increasing
competition both from overseas and other food products. Continuing survival and growth of
the industry and its sub-sectors (including broiler chickens, layer chickens, native chickens
and ducks) depend on their ability to compete in the global market, which, in turn, depends
on efficiency of their production and marketing systems.

Because the poultry sub-sectors differ significantly in their production and marketing systems,
the trade impacts on them are likely to differ, imposing threats on some while creating
opportunities for others. For example, the commercial broiler and layer chicken farms are
generally vertically integrated with large scale, technologically advanced, geographically
concentrated production units while ducks and native chickens are produced mostly by
geographically and technologically more diverse smallholders. 1 Typically, the marketing
chains for commercial chicken products are relatively short and efficient, with integrated
operators employing contract farming and their own processing and marketing facilities while
ducks and native chickens rely mainly on traditional and much less efficient marketing
channels (SEARCA, 1999).

Some studies that analysed competitiveness of, and trade impacts on, the Philippine livestock
and commercial poultry sectors have found them to be not competitive with both imports and
exports in a more liberalised trade environment (Jarvis, 1993; Gonzales, 1995; Mangabat,
1998; SEARCA, 1999; University of Asia and the Pacific, 1999; PCARRD, 2000; Mateo,
2001; Arboleda, 2001). This is because the Philippine poultry industry was a high cost
producer, relative to major exporting countries such as Brazil, China, Thailand and USA, due

1
Backyard production of ducks and native chickens accounted for more than 60 percent and 75 percent of the
2001 total duck and chicken inventories, respectively (BAS, 2002a,b).
3
to its heavy reliance on imported inputs (including feedstuffs, vaccines and breeding stock)
(Mateo, 2001; Department of Agriculture, 2001; Arboleda, 2001).

Given that the smallholder duck and native chicken sector is largely undeveloped, it is
reasonable to assume that it too, like its commercial counterpart, will not be able to compete
with imports. But this assumption is not necessarily true. This is because although the
smallholders may not compete well with the commercial sector on productivity, such as egg
production, weight gain, body weight, etc, they are lower cost producers based on local
breeds that are resistant to diseases and harsh living conditions, local resources that are lower
cost, and less intensive production systems (Arboleda, 2001). In addition, there are strong
consumer preferences for the freshness and unique taste of duck and native chicken products
(SEARCA, 1999; Lambio, 2001). Therefore, smallholder duck and native chicken production
may have a market advantage over the commercial sector and may become technically more
productive if sufficient support in research and development were given to help identify
issues and improve productivity.2 Given the massive involvement of farm households in duck
and native chickens production, even a small productivity gain as a result of research and
development can have a tremendous impact on the livelihood of resource-poor farmers.

This study is a part of a research project, entitled “Future prospects for smallholder Philippine
poultry producers: ducks and native chickens”, funded by the Australian Centre for
International Agricultural Research (ACIAR). The overall objective of the research project is
to determine whether and how the Philippine smallholder duck and native chicken producers
can become more efficient. Because of the limited space, this paper focuses on ducks only
where more research is needed. A special report on native chickens will follow in due course.
This paper is organised as follows. First, it provided an overview of the industry, including
trends in production, consumption and trade and government policies and regulations that
have an impact on the sector. It then identifies key issues facing the duck sector and makes
recommendations to the government and the industry on areas that further research is needed.
The paper ends with some concluding remarks.

‘Balut” and the smallholder production

Ducks are raised primarily for meat in the Western countries (eg Australia, USA, Canada and
France) and in Asian countries dominated by the Chinese (China, Taiwan, Hong Kong and

2
Despite their economic and social significance to the majority of the Philippine population, smallholder
production in general has received little attention from either the research community or government until
recently when the Republic Act 8435, otherwise known as the Agricultural and Fisheries Modernisation Act
(AFMA) was enacted in 1998 as a support to the smallholder poultry and livestock industries (Department of
Agriculture 1999).
4
Singapore). In other Asian countries, such as Thailand, Malaysia, Vietnam and Indonesia,
India, and Bangladesh, ducks are raised to produce eggs for table egg consumption and
processed into salted and century eggs (Farrell and Stapleton, 1986). But this is not the case
in the Philippines.

In the Philippines, about 90 percent of total duck egg production is used for processing (BAS-
SRTC 1998). Eighty-seven percent of which is processed into balut3 and another 7 percent is
processed into salted eggs. The remaining 6 percent consists of century eggs, penoy, and
other unidentified forms. This means that balut accounts for about 80 percent of total egg
production. This emphasis on balut production is a unique feature of the Philippine duck
industry. 4 Although unfamiliar to most foreigners, balut and penoy are delicacies in the
Philippines for their unique taste and nutritional content. Cooked balut is sold as snacks in the
evenings by street vendors, either peddling on the street or stationing on the sidewalk. Most
Filipinos speak of balut fondly and proudly.

Although in the Philippines some meat-type ducks are being raised, the majority of duck
meat is derived from excess males and culled layers. Consequently, the meat is relatively low
in quality, with fishy meat taint and tough and coarse texture (Perez, 2003). Duck meat is
often used for making another traditional Filipino duck dish known as “kinulob na itik”,
whereby fishy smell and toughness are overcome or disguised by heavy seasonings and deep
frying after being boiled for hours (Lambio, 2001). As a result, consumers prefer pork and
chicken meat and the demand for “kinulob na itik” is limited to a small segment of the
Filipino population (de Castro et al., 2002).

A second feature of the Philippine duck industry is the dominance of smallholders in duck
rasing. More than 75 percent of the ducks in the Philippines are raised by smallholders or
backyard raisers with less than 100 heads per household (BAS, 2002a). Ducks are commonly
raised and preferred by smallholders in rural areas because they can subsist under a wide
range of climatic conditions and feed on a variety of foods, and are resistant to common avian
diseases (Farrell and Stapleton, 1986). Therefore, duck products are good sources of income
and low cost animal protein for rural population. Philippine ducks are composed mainly of
the Mallard duck (Anas platyrhynchos L.) for egg purposes, with only a small number of
Muscovy duck (Cairina moschata L.) being raised for meat (Lambio, 2001). Duck eggs are

3
Balut, which is referred to as “embryonated egg” by the Chinese and as “hot vit lon” by the Vietnamese, is
partially incubated duck eggs whose live embryos are harvested between 16-18 days old. The infertile eggs and
dead embryos are sold as ‘penoy’ in the Philippines.
4
Although balut is also produced and consumed in Vietnam and some Chinese provinces, they are not in such a
large scale as in the Philippines.
5
larger in size and have thicker shells and stronger flavour than chicken eggs, all of these
characteristics make them more suitable for processing into value-added products.

The emphasis on egg and balut production and the dominance of smallholders mean that the
future prospects of the industry depends heavily on the future demand for balut and the
ability of the smallholders to compete with other competing products in price and product
quality. However, products such as balut and penoy, despite their uniqueness and cultural
significance, may face uncertain future because of changing lifestyles and consumer
preferences, issues of availability, and concerns over food safety and product quality.

Duck distribution

In 1950, when the inventory of ducks in the Philippines was first taken, there were 709,000
heads of ducks (BAS, 2002b). Since then, the total population has shown a steady increase. It
reached 4.67 million heads in 1980 and almost 10 million heads in 2001. The duck inventory
is classified into commercial and backyard. A duck operation is defined as “commercial” by
Bureau of Agricultural Statistics (2000a) if the farm has more than 100 heads of ducks.
Otherwise, it is referred to as “backyard”. Therefore, the classification is based on the number
of the birds, regardless of the production methods5 or whether the outputs are primarily for
sale or for household’s own consumption. Nevertheless, it is reasonable to assume that farms
with more than 100 heads of ducks are in operation most definitely for business and income
generating purposes. Table 1 shows the number and production share of the commercial and
backyard sectors during 1991-2001. It can be seen from Table 1 that the percentage share of
ducks raised under commercial scale increased from about 10 percent in 1991 to about 22
percent in 2001 (BAS, 2002b). That means in 2001 about 78 percent of ducks are still raised
in small scale, backyard operations.

5
Ducks can be produced in several different ways: intensive system based on confinement and formulated
feeds; semi-intensive system based on a mixture of naturally occurring feeds and supplementary feeding;
(back)yarding based mainly on naturally occurring feeds and household scraps; herding based on foraging on
the rice fields; and integrated system with fish or pig production (Farrell and Stapleton, 1986).
6
Table 1. Philippine duck inventory, 1991-2001
Year Total Backyard Commercial
Heads % Heads %
1991 8,267,690 7,417,520 89.72 850,170 10.28
1992 8,348,291 7,660,895 91.77 687,396 8.23
1993 8,706,783 8,175,475 93.90 531,308 6.10
1994 8,186,877 7,585,108 92.65 601,769 7.35
1995 9,072,203 6,855,460 75.57 2,216,743 24.43
1996 9,469,693 7,335,159 77.46 2,134,534 22.54
1997 8,923,496 6,762,241 75.78 2,161,255 24.22
1998 8,823,566 6,953,335 78.80 1,870,231 22.20
1999 8,613,651 6,589,101 76.50 2,024,550 23.50
2000 9,245,788 7,074,944 76.52 2,170,844 23.48
2001 9,986,803 7,810,034 78.20 2,176,769 21.79
Source: BAS, 2002b

Figure 1 shows the changing trends in the make up of the duck inventory between 1980 and
2001. It can be seen that overall, the total inventory has shown an increasing trend. The
numbers of backyard (village) ducks increased gradually from 1980 to 1993 but after 1993
the backyard duck population has shown some decline and fluctuated around 7 million birds.
The commercial duck industry shows a different pattern. Numbers from 1980 to 1994
appeared to be declining steadily. In 1995, however, there was a major boost to over 2
million birds, which has been maintained since.

The significant growth in the commercial sector since the mid-1990s could be attributed to
the introduction of commercial duck feeds. However, it is not clear what caused the declines
in the commercial sector (between 1980-1994) and in the backyard sector (between 1994 and
1999). While the large scale commercial sector uses mainly commercially formulated feeds,
smaller farms (including some commercial farms and backyard raisers) use different feeding
regimes based on a mixture of naturally occurring feeds, supplementary feeding of corn and
dried coconut, and commercial feeds. Traditionally, ducks were raised on naturally occurring
feeds in and around rivers and lakes (eg Laguna Lake) and rice producing areas (where
herding system is more common). However, the advent of commercial feeds has allowed
ducks to be raised in traditionally non-duck areas and has resulted in changes in the
geographical distribution of duck population in the Philippines (University of Asia and the
Pacific, 1999).
7
 Figure 1: Total Duck Population, 1980-2001

12

10
Inventory (million)

Total
6 Backyard

2
Commercial

0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
A case in point is the drastic reduction in duck numbers in Laguna province (home to the
Laguna Lake), which used to be the largest duck producer of the country for many decades,
and substantial increases in Nueva Ecija, Tarlac and Isabela provinces, as can be seen in
Figure 2. The most significant increases in population (apart from Nueva Ecija) during the
period 1991-2001 have been in Tarlac (Region III) and Isabela (Region II).

8
 Figure 2: Average Total Duck Populations by Province,
1980-1990 and 1991-2001

700

600 1980-1990
1991-2001
500
population ('000)

400

300

200

100

0 La g u n a ( IV) N e u v a E c ija N e g ro s O c c T a rla c ( III) P a m p a n g a ( III) Ile ilo ( VI) Is a b e la ( II)

( III) ( VI)

In 2001, Nueva Ecija in Region III took over Laguna and became the largest duck producing
province. This was followed by Pampanga (Region III), Iloilo (Region VI), Sultan Kudarat
(Region XII) and Isabela (Region II).

The major shift in the total duck production from Region IV to Region III mirrors the
developments in the commercial duck sector (Figure 3). That is, traditionally the major
commercial duck producing area was in the province of Laguna (Region IV), but in the last
10 years the provinces of Pampanga and Nueva Ecija in Region III and Isabela in Region II
have become more dominant while Bulacan (Region III) has grown but at a much slower rate.
The survey conducted in BAS-SPTC (1998) has shown that the commercial duck egg
production in Nueva Ecija, Pampanga and Bulacan is much more profitable than Laguna due
to lower costs of production.

9
 Figure 3: Average Commercial Duck Populations by
Province; 1980-1990 and 1991-2001

450
400
1980-1990
350 1991-2001
population ('000)

300
250
200
150
100
50
-
Pampanga(III) Laguna(IV) Nueva Ecija(III) Bulacan(III) Isabela(II)

The top ten duck producing provinces in 2001 were: Nueva Ecijia, Iloilo, Sultan Kudarat,
Isabela, Pangasinan, Laguna, Bukidnon, Davao del Norte, Maguindanao, and Leyte (BAS,
2002a). Together they accounted for 46 percent of total duck inventory.

Value and volume of production

In 2002, the total value of duck production amounted to 2.67 billion Philippine pesos, with
duck eggs valued at P1.27 billion and duck meat valued at P1.40 billion. The total value is
higher than the value of production of carabao (P 2.53 billion), goat (P 2.28 billion) and dairy
cattle (P 76.07 million) (Table 2). As indicated, in 2002 the value shares of poultry products
were 10.10, 2.69, 0.48 and 0.43 percent for chicken meat, chicken eggs, duck meat and duck
eggs, respectively. Note that the value share of the poultry industry has increased from 11.90
percent in 2000 to 12.81 percent in 2001 and to 13.70 percent in 2002 while all other
agricultural sectors (crop, livestock and fisheries) have showed some decline between 2001
and 2002. The growth in the poultry sector appeared to come from the chicken meat and the
duck eggs, where similar trends were observed.

10
Table 2. Values of agricultural production by sector, 2000-2002

2000 2001 2002

Sub-sectors In million % In million % In million %
Phil pesos Phil pesos Phil pesos
Chicken Meat 23,510.38 8.51 25,773,99 9.38 29,717.05 10.10
Duck Meat 1,348.29 0.49 1,473.65 0.54 1,402.91 0.48
Chicken Eggs 6,872.71 2.49 6.794.36 2.47 7,896.94 2.69
Duck Eggs 1,145.27 0.41 1,154.92 0.42 1,270.95 0.43
Poultry Total 32,876.65 11.90 35,196.92 12.81 40,287.84 13.70
Crops 125,961.27 53.28 137,077.89 49.90 146,399.25 49.78
Livestock 48,606.05 17.60 50,441.07 18.36 52,287.96 17.78
Fishery 47,547.34 17.22 52,011.47 18.93 55,131.62 18.75
Total 276,185.49 100 274,727.35 100 294,106.68 100
Source: BAS, 2003a

In 2001, the volume of production for duck eggs is 53,920 Mt and the corresponding figure
for duck meat is 10,940 Mt, as indicated in Table 3. Note that although the egg sector is
larger in volume terms, the meat sector is actually bigger in value terms, as indicated in Table
2. This means that the emphasis that has been placed on duck egg sector may be overstated
and more attention should be given to the duck meat sector particularly in changing consumer
perceptions and new product development.

11
Table 3. Production of duck products (in metric tons), 1991 – 2001
Year Duck egg Duck meat
(in dressed weight)
1991 33,400 6,513.00
1992 36,750 7,536.75
1993 39,200 8,531.25
1994 41,570 9,009.00
1995 47,690 9,701.25
1996 54,460 10,432.50
1997 52,960 10,393.50
1998 53,100 10,481.25
1999 52,650 10,471.50
2000 53,470 10,520.25
2001 53,920 10,939.50
Average 47,197 9,502.70
Source: BAS, 2003b
Per capita consumption

In 2001, annual per capita consumption of duck egg and duck meat in the Philippines were
0.65 kg and 0.14kg, respectively. The corresponding figures for chicken eggs and chicken
meat were 2.91 kg and 7.68 kg, respectively. These figures are relatively low compared to her
neighbouring countries. Based on FAO statistics (2003), in 2001 annual per capita poultry
meat consumption were 8.1 kg for the Philippines, compared with 34.9 kg in Malaysia and
13.9kg in Thailand while annual per capita poultry egg consumption were 6.1 kg for the
Philippines, compared with 11.9 kg in Malaysia and 9.6kg in Thailand.

As can be seen in Table 4, neither poultry product has shown any significant growth in the
past ten year, except for chicken meat. In fact, per capita consumption of duck eggs has
shown a declining trend since 1996. Price may be one of the main factors contributing to no
or low growth in poultry products in the Philippines. In 2002, average farm gate prices for
chicken eggs, chicken meat, duck eggs and duck meat were 62.55, 58.19, 46.25 and 54.25
Philippine pesos per kilogram, respectively (BAS, 2003a). The corresponding figures for
competing meats such as carabao, cattle, hog, and goat were 41.28, 51.62, 52.34, and 56.08
Philippine pesos.6

6
Ideally, one would prefer to use retail prices for comparison. However, consistent retail prices are not available.
12
Table 4. Per capita consumption of poultry products (in kg), 1991-2001
YEAR Chicken egg Chicken meat Duck egg Duck meat
1991 2.50 4.56 0.46 0.10
1992 2.59 5.55 0.54 0.12
1993 2.84 5.57 0.57 0.13
1994 2.63 5.49 0.57 0.13
1995 2.69 5.85 0.66 0.14
1996 2.70 6.51 0.73 0.15
1997 2.87 6.96 0.70 0.15
1998 2.86 6.75 0.68 0.15
1999 2.83 7.03 0.66 0.14
2000 2.93 7.20 0.66 0.14
2001 2.91 7.68 0.65 0.14
Source: BAS, 2003b

Even poultry products are arguably the cheapest source of animal protein, they are still too
expensive for most low income Filipino families to be included in their daily diet. To increase
consumption, price may have to come down either by allowing more imports or by improving
production and marketing efficiency in the current systems. In addition to price, the decade
long negative publicity associated with the high level of cholesterol in eggs has also been
attributed to the little growth in egg consumption (DA and NAFC, 2002).

Farm gate prices for broiler, native chickens, chicken egg and duck egg over the period 1990-
2001 are presented in Table 5. Although prices for broiler chicken and chicken eggs are
available at all marketing levels, there are no reported prices at the wholesale and retail levels
for native chickens or wholesale prices of duck eggs. Therefore, farm gate pieces are
presented for consistency. Note also that there is no public price information on duck meat
until 2000.

Note that there are price premiums associated with native chickens compared to their
commercial counterpart. Price premiums reflect the strong consumer preference for the
unique taste of native chickens.

13
Table 5. Average farm gate prices of poultry products, 1990-2001
YEAR Broiler Native chicken Duck Chicken egg Duck egg

Philippine pesos/kilo, live weight Philippine pesos/kg

1990 34.47 38.01 --a 37.38 32.85

1991 45.88 42.96 -- 44.1 34.95

1992 53.61 50.10 -- 48.09 34.5

1993 50.57 49.90 -- 46.2 35.85

1994 55.11 53.64 -- 47.46 36

1995 47.78 56.54 -- 45.36 38.4

1996 47.89 63.29 -- 47.46 39.6

1997 48.12 66.65 -- 48.72 40.35

1998 54.91 65.94 -- 55.86 45.75

1999 52.55 68.25 -- 59.64 48

2000 57.96 -- 53.10 56.91 43.2

2001 65.96 -- 58.47 56.28 44.25

--
Not reported or not available.
Source: BAS, 2002b,c and 2003a.

In addition to the low level of, and low growth in, consumption, another marketing issue
facing the Philippine duck industry is the seasonal variations in demand and supply and hence
fluctuating prices. Price fluctuations and marketing margins (price differentials between
different marketing levels) over a 12-month period are illustrated in Table 6 and Figure 4.
They are calculated based on monthly averages over the observation period from 1990 to
2001.

14
Table 6. Monthly prices of duck eggs (in pesos per piece), 1990-2001
Month Farm gate Retail Margin
Jan 2.75 3.06 0.31
Feb 2.61 3.11 0.50
Mar 2.74 3.09 0.35
Apr 2.55 3.04 0.49
May 2.60 3.03 0.43
Jun 2.64 3.12 0.48
Jul 2.89 3.10 0.21
Aug 2.68 3.16 0.48
Sep 2.72 3.18 0.46
Oct 2.63 3.11 0.48
Nov 2.61 3.10 0.49
Dec 2.61 3.18 0.57
Average 2.67 3.11 0.44
Source: BAS, 2002a

As illustrated, the farm gate price is highest in July and lowest in April. The retail price is
highest in September and December and lowest in April and May. Marketing margin is the
highest in December and lowest in July. The reasons behind these fluctuations in prices and
marketing margins are not clear and warrant further investigation to determine whether they
are a true reflection of demand and supply balances or merely data abnormality.

Figure 4. Monthly Prices of Duck Eggs, 1990-2001

3.50
Farmgate Retail
3.00
Price (Pesos/piece)

2.50

2.00

1.50

1.00

0.50

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month

15
Imports and exports

Government intervention in the trade of poultry products in the forms of tariff and
quantitative restrictions has always been an important part of the agricultural policies in the
Philippines because of the desire to be self-sufficient. However, quantitative restrictions have
largely been abolished (except for rice) and tariffs reduced since the mid-1980s as a result of
tariff reforms and the accession to WTO in 1995 (Cororaton and Suenca, 2000).

The new tariff-quota regimes under WTO allow in-quota volumes at the normal applied
tariffs and out-quota volumes at much higher tariff rates. For example, the in-quota volumes
(or MAV) for fresh/chilled/frozen poultry were set at 22,525 Mt in 1995/96, 16,160 Mt in
1997, 16,701 Mt in 1998, 17,746 Mt in 1999, 18,790 Mt in 2000), 19,834 Mt in 2001, 20,879
Mt in 2002, and 21,923 Mt in 2003 (Department of Agriculture, 2003a). The utilisation rates
ranged from 4.3 percent in 1995/96 to 90.9 percent in 1999, maintaining around 60 percent in
more recent years. Note that imports have not reached the allocated MAVs under the new
regime. The reason for the low rates of utilisation is that consumers prefer fresh poultry
products over frozen poultry imports (SEARCA, 1999). Table 6 shows the change in tariffs
over time for chickens and ducks as a consequence of trade liberalisation. Note the
substantial reductions in the tariffs under the agreements. For the period 1993 to 1994, the
tariffs were 50 to 70 percent but these were reduced to 40 percent by 2003.

Table 6. In-quota and out-quota tariff rates for selected poultry products, 2002-2004
HS CODE (Commodity) 2002 2003 2004
0207 (Poultry) In Out In Out In Out
quota quota quota quota quota quota
Frozen Chicken (Whole) 40 60 40 40 40 40
Frozen Chicken (Liver) 40 60 40 40 40 40
Frozen Chicken 40 50 40 40 40 40
(Cuts/Other Offals)
Frozen Ducks (Whole) 40 50 40 40 40 40
Frozen Ducks 40 60 40 40 40 40
(Cuts/Other Offals)
Source: Department of Agriculture, 2003b

Imports of poultry products have increased since the removal of quantitative restrictions and
the reduction in tariffs. Table 7 shows imports of duck eggs and duck meats in the past 10
years, both in terms of volume, value and unit import value. As indicated, imports of duck

16
eggs averaged 156.58 Mt over the past decade (1991-2001), accounting for on average 0.33
percent of total duck egg supply. Import volumes appeared to be rather unstable, having
fluctuated between a low of 56.12 Mt in 1991 to a peak of 218.62 Mt in 1994 over the 10-
year period. Duck eggs are imported mostly for breeding purposes in the form of live
embryos at about 20 days old. China was the dominant supplier, with 92 percent import share
in 1999 (University of Asia and the Pacific, 1999). Other suppliers included Hong Kong,
India and France.

Table 7. Importation of duck eggs and meat, Philippines, 1991-2000

Year Volume Value Unit Volume Value Unit
of duck fob import of duck fob import
eggs (‘000 value meat (‘000 value
(Mt) $US) ($US/kg) (Mt) $US) ($US/kg)
1991 56.12 14.55 0.26 6.30 12.00 1.90
1992 103.80 34.52 0.33 8.60 35.00 4.07
1993 212.04 123.74 0.58 60.95 146.00 2.40
1994 218.62 125.26 0.57 150.94 302.00 2.00
1995 157.87 169.66 1.07 189.03 248.00 1.31
1996 175.74 193.18 1.10 260.79 328.00 1.26
1997 156.49 177.09 1.13 421.84 413.00 0.98
1998 167.71 215.38 1.28 329.80 422.52 1.28
1999 171.92 173.84 1.01 302.21 322.00 1.07
2000 161.22 97.83 0.61 189.75 182.00 0.96
2001 140.84 -- 118.28 --
Average 156.58 185.32
Sources: National Statistics Office, 2002; BAS, 2003b

In the case of duck meat imports, they averaged 185.32 Mt during 1991-2001, which
accounted for on average 1.9 percent of total supply. Like duck eggs, duck meat imports have
also fluctuated between a low of 6.30 Mt in 1991 and a peak of 421.84 Mt in 1997. The
majority of duck meat was imported either in whole frozen form or in frozen cuts. China was
the largest duck meat supplier to the Philippines in 1999, accounting for 85 percent of total
whole frozen duck imports (University of Asia and the Pacific, 1999). Australia, on the other
hand, was the major supplier of frozen cuts, enjoying a market share of 68 percent in that
product category. Other major suppliers included USA, Taiwan, Hong Kong, and Canada.

17
It is also evident from Table 7 that there are also substantial fluctuations in the unit import
values during the observation period. For example, the unit import values of imported duck
eggs range from US$0.26 to US$1.28 while the unit import values of imported duck meat
range from US$0.96 to US$4.07. The reason behind the fluctuations is unclear. But some of
the fluctuations can be attributed to the more liberal trade regimes since the mid-1990s, the
devaluation of Philippine pesos and an unstable economy, particularly following the Asian
financial crisis in the late 1997. Nevertheless, they appeared to have become cheaper
compared to domestically produced products in the past few years, eg farm gate prices for
duck eggs and duck meat were 46.25 Philippine pesos/kg (US$0.93/kg) and 54.25 Philippine
pesos/kg US$1.09/kg) in 2002 based on the exchange rate being 50 Philippine pesos in a US
dollar.

In 2000 and 2001, 11.07 Mt and 10.41 Mt of duck eggs, respectively, were exported either as
hatching eggs or as balut to countries where most Filipino expatriates or overseas workers
lived, such as Saudi Arabia, Hong Kong, Singapore and Europe. No duck meat exportation
was reported during the observation period.

These trade figures indicated that trade is currently a very small component of total demand
for, and supply of, duck products in the Philippines. However, as trade liberalisation
continues, the Philippines will no doubt be facing increasing competition from imports as
well as threats to her overseas markets most possibly for balut. Indeed, strong demand for
duck products from overseas Chinese, Filipino and Vietnamese has been recognised as
emerging marketing opportunities (Laux, 2004; VWM and ZAC, 2002; Metzerfarms, 2004;
Wondu Holdings, 2001). Of particular mentioning is the demand for balut by Filipino and
Vietnamese communities in North America. Although many observers in the Philippine duck
industry believe that balut is too unique to be influenced by trade liberalisation, this
assumption ought to be tested by further market research. Another area for market research is
to determine the market potential for the domestic industry to invest in the meat-type duck
production and new product development.

Marketing channels

The Philippine duck industry is fragmented because of the large number of small scale
producers and traders involved in the production, processing and marketing of duck products.
Unlike their commercial chicken counterparts, the duck sector tends to rely on traditional and
much less efficient production and marketing methods.

18
Because more than three quarters of the ducks in the Philippines are raised in small scale
backyard production, there are no dominant players in the duck industry at the national or
regional level. However, balutans may enjoy some market powers in the local areas. By
comparison, the broiler chicken industry is dominated by five major integrators at the
national level,7 including San Miguel Corporation, Swift Foods, Vitarich Corporation, Pure
Foods, and Tyson Agro-Ventures. Together, they captured 80 percent of broiler chicken
supply in the Philippines, as reported in the Broiler Master Plan (DA and NAFC, 2002b).
Broiler production is concentrated in Central Luzon (40 percent) and Southern Tagalog (20
percent). However, in recent year, there is an increasing number of quasi-integrators
emerging in the duck industry, employing similar strategies (contract growing and upstream
or downstream integration) as the commercial chickens, although on a much small scale (eg
75,000 for layer chickens versus 10,000 or less for layer ducks per production cycle) and to a
lesser degree of integration. In 1998, the BAS-SRTC survey found that out of a total list of
1957 commercial duck layer farms, 57 of them were identified as “integrators”. The main
advantage of an integrated operation is better control over demand and supply, as well as
price and product quality.

There are five identified marketing channels for fresh and processed duck eggs (balut, penoy,
salted eggs and century eggs), day-old ducklings and ready-to-lay pullets. The key players in
the duck products supply chain are producers, balutan operators, viajeros (itinerant traders),
retailers and consumers (PCARRD, 1991; BAS-SRTC, 1998). Major marketing channels, as
described in PCARRD (1991), are outlined below, along with discussion of associated
marketing issues.

Fresh eggs: Egg producer → Viajero/Trader → Retailer → Consumer. In this

distribution channel, fresh duck eggs in the producing areas are collected by viajeros/local
traders, who then on-sell to retailers in the local markets. Retailing of fresh duck eggs occurs
mainly at wet markets and sari-sari stores (small mom and pop grocery stores), as well as in
some supermarkets. Duck eggs are sold by pieces at the wet market and grocery stores while
in the supermarkets they are sold in dozen or half dozen carton. Eggs are sorted on farm into
“good” and “rejects” based primarily on personal experience and judgement of the traders or
farmers (Malabayabas et al. 2002; Perez 2003). Rejects include eggs that are cracked, soiled,
off-sized, twin-yolk, and thin-shelled. There are no official product standards or grading
systems for fresh duck eggs. Throughout the marketing channel, eggs are usually not kept in

7
In the chicken industry, Integrator is defined as companies that integrate production of inputs (chicks, feeds,
etc.) with production, processing and marketing of outputs.
19
cold storage or protective containers (except for those sold through supermarkets) and can be
subjected to extreme heat and other weather elements before reaching consumers. As such,
breakage, quality deterioration and spoilage are high during shipping and handling. All of
these have contributed to lower quality and higher costs products, as well as dispute and
mistrust between sellers and buyers.

Processed eggs: Egg producer → Viajero/Trader → ‘Balut’ Operator → Retailer →

Consumer. From the farms the viajero/trader the fresh duck eggs and delivers them to a
‘balutan’ or balut processor, who generally produces balut as the main product and penoy,
salted and century eggs as by-products using infertile eggs or off-size eggs. Once the
processed eggs are ready for sale, the retailers procure the eggs directly from the balutan and
sell them to consumers on the streets. In some areas, there may also be viajero/trader in-
between balut operators and retailers. This type of channel (Producer → Assembler/trader →
Balutan operator → Trader-Retailer → Retailer → Consumer) is generally the longest and
understandably is only used in remote areas and for more distant or dispersed markets. In
other cases, the balut operators may bypass the viajero/trader and buy directly from large
scale egg producers or even integrated backward to egg production. As such, the channels are
shortened.

‘Balut ‘ and ‘penoy’ are sold only at the night time by street ‘balut’ vendors while salted and
century eggs, can be found alongside fresh eggs in the wet markets, grocery stores and
supermarkets. No sorting or grading is applied to any of the processed egg products discussed
so far (de Castro et al. 2002) and they are also sold on a piece by piece basis, except in the
supermarkets.

Day-old Ducklings: Egg producer → Balutan/Hatchery → Producer/Ready-to-lay Pullet

Raiser. Day-old ducklings (DOC) are mainly supplied by balutans because there are no
specialised hatcheries for ducks in the Philippines. Generally, balutans accept orders from the
duck raisers, source and hatch the eggs, and then sells them to the duck raisers. DOC are
either ordered by egg producers to be used as replacement stocks, or by ready-to-lay pullets
producers to be raised and on-sold to egg producers later. Because there are no breeder farms,
eggs for DOC are obtained from the same sources (ie commercial farms) that produce eggs
for balut making and incubated together with balut. As such, no distinction is made between
the eggs that are used for balut and those for DOC until on the17th day/18th day when those
egg with “more vigorous” embryos are retained and set back for hatching while the rest are
sent away to balut markets. The more vigorous embryos are identified through candling by

20
experienced balutan operators. Since this is the only selection process involved in choosing
the replacement stocks and it is not clear how effective and rigorous this process is in picking
the winners and what the impact is on the long term overall performance of the industry.

Because DOC is only a side business to balut making, balutans tend to give first priorities to
meeting demand requirements for balut even during the hatching season when DOC are in
high demand. That means day-old-duckings may either not be available or be rejects from
balut. As such, the so-called “replacement stocks” are not selected based on known progeny
or any performance indicator and the quality of the replacement stock is not at all fully
guaranteed. Often, the ducklings obtained this way do not have the genetic make-up that is
necessary for good performance. The lack of professional breeding farms and specialised
hatcheries has been cited to be the main reason for lack of quality replacement stock and
declining productivity in duck egg production (Lambio 2001; Coligado 1985).

In addition, there are two common complaints from the egg producers who acquire ready-to-
lay pullets from the market. Firstly, there is no record or information on the stocks being
acquired in terms of age, breed, breeding and disease history, past management or feeding
practices. As such, the new flocks usually perform poorly during transition because no proper
adjustments can be provided to the newcomers. Secondly, the ready-to-lay pullets that are
being acquired are not always what they ought to be. That is, rather than new layers, they are
so-called “balikbayan” which have already undergone at least one laying cycle (and hence
have lower laying efficiency and shorter productive life). Often, “balikbayan” is re-cycled
into the market by unscrupulous traders and farmers (Malabayabas et al. 2002). In this case,
incomplete and asymmetric information has contributed to the inefficient working of the
market for ready-to-lay pullets.

Cost structure
To survive or succeed in a liberalized market, it is important that a production unit is cost
competitive since costs are the only element in a profit equation that is under the control of
the producers (price is determined largely by market demand and supply). This section
compares the cost structure and relative profitability across different poultry sub-sectors
(ducks, broilers, and layers) and, within each sub-sector, across different scales of production
(small, medium, and large). The comparisons are based on the results presented in
SIKAP/STRIVE Foundation (2001), which are reproduced in Table 8.

As can be seen from the costs and returns, there appear to be significant economies of scale in
duck production. That is, the larger the duck farms, the lower the cost of production and the

21
higher the returns. However, this is not the case for chicken production. As shown, the farm
costs are 19.02, 16.94 and 12.29 per dozen of eggs for small, medium, and large duck farms,
respectively. Farm costs for broilers are lowest for medium size farms at 35.29 per kilogram
live weight, followed by 35.56 for large farms and by 45.40 for small farms. Similarly, the
costs of production for layers are 22.92, 19.50 and 20.02 per dozen eggs for small, medium,
and large farms, respectively. This means for broilers and layers, the medium size farms are
more efficient than the large size farms.

Returns to producers or net farm income, which is the difference between the farm gate price
and the farm costs, also vary with farm size. Given that the farm gate prices are not the same
for all farms, lower farm costs does not necessarily imply higher returns to producers. For
broiler and duck producers, the returns are higher the larger the farm size while for layers, the
medium size farms have the highest returns, followed first by large size farms and then by
small size farms. In terms of wholesale costs, it appears that for broilers and layers, medium
size operations have lower wholesale costs than the large size farms, which is, in turn, lower
than the small size farms. By comparison, the bigger the duck farms, the lower the wholesale
costs. Since the wholesale prices are the same for farms of all sizes, returns to wholesalers are
higher the lower the wholesale costs. From Table 8, it is also evident that the duck egg
operations, both at the farm and wholesale levels are much more profitable than chicken eggs
on a per dozen eggs basis. When converting returns to producers in per kilogram terms
(assuming 15 pieces duck eggs in a kilogram and 21 pieces of chicken eggs in a kilogram),
returns to producers (based on medium size farms) are the highest for ducks (21.75/kg),
followed by layers (15.37/kg) and broilers (14.74/kg).

Based on the discussions, it is clear that duck raising on a commercial scale can be profitable
and is more profitable than the commercial chickens. These results suggest that economies of
scale and the relatively high profitability in duck egg production may attract new entrants into
the industry, It may also encourage the existing farms to become larger, but perhaps not to the
scale reached by boilers or layers where diseconomies of scale appear to have set in at a very
large scale. The relevant research questions are: where is such expansion is likely to occur
and what is the implication for marketing infrastructure? can such expansion be absorbed by
consumer demand without causing a glut in the market? And what is the likely impact of such
expansion on smallholder producers?

22
Table 8. Farm to wholesale cost and returns of poultry production in the Philippines, 2000

ITEM Broiler Layer Duck

Small Medium Large Small Medium Large Small Medium Large
Ave. no. of birds per production cycle 363 7,231 25,560 460 2,245 26,633 317 691 2,620
Production (in kg for broiler or dozen for eggs) 3,341 60,544 245,516 7,781 40,902 592,059 6,422 13,815 59,643
Fixed Costs
Land Acquisition Dev't and Building 0.43 0.41 0.20 0.85 0.69 0.20 1.25 0.45 0.29
Operation and Maintenance
Cost of Feeds 30.67 23.47 24.67 18.45 14.15 14.80 8.30 7.23 6.24
Cost of Day Old Chicks/layers 10.09 9.03 8.78 1.69 4.21 4.60 3.93 3.79 3.76
Labor 3.67 2.04 1.72 1.73 0.35 0.33 4.69 3.86 1.74
Overhead 0.53 0.34 0.20 0.20 0.11 0.09 0.85 1.61 0.26
Farm Costs (P/kg or P/dozen egg) 45.40 35.29 35.56 22.92 19.50 20.02 19.02 16.94 12.29
Farm Gate Prices 49.97 50.03 51.19 30.18 28.28 26.72 34.34 34.34 34.34
Transport and Handling to Manila 2.06 2.06 2.06 2.02 2.02 2.02 1.05 0.63 0.73
Processing (P/kg or P/doz egg)
Slaughtering 2.00 2.00 2.00
Packing/Packaging 0.00 0.00 0.00 1.20 1.20 1.20 1.20 1.20 1.20
Cold Storage 3.00 3.00 3.00
Shrinkage 3.00 3.00 3.00
Losses 1.80 1.80 1.80 1.80 1.80 1.80
Ex-Dressing Plant, Manila (P/kg or P/doz. egg) 55.46 45.35 45.62 24.94 24.51 25.04 23.07 20.57 16.02
Transport and Handling 0.25 0.25 0.25 0.21 0.21 0.21 0.21 0.21 0.21
Trading Costs and Margins 4.00 4.00 4.00 1.42 1.42 1.42 1.42 1.42 1.42
Wholesale Costs (Ex-Manila) 59.71 49.60 49.87 29.57 26.14 26.67 24.70 22.20 17.65
Wholesale Prices 66.00 66.00 66.00 36.00 36.00 36.00 54.00 54.00 54.00
Farn Return (per kg or per dozen eggs) 4.57 14.74 15.63 7.26 8.78 6.70 15.32 17.40 22.05
Wholesale Return (per kg or dozen eggs) 6.29 16.40 16.13 6.43 9.86 9.33 29.30 31.80 36.35
a. Broilers and layers: Small commercial (100-900 birds/layers); Medium commercial (1,000-10,000 birds/layers); Large commercial (11,000-80,000 birds for brolers)
and 11,000-45,000 layers for layers). Ducks: Small commercial (100-500 layers); Medium commercial (501-1,000 layers); Large commercial (>1,000 layers).
b. Overhead cost (electric, water, rent, tax); Cost of feeds (feeds, vitamins, minerals supplements and other feed ingredients; Cost of Layers (day old chicks, pullets, layers).
b. Culling Rate (includes sold and consumed pullets or layers)
Source: Adapted from SIKAP/STRIVE Foundation, 2001

23
Problems and issues

Ducks had played a prominent role in Asian history and cultures. They were a common scene
in the countryside especially around rice producing areas and along the shores of rivers and
lakes where naturally occurring feeds were abundant. And because ducks are hardy and
required low or no maintenance, they have been were ideal for subsistent farmers and rural
poor to supplement their income and protein needs. However, as the economy develops,
industrialisation and urbanisation mean a decline in agricultural land, the disappearing of
ducks’ natural habitats, and an increase in commercialisation of duck production.

It is fair to say that commercialisation will continue and eventually smallholder backyard
operation will become either a thing of the past or a niche sector. Recent developments in the
duck industry everywhere in Asia are exemplary. Take Taiwan for example. Despite the
modernisation of the duck sector, with the establishment of the Duck Research Centre,
specialised breeder farms, hatcheries and processing plants, and the developments in new
products and product grading, the demand for duck products continues to decline, accounting
for a smaller and smaller share of total meat and poultry consumption. And the trend is
expected to continue.

The main reason for the decline is the intense competition from most notably the commercial
chicken sector that has a marketing advantage in price, product quality and convenience and
versatility in preparation. Although the demand for most food products generally increases as
income increases, this is not the case for products that are perceived to be of low or dubious
quality, “traditional” or “old-fashioned”. More affluent consumers nowadays are known to be
wanting quality and varieties in their diet and not interested in things that are too familiar or
traditional, and hence are most likely not to be included in their shopping list too often. Most
traditional duck products may fall into this too familiar and old-fashioned category. Another
reason is that in the past government-led research and development programs has focussed on
production and little attention has given to marketing research and consumer demand.
Finally, the Taiwan duck industry has suffered from trade liberalisation, eg competition from
China in its export markets especially after the economic reform in China since the late
1980s. The competition is expected to intensify with China’s and Taiwan’s accession to
WTO in 2002.

With continuing trade liberalisation and increased global competition, the Philippine duck
industry may be significantly affected, depending on policy response from the industry and
government. Given its lower stage of development and the dominance of smallholder

24
backyard production, the Philippine duck industry does appear to be vulnerable. However,
given the relatively high level of profitability enjoyed by the commercial duck sector and
continuing strong consumer demand for balut, the industry may be able to survive or succeed
if the key issues (including the lack of quality breeder stock, high cost, inconsistent quality,
and inefficient marketing system) identified in the past (eg Caligado, 1985; Lambio, 2001)
can be adequately addressed. A close examination of some of these issues suggests that they
are essentially a manifestation of an imperfect market due to the absence of grading and
quality standards and market information, which, in turn, is a reflection of an under-
developed and under-regulated marketing system. The issue of breeder stock is analysed
below to illustrate the importance of well-designed product standards and grading system and
how it will help resolve the decade old issue.

Lack of quality breeder stocks has been cited as the major issue in egg-type duck production
in the Philippines in the 1980s (Coligado, 1985; Arboleda et al., 1985; Lambio, 2001;
Department of Agriculture, 2001; PCARRD, 2000). There are several reasons for it. Firstly,
there is no market signal for quality products and therefore no economic incentive to provide
quality breeder stock or to improve the quality of the flock. This is because the demand for
quality breeder stock is a derived demand for quality end products, especially balut in the
Philippines. Therefore, if there is no demand for quality balut, there will not be a demand for
quality breeder stocks. Without the demand for quality breeder stocks, there will be no supply,
ie no specialized breeder farms. Previously, the lack of professional breeder farms and
specialised hatcheries was cited to be the main reason for lack of quality replacement stock
and declining productivity in duck egg production (Lambio 2001; Coligado 1985). Indeed,
unlike the commercial chicken sectors, there are very few specialised breeder
farms/hatcheries in the Philippines. The 1998 BAS-SRTC study found that three out of a total
list of 1957 commercial duck layer farms surveyed were identified as “breeder/hatchery”.
And even when they existed, they were not equivalent to the breeder farms for commercial
chickens because they did not have organised breeding or selection programs in place that
were necessary for producing quality breeder stocks (BAS-SRTC, 1998). But, the lack of
professional breeding farms and specialised hatcheries is only a symptom, not the cause.

The real problem is that although balut accounts for about 80 percent of the total egg
production, there is no established product standards or grading system for balut or fresh eggs.
That is, there is only one price for balut, regardless of the size, age and quality and there is

25
only one price for fresh eggs that qualify for balut making.8 Without a quality-based pricing
scheme, there is no incentive for farmers to improve the quality of the eggs and hence there is
no demand for better quality breeder stocks. In short, unless the demand for good quality
balut exists, there will be no demand for, and hence no supply of, good quality breeder stocks.

Secondly, duck raisers in general appear not to attach any importance to breeds or the quality
of stocks when it comes to finding replacement (BAS-SRTC, 1998). The reasons are: (1)
unavailability of good quality stock, particularly for farmers in remote, isolated areas; (2)
higher costs associated with sourcing better quality stocks; and (3) lack of the
technique/know-how for identifying good quality stocks. As a result, replacement stocks are
often obtained from own flock or cheaper sources with unknown origins or genetics. This is
another example of market failure due to imperfect information. In the absence of good
quality replacement stocks, what farmers tend to do is to resort to the use of expensive
external inputs, such as formulated feeds and veterinary medicines, in order to improve
performance and combat diseases. This practice not only increases costs but leaves the real
problem of poor genetics untouched.

If a demand for high quality breeder stocks can indeed be created as suggested earlier, a
related policy question is: how can such a demand be filled? There appear to be two
alternatives. One is based on the importation of breeding animals from overseas. This
particular strategy had been tried both in the Philippines and overseas before but failed. The
reasons for those failures were that (1) the imported stocks were inappropriate either for
smallholder production or for Philippine conditions; (2) they are input intensive and possibly
import dependent; and (3) they were too expensive for smallholders (Department of
Agriculture 2001). Furthermore, balut produced from imported breeds was rejected by
consumers for poor taste. The other option is to select and upgrade the existing and native
breeds. This strategy has gained support from the government and the academics in recent
years with the advantage of being less expensive, more suitable for local conditions, better
utilisation of local resources and maintenance of biodiversity and conservation of local
germplasm (Department of Agriculture 2001). However, more research is needed to review
existing policies and develop strategies that improve the productivity of the local breeds and
smallholder producers.

8
In the current system fresh eggs are sorted into “good” and “rejects”, based on personal experience and
judgement with seemingly arbitrary criteria. “Good” eggs are eggs deemed suitable for balut making (with the
right size and no defects) and commend higher price. “Rejects” are eggs that are too small (or too big), soiled,
thin shelled or cracked and will be sold as table eggs or processed into salted and century eggs. However, there
is no further quality grading within the category of “good” eggs.
26
In addition to poor genetic make-up, long and inefficient marketing chain also contribute to
higher production costs and poor product quality. As shown in Figure 2, the industry is
fragmented, consisting of a large number of smallholder producers and traders. Each of them
individually, often being resource-poor, cannot afford, or do not have access, to better
marketing infrastructure with respect to transportation, storage or processing. As a result,
incidence of product wastage and quality deterioration is high, resulting in higher costs and
poor quality products.

Policy recommendations and research needs

In general, the food marketing system in the Philippines is in the hands of the private sector,
including poultry, where government intervention, whether direct or indirect, is minimal.
This may help explain why some of the marketing services which have the public good
characteristics are not sufficiently provided by the market, such as research and development,
market information, product standards and marketing infrastructure. In a sense, the food
marketing system in the Philippines may be under-regulated.

One possible solution to market failure as a result of imperfect market information is for the
government or/and the industry to develop and promote appropriate product standards and
grading and labelling schemes, for individual duck products. Not only can standardisation
and grading facilitate trade and reduce marketing costs, but it also helps reduce the market
powers enjoyed by bigger players who may be able to take advantage of more arbitrary or
less rigorous grading and pricing systems. As the Philippine duck industry is rather unique
because of the focus on balut production, existing product standards and grading systems for
fresh table eggs (eg the USDA Grading system) may not be suitable and a system that is
specific to balut will have to be developed. This will involve, first of all, defining “quality”,
or “eating quality”, 9 for balut and secondly, developing some quality indicators that are
objective and measurable. To introduce a new system, more needs to know about the working
of the exiting (unofficial) grading systems and the suitability of those grading systems that
have been applied overseas. More research is also needed to establish the links between the
quality of the breeder stock, the quality of fresh eggs and the quality of balut, however quality
is defined. These linkages are important in determining the market value of each of these key
products and making sure their prices are consistent with their values to the supply chain.

9
Meat Standards Australia for beef is possibly one of the first grading schemes that are based on eating quality
(such as flavour, juiciness, tenderness, etc) in addition to more conventional physical measurements (such as
breeds, muscle scores, age, sex, etc).
27
In addition, there ought to be systematic collection and dissemination of market information
on prevailing prices and quantities supplied and demanded on a regular basis. Since between
80 to 90 percent of the duck eggs produced in the Philippines pass through balutans, it is
reasonable to consider balutans as the hub of a network, connecting egg producers and traders
with balut traders and vendors. They can also be considered as the channel leader in the
supply chain with ready access to market information and the potential to control the demand
for, and supply of, key products. This is particularly true for balutan operators who have
integrated backward into duck rasing and egg production. It is envisaged that as the industry
develops further and become more specialised, balutans will paly an increasingly important
role in shaping the structure of the Philippine duck industry. More research is needed on this
very important player to better understand their current operations and future plans and the
impact of a changing industry structure on smallholders.

Thirdly, an efficient marketing system also depends on infrastructure that facilitates the
creation of time, place and form utilities. This means basic infrastructure such as processing,
storage and transport facilities must be put in place or improved so that value can be created
at the least cost. Since some of the marketing infrastructure has public good characteristics,
there is a role for government direct involvement as well as providing incentives for private
investment. Moreover, quality assurance programs also ought to be an integral part of the
marketing infrastructure to provide guarantee of food safety and quality to final consumers.
More research is required as to how existing quality assurance can be applied to products
such as balut and ready-to-lay pullets.

Conclusion

Ducks had traditionally played a prominent role in the history and cultures of rice producing
countries in Asia, including the Philippines. However, it appears that as the economy
develops, a traditional sector such as ducks is increasingly facing steep competition from
other food products, especially commercial chickens and other meats, both in the domestic
market and from overseas. Statistics have shown that the demand for duck products in the
traditional duck producing countries has been in decline. The Philippine duck industry is
likely to be affected in the similar way. Although the Philippine duck industry is rather
unique and what had happened in other Asian countries may not be quite as applicable,
lessons still can be learned from the experiences of other countries, especially on the recent
developments in the production sector, changes in consumer demand, and competition from
other products and overseas in the most recent decade.

28
In addition to potentially facing a declining demand for its products occurring elsewhere, the
Philippine duck industry has a few more problems of its own due mainly to the dominance of
smallholder backyard production. The crucial issues identified for ducks are: the lack of
supply of quality breeder stocks and an inefficient marketing system. Many of the problems,
on close examination, are in fact a manifestation of market imperfection and a reflection of an
under-regulated marketing system. This is particularly true with respect to the establishment
of official product standards and grading systems and the provision of reliable market
information and marketing infrastructure. Since an efficient marketing system depends on
market information and marketing infrastructure, the absence of pertinent marketing services
has prevented the market from functioning properly and resulted in misallocation of resources
and market inefficiency. In either case, the Philippine duck industry is not reaching its
potential and is less prosperous than it otherwise would be.

Finally, the future of the Philippine duck industry appears to be hinged largely on the demand
for balut, which is, in turn, depends on its price and quality relative to other food products,
especially chicken and pork. Competitiveness of the Philippine duck industry, in turn,
depends on efficient production and marketing systems that can deliver the right product at
the right price to the right market. However, to improve efficiency, more research is needed
in several areas. Areas for duck research should focus on identifying issues and solutions
facing the commercial sector and the smallholders, better understanding of consumer
demand, developing product standards, and improving generation and dissemination of
market intelligence. Research should also focus on the selection of breeds, disease control,
feeds and feeding and waste management that suit smallholders and different scale of duck
production, as well as utilization of by-products and new product development.

29
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