Low wheat output seen to raise prices
Ricardo Pinca, the executive director of the Philippine Association of Flour Millers Inc., said the devaluation of the peso against the US dollar and the unrelenting fuel price hikes would exacerbate the situation. “Global wheat [supply] is at its five-year low. It is not only the US that has low production, even the world’s biggest producer, the European Union is entering a six-year low production period,” he said. Germany, France, Sweden, and the Baltic nations reported lower production, year-on-year, he said. Based on the global wheat production report, Russia, Kazakhstan, and Ukraine were expecting a 15-percent to 20-percent decline in output, with Russia fearful of rain affecting harvest that might cause lower quality. There were also concerns that the 12.5-percent protein wheat could be in tight supply now. “So the issue is not simply quality, but also quantity that could further jack up global prices, no matter where the origin is,” Pinca said. Canada, the second biggest exporter of milling wheat of the Philippines, next to the US, warned of a production drop of 2 million to 4 million metric tons. The Philippines sources 95 percent of its wheat requirements from the US. Prices fluctuated from $192.17/MT in January 2018 to $212.38/MT in September 2018. Prices peaked at $236.63 in August 2018. Global wheat prices may hit the $300/MT mark, according to analysts, driven by several factors such as the cost of global prices, cost of freight, peso-dollar exchange rate, logistics and labor cost. This means the price of local flour may soon adjust accordingly. Pafmil said flour prices may hit more than P700 per 25-kilogram bag, up from about P640 to P660 per bag at present. The entry of independent, non-affiliated wheat milling companies increased the local flour industry’s capacity by 25 percent to 5 million MT from 4 million MT. From 12 companies, there are now 21 flour millers, including the new players in Cebu, Laguna, and Subic. New industry players started operations in 2010 and added a combined capacity of 909,000 MT a year. The new capacity added to the annual 2.55 million MT output of Pafmil members and the 1.6 million MT production of the Chamber of Philippine Flour Millers Inc. New millers include Monde Nissin Corp., Atlantic Grains Inc., Asian Grains Inc., New Hope Flour Milling Corp., Great Earth Industrial Food Inc., North Star Flour Mill, Mabuhay Interflour Mill, AgriPacific Corp., Big-C Agri Miller, and California Flour Mill Group. Pafmil and Chamflour represent the groups of institutional flour millers. Pafmil members are RFM Corp., Liberty Flour Mills Inc., Wellington Flour Mills, Pilmico Foods Corp., General Milling Corp., Universal Robina Corp., and Philippine Flour Mills. San Miguel Mills Inc., the country’s biggest flour miller, and Philippine Foremost Flour Mills, the country second biggest flour mill belong to Chamflour. Its other members are Morning Star Milling Corp. and Delta Milling Industries, Inc.