Pricing behavior in Philippine Corn Markets: Implications For Market Efficiency

Income-led growth in demand for meat is expected to provide the major stimulus for expansion in the Philippine corn sector. Traditionally eaten as a cheaper carbohydrate substituting for rice by many Filipinos, corn is now increasingly being used to grow corn, which has displaced rice as the most important crop in terms of cultivated area. In recent years, the Philippine government had vigorously pursued a series of sectoral and economy wide policy reforms to invigorate the corn sector and support the feed requirements of the livestock industry. These reforms include more liberal foreign exchange policies, lifting of control over domestic marketing operations, deregulation of the interisland transportation system, and production- augmenting programs. A major bottleneck in development of the livestock sector is the domestic pricing and marketing of corn. In this report, Meyra Sello Mendoza and Mark W. Rosegrant examine the accuracy and timeliness of transmission of price information that is critical in the production and marketing decision making of farmers and traders, and identify possible barriers to efficient pricing and distribution of corn across regional markets in the Philippines. Establishing pertinent and enforceable corn grading and standardization, building roads and providing adequate transportation to connect rural production areas with urban and providing adequate transportation to connect rural production areas with urban consumption centers, and ensuring the transparency of prices through improved market knowledge are important policy challenges for the Philippine government to support the expected growth in the livestock sector. Motivated by the need to understand possible constraints in growth in the corn sector, the research for this study started as part of a comprehensive USAID- funded project on the Philippine corn and livestock sector undertaken by IFPRI. Conducted in collaboration with the Philippine Department of Agriculture and the University of the Philippines at Los Banos, the project covered issues pertaining to production and foreign trade, prospects for increasing meat consumption, and policy alternatives conductive to the development of the corn and livestock sectors.