Flour industry expects another challenging year

MANILA, Philippines - The local flour industry projects 2012 to be another challen-ging year as the economy is expected to remain weak plus an ever-increasing competition from Turkish and Indonesia flour imports.

Ric Pinca, executive director of the Philippine Association of Flour Millers, Inc. (PAFMIL), said “we do not expect an increase in demand next year as the economy remains weak.”

This year was “difficult, marked by an increase of imported flour from Turkey,” he said.

Citing on official records, Pinca said, flour imported from Turkey amounted to only 86,000 metric tons in 2010.

This year, Pinca said, the volume of imported Turkish flour has already reached 94,000 MT.

What is more alarming, Pinca said, is the entry of Indonesia flour.

For this year, Pinca said, imports of Indonesia flour reached 20,000 MT.

PAFMIL fears that by next year, more Indonesian flour will be imported by small bakeries and clandestine pasta manufacturers who usually sell their products in the local wetmarkets.

Imported Turkish and Indonesian flour, Pinca admitted, is usually sold at 10 percent to 15 percent lower than locally produced flour.

Locally produced flour, Pinca said, sells ex-mill at P850 to P920 per 25-kilogram bag and is passed on by retailers with an additional charge of P10 to P20 per bag.

On the other hand, imported flour sells at P740 to P820 per 25kg bag.

According to Pinca, Indonesia is of special concern to local flour millers because of its proximity and the Indonesian flour industry’s higher milling capacity.

One of Indonesia’s biggest flour companies-Bogasari, which is part of the Indofoods Group – has a million capacity of eight million metric tons.

In comparison, Pinca said, the entire milling capacity of the Philippine flour industry is four million MT.

Pinca said Indonesian flour manufacturers source their wheat from Australia which has a lower protein content.

Philippine flour manufacturers source their wheat from the United States which has a higher protein content of 14 percent.

Filipinos, Pinca explained, prefer a higher protein content because it makes the dough rise higher for a fluffier “pandesal.”

In the case of Turkish flour, Pinca explained, the Turkish government actively encourages its flour manufacturers to export, providing them with incentives in the form of a waiver of the 135-percent duty on imported wheat so that Turkish flour millers can produce more flour.

However, while Turkish flour is sold at $600 per MT in Turkey, the export price is cut in half to $300/MT and effectively “dumped” in the Philippines.