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An Expanding Filipino Milling Industry Sends Trade Team to the United States
August 03, 2015
ARLINGTON, Virginia — The southeast Asian wheat market is a story of success for the U.S. wheat industry. In the 2014/15 marketing year (June to May), the region accounted for 20 percent of global U.S. wheat sales. With a strong milling industry to support it, the Philippine wheat market continues to be one of the region’s most consistent and important export markets year after year. In 2014/15, the Philippines was the third largest buyer of U.S. wheat and the second largest buyer of both soft white (SW) and hard red spring (HRS) wheat, setting a new sales record for the second year in a row.

Looking forward, the Philippine milling industry is going through transitions including an expansion of new mills and a new generation of management. Building on more than 50 years of service in the Philippines, U.S. Wheat Associates (USW) is playing a role in these transitions and further strengthening its relationships, including by hosting four milling industry customers on a visit to the United States Aug. 2 to 12, 2015.

“This is a trade team of emerging leaders that represent growing market trends in the Philippines,” said USW South Asia Assistant Regional Vice President Joe Sowers, who is traveling with the team. “We invited participants that we think will best apply what they learn on the trip to the challenges and opportunities presented by the evolving market environment.”

USW worked with the North Dakota Wheat Commission, Montana Wheat and Barley Committee, Washington Grain Commission, Idaho Wheat Commission and Oregon Wheat Commission to organize this team. While visiting these states, the team will get an on-farm look at the SW, HRS and hard red winter (HRW) wheat crops, and an early report on the 2015 crop quality outlook. The trip also includes tours of wheat breeding research, shuttle and barge loading facilities and export elevators, as well as to observe activities performed by the Federal Grain Inspection Service (FGIS) to assure adherence to contracted quality specifications.

“Our purpose is to demonstrate how the quality, value and reliability of U.S. wheat and its supply chain can help these millers grow their own businesses,” said Sowers.

USW is the industry’s market development organization working in more than 100 countries. Its mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. USW maintains 17 offices strategically located around the world to help wheat buyers, millers, bakers, wheat food processors and government officials understand the quality, value and reliability of all six classes of U.S. wheat.

2015 Philippine Trade Team Members

Ernesto Lorenzo S. Ladrido V
Vice President Atlantic Flour Mill

Ramon Estrella
Director of Manufacturing, Monde Nissin

Welly Toha
Materials Manager, Monde Nissin

Steven Uy
Senior Manager, Republic Flour Mills

Joe Sowers
Assistant Regional Vice President, U.S. Wheat Associates, South Asia

Elizabeth Westendorf
Policy Specialist, U.S. Wheat Associates, Arlington, VA

U.S. Wheat and the Philippines: A Legacy of Success

In 1961, Western Wheat Associates, one of the two organizations that later united to form USW, established an office in Manila. Since then, with the support of checkoff funding from state wheat commissions and export market development funding from USDA’s Foreign Agricultural Service, USW has maintained close, long-term relationships with industry leaders in the Philippines. USW staff has provided technical assistance, such as introducing new products and innovative baking methods, which support use of U.S. wheat and has maintained a strong industry preference for U.S. wheat quality, service, and reliability. USW provides more marketing training than any competitor, with a resulting literacy of the U.S. system that increases buyer satisfaction and helps support the dominant U.S. market share. USW’s investment in activities to increase wheat flour consumption, including wheat foods education and marketing campaigns, is further evidence of the USW’s commitment to the Filipino industry.

The Philippines was the third largest buyer of U.S. wheat in the 2014/15 marketing year and the second largest buyer of both SW and HRS wheat. At nearly 2.4 MMT, sales of U.S. wheat to the Philippines set a new record for the second year in a row. The United States achieved a market share exceeding 91 percent of total Philippine milling wheat imports in 2014/15, making it the fifth consecutive year U.S. wheat market share has exceeded 90 percent.

Still, challenges exist in this dynamic market. The milling industry is undergoing its most substantial transition in more than two decades. After not seeing a new entrant to the commercial flour market since 1990, two new mills entered the Philippine market in 2013/14 and two more are under construction. Established market shares, carved out over decades, are now being contested. At the same time, after years of growth equal to or below population growth, the flour market is expected to grow significantly in the near term.

Most troubling, Philippine millers have been subject to trade distortions caused by the Turkish government’s policies of import tariffs, inward processing system and subsidies that support its wheat producers and flour millers. Turkish millers have been exporting flour to the Philippines at prices below fair market value resulting in a share of more than 10 percent of the Philippine flour market. USW and even the U.S. government have been helping the Philippine milling industry fight to protect it from unfair competition. In June 2014, the milling industry was successful in securing temporary tariff protection from Turkish flour dumping.

In the face of these opportunities and challenges, USW selected a diverse group of flour milling customers to participate in the trade team set to visit the United States in 2015. This activity will illustrate the many ways the U.S. wheat production and marketing system benefits the Filipino industry. At the same time, it provides the team participants a chance to become familiar with the mechanics of the U.S. grain industry and the many resources they can draw on to help their businesses grow in this market environment.

The U.S. Wheat Sales to Philippines
1,000 Metric Tons
Crop Year
(June - May)
HRW
SRW
HRS
White
Durum
Total
2015/16
25.4
0.0
267.0
259.2
0.0
551.6
2014/15
56.7
244.9
1,221.2
931.0
0.0
2,453.7
2013/14
31.2
1.5
1,266.0
864.5
0.0
2,163.3
2012/13
30.8
0.0
1,122.1
804.3
0.0
1,957.2
2011/12
49.9
0.0
1,218.2
821.1
0.0
2,089.2
2010/11
15.6
0.0
983.0
872.6
0.0
1,871.2
2009/10
31.4
0.0
792.1
747.1
0.0
1,570.5
2008/09
32.9
19.3
832.7
647.3
0.0
1,532.2
2007/08
12.4
6.0
885.4
768.5
0.0
1,672.2
2006/07
11.1
8.9
964.6
781.9
0.0
1,766.5
Data current through July 23, 2015

One metric ton = 36.74 bushels
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