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Why the Turks want PH flour market

An important archaeological discovery near the Turkish city of Sanliurfa suggests that men planted wheat as early as 12,000 years ago, prompting some scholars to label it as the origin of agriculture.

Turgay Unlu
“It is the land where agriculture started,” Turgay Unlu, chairman of Turkish Flour, Yeast and Ingredients Promotion Group, tells a group of Filipino journalists who were invited to witness Turkey’s contribution to humanity and the new things it has to offer the world.

“The origin of wheat is Turkey, even wheat from the US and Australia.  Turkey has been producing wheat for 12,000 years, or 5,000 years before the pyramids were built in Egypt,” he says.

Unlu heads a group of Turkish flour millers and exporters who promote Turkish flour as a global brand. Promoting flour export is a part of an ambitious strategy of Turkey to boost per capita income to $25,000 by 2023, the 100th anniversary of the Turkish Republic, from the current $11,000.

“Turkey is a self-sufficient country in terms of agriculture.  It is the second biggest exporter of pasta in the world,” says Unlu, who has been involved in flour production for 40 years.

The economic strategy involves increasing Turkish total exports to $500 billion by 2023 from $152 billion in 2013, which already represented a substantial growth from just $26 billion in 2002.  Tourism is also an important pillar of the strategy as revenues from international visitor arrivals now account for $6 billion annually.

A bread factory in Istanbul
Turkey, which is keen on joining the European Union, is a fast-growing economy that attracts foreign investors and tourists.  It has a proud history of domination and conquest, evident in its grandiose palaces and mighty citadels.  Today, the country also aims to become an economic giant, at par with other European countries.

“Tourism and exports are indispensable to Turkey,” says Unlu.  However, he says one challenge to this ambitious goal is what he calls the protectionist policy of the Philippines, which emerged as the third largest export market of Turkish wheat flour in 2013.

The Turkish group is challenging a temporary anti-dumping duty imposed by the Philippine Agriculture Department, as the measure can be replicated in other countries.  Turkey exports wheat flour to 120 countries.

Turkey is now the world’s largest wheat flour exporter.  Last year, it exported 2.2 million metric tons of wheat flour worth nearly $1 billion, up from just 253,000 MT in 2002.

Aside from wheat, Turkey also produces other cereals such as barley, maize, oats, rye, millet spelt, canary grass and mixed gain.  It has vast farm lands in the southeast, which is a part of the Fertile Crescent of the ancient world.

Turkish people are also proud of their history and culture.  It is the only country that spans both Europe and Asia.  Its biggest city, Istanbul, was known as a hub of major empires and civilizations in the past and is now a dynamic European city, thriving with culture and industries.  Bosphorus, a 20-mile strait,  separates the Asian side of Istanbul from the European side.

A mosque in Sanliurfa, Turkey
“We call Istanbul the pearl of the world.  It was the capital of several cultures,” says Unlu.

Istanbul played a crucial role during the Roman, Byzantine, Latin and Ottoman empires.  Previously known as Constantinople, it served as the capital of the Roman Empire in 330 AD.  It became a Muslim center in the 15th century, following the rise of the Ottoman Empire.

Constantinople, which was built on seven hills as well as on the Golden Horn and the Sea of Marmara, with vast fortresses protecting magnificent palaces, domes, churches, mosques and towers, was renamed Istanbul, during the founding of the modern Republic of Turkey in 1923.

Aside from Istanbul, Turkey is proud of the ancient city of Sanliurfa, where Abraham, an important figure in Christian, Jewish and Muslim religions, once lived.

Excavations in Sanliurfa-Gobeklitepe show sites where wheat was probably first domesticated, a finding that was identified with carbon dating, according to Unlu.

Unlu claims that wheat was first grown in the Karacadag mountain range located in southeast Turkey between 8,400 to 8,800 BC.  A German researcher, who excavated the site, believes that Gobeklitepe was the place where wild wheat was first cultivated and where the first act of farming took place. 

The site, in the south-eastern site of Anatolia (Turkey), is a part of a region called Fertile Crescent, a fertile land spanning several Biblical cities in the Middle East.

Gobeklitepe discovery near
Sanliurfa, Turkey, where men first
grew wheat 12,000 years ago
With a proud history of wheat production, Turkey has also become a leader in wheat flour exports.  According to UN statistics, Turkey was the top wheat flour exporter in 2005, 2006, and 2007.  In 2013, it regained its status as top exporter of wheat flour both in terms of value and quantity. It sold 2.2 million MT of wheat flour worth $946 million to 120 countries, including the Philippines, last year.

Some 8.1 million to 9.5 million hectares in Turkey are planted to wheat, which produce more than 20 million metric tons annually.  In 2013, Turkish wheat production increased 9.7 percent to 22.1 million MT.

Turkey exports 3.5 million to 4 million MT of wheat, but Unlu says the country also imports wheat from other countries, if prices abroad are cheaper, to support its export-oriented flour milling industry. 

In 2013, Turkey exported 2.2 million MT of wheat flour to 120 countries. Iraq is the biggest market of Turkish flour, with 800,000 to 1 million tons of wheat flour sold to the Middle Eastern country each year.

Unlu says there are about 1,200 wheat flour factories operating throughout Turkey, with combined capacity of about 30 million MT.  About 16 companies were exporting flour to the Philippines, until the anti-dumping duty was imposed.

Turkey itself is one of the biggest wheat consumers in the world.  It has an annual per capita wheat consumption of 250 kilograms, much higher than 35 kilograms in the Philippines.

“In Southeast Asia, we see a growing trend in wheat flour consumption.  The market is growing,” says Ausin Kasicki, spokesman of Turkish Flour, Yeast and Ingredients Promotion Group and member of the working group.

Dolmabahce Palace
Of the 16 companies previously exporting wheat flour to the Philippines, half were slapped with 39.26-percent anti-dumping duty by the Agriculture Department on charges they were exporting flour to the Philippines at prices lower than prices of flour in Turkey. In foreign trade, export prices are assumed to be higher because of the additional logistics cost, import duty and taxes. Unlu says this is not necessarily true.

The Philippine Agriculture Department temporarily slapped an anti-dumping duty of 2.28 percent to 39.26 percent on Turkish flour after the Philippine Association of Flour Millers Inc., the group of local millers, cried foul and claimed Turkish flour was being sold in the Philippines at far less than the domestic price in Turkey.

Kasicki says the general rate of 39.26 percent was calculated by the Agriculture Department based on exporters’ data of small-size Turkish exporters.  “These companies also didn’t use professional or legal assistance. The eight companies who got zero-percent margin got professional assistance and had the opportunity to defend themselves properly, contrary to what Pafmil claims.  In fact, DA’s  announcement that Turkish flour millers who got professional  legal assistance during the investigation and presented their cases in a proper way were calculated zero dumping margins should be interpreted as Turkish flour hasn’t been dumped to the Philippines,” he says.

“Only eight companies were exporting right now,” says Kasicki, who himself is a flour exporter.  “This year, I think our market share will drop from 7 percent to a range of 3 percent to 4 percent. We are already satisfied with a 7-percent market share, because the Philippine market is growing.”

The Philippines ranked third as export market for Turkish flour, behind Iraq and Syria.  Turkey exported $60.4 million worth of wheat flour to the Philippines in 2013, down by 11.9 percent from $68.5 million in 2012. It represented 8 percent of the total wheat flour exports of Turkey.

Centuries-old citadel in Turkey
The Flour, Yeast and Ingredients Promotion Group says Turkish consumers are enjoying the same affordable prices in their own segment. “We want to remind all the parties that the flour consumed in Turkey is for bread, whereas big portion of the flour exported to the Philippines is for biscuit and noodle. Such price gap exists in every market,” it says.

“Local millers sell their bread making hard flour at around $850 to $900 per ton, while they sell their biscuit flour at $600 to $650 per ton,” the group says.

Unlu says the wheat flour milling industry in Turkey is also efficient, with a low-profit margin of 1 percent, 2 percent or 5 percent.  “In the Philippines, the profit margin is high.  In Turkey, we have a low-profit margin and we are competitive,” he says.

Kasicki says Turkish exporters are able to bring down their prices also because of a provision in the World Trade Organization that tolerates “inward processing regime.”  He says this provision allows exporters to import wheat from any country, to use as raw materials for the production of flour which would be later fully exported.  “We exercise this option when prices of Turkish wheat are high,” he says.

“If wheat price in Turkey is high, automatically, flour price is high, but exporters can buy cheap wheat from other countries.  This is to sustain the export market.  There is a price difference because raw materials are different.  There were differences in prices in 2012 and 2014,” he says.

Kasicki also denies Turkish flour exporters are receiving subsidy from the government. “Even one cent, we didn’t receive subsidy or support from the government,” he says.

A view of Istanbul from Bosphorus, the 20-mile
channel that separates Europe and Asia
Unlu says Turkey promotes free trade and countries such as the Philippines and the US should allow their consumers to enjoy high-quality and affordable products from Turkey and other countries.

“The US exports wheat to the Philippines.  Turkey can be a threat to US in wheat flour.  But this is about commercial competition. We do our work within the framework of the WTO. There is absolutely no anti-dumping,” he says.

Unlu says Turkish flour exports to the Philippines began to fall since the Agriculture Department imposed a provisional duty on May 22 this year, but says he is confident shipments will rebound once the group gets a favourable ruling from the Philippine Tariff Commission.

“We are 100-percent confident that this investigation would be concluded without any [safeguards] measure at all. Unfortunately, there are a lot of interventions from Pafmil and USDA [United States Department of Agriculture]. The Tariff Commission will come to Turkey for verification and they will see there is no dumping at all,” Kasicki says.

Pafmil executive director Ric Pinca, however, says the Turkish flour industry is protected by the government.   “If Turkey is so competitive, why does it have such high protections for its wheat and flour industry? Why are Philippine mills required to pay more than 100 percent to export flour to Turkey when Turkish flour enters the Philippine market at much lower duties of only 7 percent,” Pinca says.

Pafmil records show the domestic price of flour in Turkey in 2010 was $600 per metric ton while export prices to the Philippines and other Asean countries were much lower at $276 per metric ton.

Kasicki says Pafmil is doing anything it can to protect its interest.  “Turkish wheat flour exports to the Philippines was just 7 percent of the market, and they felt threatened.  They can dictate prices as they like. There should be a free market and open competition, so that the Filipinos can enjoy the best prices and best quality,” he says.

“We hope that the rules of WTO [World Trade Organization] are taken into account and rights of Filipino consumers are considered.  Filipino consumers have the right to high-quality products at affordable prices,” Unlu says,

Unlu, showing the same tenacity of the Turkish people that led to the rise of several Turk empires, says: “Our mission is to preserve and protect our market. We will never give up on our exports.” RTD

Topics: Turkish flour , Istanbul , Philippines
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