Report Highlights:

Wheat consumption in the Dominican Republic during Market Year 2016/2017 (MY 2016/17) is forecast at 405,000 Metric Tons (MT), with imports remaining strong at 530,000 MT. Post forecasts imports of Corn to remain steady at 1,225,000 MT during MY 2016/17. Even though US corn has regained its leadership in the market, US market share declined during MY 2014/15 to 48% of total imports. Post expects this trend to continue during MY 2016/17 due to higher perceived quality and increased availability of Brazilian corn, combined with the willingness of importers to pay a premium for that quality. Rice continues to be one of the most important agricultural products grown in the DR. Production of milled rice for MY 2016/17 is forecast at 530,000 MT and is expected to remain stable.

WHEAT

Production

The Dominican Republic does not produce wheat; the country is completely dependent on imports to supply the domestic market.

Consumption

The Dominican Republic continues to have one of the highest per capita wheat and wheat products consumption rates in the Latin America and Caribbean Region: approximately 98 pounds per person per year. The apparent consumption (Total Supply, less formal exports and ending stocks) rate has averaged approximately 411,000 MT over the last five Calendar Years (CY), with an average annual growth of 6%. Nonetheless, substantial fluctuations in the amount of wheat processed for the domestic market is a strong indicator that large volumes of unrecorded exports are flowing across the border into Haiti, in addition to officially-registered exports.

For MY 2016/17 Post forecasts consumption of wheat and wheat products to remain stable at 405,000 MT.

DOMINICAN REPUBLIC WHEAT AND WHEAT PRODUCTS CONSUMPTION,

CY 2011-2015 (MT)*

Year

Imports

Production

Exports

Apparent consumption

2011

576,823

0

188,718

393,465

2012

555,526

0

129,760

430,241

2013

479,338

0

142,951

337,292

2014

573,969

0

104,449#

431,042

2015

546,369

0

80,284

466,085

*HS classification codes included: 1001, 1101, 190219, 190230, 190240, using a conversion factor of 1.368 for wheat flour (1101), pasta and couscous (190219, 190230 and 190240).

#The volume of exports for 2014 was reviewed and updated with statistics from the National Statistics Office of the Dominican Republic (ONE)

Sources: Build by Post with reports from GTA, ONE, National Directorate of Customs (DGA) and GATS/USDA.

The country is home to a large milling industry and imports almost all of its wheat from the United States and Canada. A small quantity of wheat from Russia was also imported during CY 2015. Currently, the DR boasts a daily milling capacity of around 3,320 MT with a current average utilization of 60%, divided among six different processors:

MILLS CURRENTLY OPERATING IN THE DOMINICAN REPUBLIC

Molinos Modernos*

Grupo Bocel

Grupo J. Rafael Núñez

COOPROHARINA

Molinos del Higuamo

César Iglesias

Also owns Molinos del Caribe

Molinos Modernos (45%) and Molinos Valle del Cibao (34%) process nearly 80% of all wheat imports.

Generally, the wheat flour produced is used for bread-making, crackers, cookies, cakes, pastries, and pasta. According to trade estimates, more than half of the wheat flour available in the DR is used to make a popular type of bread known as pan de agua. This item is consumed regularly by a broad spectrum of the population, but is more heavily consumed in urban areas. The product is typically produced by industrial bakers, along with small and medium-sized bakeries and subsequently distributed to a variety of supermarkets, “mom-and-pop" stores, markets and/or other bakeries.

In addition, wheat flour is also used for many of the products distributed in the Dominican Government's feeding programs. Bread, cookies and muffins are included in the meals that reach more than 1.5 million school children in public schools throughout the country.

It is also worth noting that the demand for wheat flour has increased in recent years due to the growth in the HRI sector and tourism. Hotels consume large amounts of flour to make breads, cakes, pastries and other wheat-based products for four million visitors to the DR annually.

While the majority of flour production is destined for the domestic market, the DR also exports considerable quantities of wheat flour and other finished products (e.g., crackers, pasta) to neighboring Haiti. To a lesser extent, the DR has increased its exports of wheat products to Venezuela, Puerto Rico, the United States and other markets throughout the region.

Overall, millers' storage capacity is limited and varies considerably by processor. Among the six mills operating in the country, collective storage capacity is estimated to be 155,400 MT.

Stocks

The wheat milling industry in the Dominican Republic is mostly a “just in time" operation. Wheat shipments from the US generally arrive on a reliable schedule with shipping times of around 5 days, reducing the need to assume storage costs. Shipments from Canada also arrive on reliable schedules although with shipping times of approximately 10 days. Stocks are held by the private millers.

For MY 2016/17 Post forecasts ending stocks at 54,000 MT, lower than the levels estimated for MY 2015/16 of 69,000 MT.

Trade

For MY 2016/17 Post forecasts imports of wheat and wheat products to the Dominican Republic at 530,000 MT, slightly less than the 550,000 MT estimated to be imported during MY 2015/16, Although Dominican exports of wheat flour and wheat products to Haiti (both official and unrecorded) remain strong, exports of wheat products to Venezuela will continue to be affected by their current economic crisis. During CY 2015, Dominican exports of pasta to Venezuela decreased by 80%, from 12,109 MT in CY 2014 to 2,355 MT.

Imports of wheat grain by the DR during MY 2014/15 are estimated at 557,091 MT, a significant increase from the 494,754 MT imported during MY 2013/14. The demand for wheat grain in the Dominican Republic is relatively stable and fluctuates based on: 1) local population growth; 2) the number of tourists arriving in the country; and 3) the consumption of wheat flour and wheat products in neighbor country of Haiti.

DOMINICAN REPUBLIC WHEAT GRAIN IMPORTS BY PARTNER,

MY 2011-2015 (MT)

Country

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

United States

533,326

548,341

491,488

494,754

456,723

Germany

0

0

0

0

0

Guatemala

0

0

81

0

0

Canada

16,600

9,001

12,400

0

100,368

France

0

0

0

0

0

Total

549,926

557,342

503,969

494,754

557,091

*HS heading 1001

Source: Build by Post with reports from GTA, GATS/USDA

Post forecasts imports of US wheat grain to the Dominican Republic at 400,000 MT during MY 2016/17, up from the 350,000 MT estimated for MY 2015/16. This will still represent a 12% decrease from MY 2014/15 when the Dominican Republic imported approximately 82% from the US (456,723 MT). The lower market share is mainly due to competition from Canadian wheat imports. Historically, Canada has provided wheat to the Dominican market in years of overproduction. However, during the last two Marketing Years, Canada has been regularly supplying Dominican millers. Local millers cite a preference for Canadian wheat due to prices (between 5-10 US$/MT less Vs. US. Wheat) and higher protein content.

On average from 2011 to 2015, the DR imported approximately 90% of its wheat grain (HS 1001) from the United States. Smaller amounts were supplied by Canada (an average of 11% during the same time period), along with Germany, France and Russia.

Currently, the majority of Dominican wheat imports are comprised of Hard Red Winter (HRW), Soft Red Winter (SRW) and Hard Red Spring (HRS). During MY 2014/15, the Dominican Republic imported 38% HRW, mainly for bread production; 32% SRW, primarily used for cakes and pastry; and 30% HRS.

For MY 2016/17, Post forecasts exports of wheat flour from the DR to Haiti trough formal trade channels at around 75,000 MT; slightly less to the 79,000 MT estimated to be exported during MY 2015/16. During May 2015, Haiti imposed a ban on Dominican wheat flour ostensibly due to: 1) alleged content of potassium bromate in the flour composition; and, 2) the need to establish a more formal transportation channel for the flour, requiring Dominican shipments to be delivered by sea. In the short term, Haiti is not expected to lift this ban.

Haiti continues to be the most important export market for Dominican wheat products, accounting for 94% of total exports during MY 2015/16. Other markets for Dominican exports include the U.S., Venezuela and some Caribbean Islands.

The earthquake that struck Haiti in January 2010 had a direct impact on the export growth for wheat and wheat products from Dominican Republic. The only mill in Haiti at that time, Les Moulins d'Haiti (LMH), was destroyed and Dominican mills immediately increased output to supply the neighboring market. Haiti's annual wheat imports prior to the earthquake totaled approximately 200,000 MT, with the U.S. enjoying around 80% market share. The Dominican milling industry augmented its output between 40-50% (approximately 200,000 MT) in 2010 as a direct consequence of unmet demand in Haiti.

In December 2011, the LMH reopened. Additionally, since 2012 two other mills have started operating. However, Dominican contacts claim that none of the Haitian mills is working at full capacity. Further, those contacts claim that Haitian mills continue to deal with logistical challenges in distributing wheat products outside of Port au Prince. Therefore, the DR continues to supply the Haitian market with substantial amounts of wheat flour and products.

Post forecasts total exports of wheat and wheat products from the DR at 140,000 MT for MY 2016/17, similar to the 150,000 MT estimated for MY 2015/16. Although formal exports reported by the Dominican Government are well below this total, anecdotal reports from industry sources and comparative analysis of local consumption versus imports and mill throughput all, indicate informal trade with Haiti of 30-35,000 MT per year in wheat and wheat products.

Policy

Within the CAFTA-DR, the Dominican Republic applies no tariffs on the importation of wheat, but there are duties in place on wheat flour (3.73%) and pasta products classified under 1902.19 and 1902.30 (5.33%), along with a value-added tax or VAT1 of 18% on the latter. In the case of couscous (1902.40), the DR currently applies no tariff, but the product is subject to a VAT of 18%.

Wheat

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul 2014

Jul 2015

Jul 2016

Dominican Republic

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

66

66

99

74

0

69

Production

0

0

0

0

0

0

MY Imports

573

573

520

550

0

530

TY Imports

573

573

520

550

0

530

TY Imp. from U.S.

462

457

0

350

0

400

Total Supply

639

639

619

624

0

599

MY Exports

140

160

140

150

0

140

TY Exports

140

160

140

150

0

140

Feed and Residual

0

0

0

0

0

0

FSI Consumption

400

405

400

405

0

405

Total Consumption

400

405

400

405

0

405

Ending Stocks

99

74

79

69

0

54

Total Distribution

639

639

619

624

0

599

(1000 HA) ,(1000 MT)

CORN

Production

Corn production in the Dominican Republic continues to be limited. On average, annual production totals 35-40,000 MT; mostly produced in the southwest region of the country. Those levels are not expected to change in the near future. Generally, domestic production represents about 3% of total consumption.

The DR also has very little sorghum production (around 3,000 MT annually, according to the Ministry of Agriculture) and imports very little as well. The DR's imports of coarse grains are essentially comprised of yellow corn #2 or its equivalent.

Consumption

Corn is an important ingredient for the animal feed used in the DR poultry, egg and pork industries. Livestock producers import significant volumes of yellow corn for animal feed, typically around 1.0 million MT on an annual basis. According to trade sources, close to 75% of the corn supply is consumed in broiler and layer production, while swine consume about 20%. The remaining 5% is consumed by cattle, mostly from the dairy sector.

Each year, the country produces nearly 1.2 billion eggs and 190 million chickens. On a per capita basis, the DR consumes a staggering 70 pounds per year of chicken meat, coupled with approximately 16 pounds per year of pork (83,000 MT in total).

According to Post sources, during CY 2015 the Dominican Republic increased its production of chickens by 5-6 million units. This output was necessary to meet increased demand from the Government's Public Schools Feeding Program. This Program serves approximately 2,800 public schools with extended schedule classes. Local producer associations are also lobbying to include egg consumption in the Feeding Program during CY 2016 and further.

Corn is purchased by a small number of companies and buying groups composed by producers associations. The most important ones are: ASODEP, Pollo Cibao, Consejo, JUPROPE, APROAMLI and MERCASID. Nearly 80% of all corn is imported by these companies.

For 2016/17 Post forecasts total consumption of corn at 1,275,000 MT, similar to the 1,250,000 MT forecasted for 2015/16.

Stocks

Storage facilities are limited and vary considerably among feed producers. Their collective storage capacity is estimated to be around 120,000 MT, while utilization of storage capacity is normally estimated at around 65-70%.

Trade

For MY 2016/17 Post forecasts imports of 1,225,000 MT, up from the 1,200,000 MT estimated for MY 2015/16. As mentioned above, the Government's Public Schools Feeding Program will continue to increase its demand for chicken meat and will possibly start demanding eggs. Also, Government social programs tend to increase during election years. This will possibly mean higher demand of poultry products during the first five months of CY 2016.

Historically, the United States has dominated the corn market in the Dominican Republic, enjoying close to 100% market share until MY 2008/09. Since that year, persistent complaints concerning dust levels, grain cracking, mycotoxins presence, availability and shipping challenges and relatively higher prices led many importers to source South American supplies, specifically from Brazil and Argentina. Even though this trend reversed itself during MY 2013/14, US market share declined during MY 2014/15 to only 48% of imported corn. Post expects US market share to continue its decline during MY 2015/16 and MY 2016/17 due to higher quality and increased availability of Brazilian corn. It is worth mentioning that in the current market, Dominican importers are willing to pay a premium, in some cases up to US$5/MT, for South American corn.

DOMINICAN REPUBLIC CORN IMPORTS BY PARTNER, MY 2011-2015 (MT)*

Country

MY 10/11

MY 11/12

MY 12/13

MY 13/14

MY 14/15

Reporting Total

999,402

1,054,155

1,045,623

1,010,288

1,201,537

Brazil

163,921

528,895

503,275

328,551

457,803

United States

718,302

328,641

85,090

600,145

575,969

Argentina

117,166

173,596

319,555

66,500

135,896

Canada

13

2

0

0

4

South Africa

0

0

0

0

24

Mexico

0

0

2

Paraguay

0

23,019

137,700

15,000

31,841

Spain

0

2

1

0

0

India

0

0

0

92

0

* HS heading 1005.

Source: Build by Post with reports from GTA, GATS-USDA

Brazil continues to be the strongest competitor for corn to the DR market. During MY 2014/15 Brazil exported 38% of the total Dominican import volumes. Post forecasts increased exports from Brazil during MY 2016/17. Argentina also increased their volume of corn exports to the DR, exporting 135,896 MT during MY 2014/15, up from just 66,500 MT during MY 2013/14.

Dominican exports of corn have not been significant. According to the National Office of Statistics (ONE), the Dominican Republic exported approximately 2,000 MT of corn during MY 2014/15; 98% of that total was destined for Haiti. Imported yellow corn that is not used in the production of animal feed is milled to produce corn meal and corn grits for both domestic consumption and export. The export total for both products (HS 1102 and 1103) during MY 2014/15 was approximately 44,000 MT. Some Dominican companies export these products to Haiti (through both formal and informal channels) and other markets throughout the region. Similarly, there are small amounts of corn-based animal feed products being exported to Cuba and other islands in the Caribbean.

Policy

As corn (along with soybean meal) constitutes one of the primary inputs in feed formulations, it is exempt from import duties in order to reduce costs for producers. Additionally, corn imports are not subject to the value-added tax (VAT).

As part of the DR's commitments at the World Trade Organization (WTO), the country included corn among the agricultural products comprising the Technical Rectification (TR). Specifically, as part of its WTO commitments under the TR following the Uruguay Round, the Government of Dominican Republic established an initial tariff-rate quota (TRQ) of 703,000 MT for corn that increased gradually to 1,091,000 MT as of 2004. Although the DR has a bound out-of-quota tariff rate of 40%, this tariff is not applied. According to the Decree 569-12 the Government will not apply the out-of-quota rate in corn imports.

The Decree 569-12 also included corn in the Automatic License System for the adjudication of the quota; which means that the import process is expedited for importers.

At the present time, the DR has legislation in place which requires every corn importer to purchase locally produced sorghum. Specifically, the National Corn and Sorghum Commission (CNMS is the Spanish acronym) requires the purchase of 5% of national sorghum production in exchange for the importation of corn. According to officials at the Ministry of Agriculture, the 5% figure applies regardless of the amount of corn imported.

Finally, it is worth noting that the DR does not currently restrict imports of GE commodities. Although the country has signed and ratified the Cartagena Protocol, the country's regulatory framework still awaits congressional approval and has not yet been implemented. For imports of corn used as propagation material the DR does have a rule in place that requires that the phytosanitary certificate accompanying the shipment state that said product “does not contain GMO material".

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

Oct 2015

Oct 2016

Dominican Republic

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

29

29

29

29

0

30

Beginning Stocks

106

106

223

141

0

134

Production

45

35

45

45

0

50

MY Imports

1202

1202

1100

1200

0

1225

TY Imports

1202

1202

1100

1200

0

1225

TY Imp. from U.S.

576

576

0

550

0

530

Total Supply

1353

1343

1368

1386

0

1409

MY Exports

5

2

5

2

0

2

TY Exports

5

2

5

2

0

2

Feed and Residual

1025

1100

1025

1150

0

1175

FSI Consumption

100

100

100

100

0

100

Total Consumption

1125

1200

1125

1250

0

1275

Ending Stocks

223

141

238

134

0

132

Total Distribution

1353

1343

1368

1386

0

1409

(1000 HA) ,(1000 MT)

RICE

Production

Rice is one of the most important agricultural products in the Dominican Republic due to its political, economic and social impact on Dominican society. According to national estimates, the country has approximately 30,500 rice producers, nearly 250,000 people are involved in the production, processing and marketing of rice, and the sector contributes approximately 5% to Agricultural Gross Domestic Product.

Post forecasts a harvested area for rice of approximately 140,000 HA during MY 2016/17, less than the 150,000 HA projected during MY 2015/16. This continued reduction will likely come as a consequence of a severe drought that has affected the country during the last 2-3 years, reducing the availability of irrigated production areas. Rice is produced in two cycles during the year and recently, due to the use of short cycle varieties, a growing share of production is harvested in the May second crop (now almost 25% of total harvest).

Most Dominican rice is produced under irrigation. According to Post sources, rice under irrigation accounts for 99% of the total area.

During MY 2016/17 Post forecasts “rough" rice production to be 791,000 MT and milled production at 530,000 MT, down 10,000 MT from MY 2015/16. Production will continue to decline due to reduced availability of irrigated production area and the continued high level of stocks managed by the Government.

The average yield has varied between 4-5 MT/HA over the last ten years. Post sources expect yields to remain in this range in coming years, due to lack of development of new varieties and/or production technologies.

Consumption

Rice is one of the most important products in the basic consumer basket. For MY 2016/17, consumption is forecast at 560,000 MT, similar to MY 2015/16. Rice consumption has averaged 566,000 MT during the last four market years, but has fluctuated significantly during the period.

DOMINICAN REPUBLIC RICE APPARENT CONSUMPTION, MY 2012-2015

Market Year

Population (millions)

Production (1000 MT)

Initial Stocks (1000 MT)

Imports (1000 MT)

Exports (1000 MT)

Ending Stocks (1000 MT)

Consumption (1000 MT)

Per capita (Pound/ habitant)

2011/12

10,190.50

591

318

8

40

218

659

142

2012/13

10,322.90

494

218

12

10

214

500

107

2013/14

10,436.40

536

214

19

17

206

546

115

2014/15

10,540.76

577

205

19

18

224

560

120

Average

10,372.64

550

239

15

21

216

566

121

Source: Build by Post with reports from the Ministry of Agriculture of the Dominican Republic, ONE, Central Bank and Post estimates.

In per capita terms, Dominicans consumed 120 pounds each in MY 2014/2015, slightly less than the average consumption of 121 pounds per capita during MY's 2012-2015. No significant changes in rice consumption trends are expected in the near future.

Stocks

Post forecasts stock levels to decline to 178,000 MT during MY 2016/17. This forecast is significantly lower than the 4-market year annual average of 216,000 MT, but still equal to 32% of consumption. Storage facilities are owned by both private processors (mills) and the Government.

Stock levels tend to be high as a result of the GoDR Pignoracion Program; according Post sources, 80% of stocks are maintained under that program, which is further explained in section 3.5 (below).

Trade

Both imports and exports by the Dominican Republic are limited. The country has been self-sufficient in rice in the last several years, and most rice imports come from the US (100% of the MY 2014/15 total) thanks to a TRQ established in the CAFTA-DR agreement. Since rice is included in Basket V of the DR-CAFTA agreement (explained in section 3.5 below), out-of-quota rice imports currently pay a duty of 91.08%, effectively pricing them out of the market.

For MY 2016/17 Post forecast imports of 15,000 MT, similar to the 17,000 MT projected for MY 2015/16.

Dominican rice is exported on rare occasions; mainly to Haiti. For MY 2016/17 Post forecasts exports of 12,000 MT, slightly less than the 16,000 MT estimated for MY 2015/16. Occasional spikes in exports occur due to saturation of the local market and price decreases.

Policy

Under the CAFTA-DR, the Dominican Republic negotiated that rice be placed in Basket V, which concedes a longer-term tariff reduction period-- 20 years—as well as establishing a 99% out-of-quota tariff rate. This non- quota tariff rate will remain unchanged during the first 10 years of the Agreement, until 2015. From 2016 to 2020 the non- quota tariff rate will be reduced by 8% annually, and from years 2021 to 2025 by 12% annually. Currently, the non-quota tariff rate for rice is 91.08%. Additionally, the DR negotiated a special safeguard with an additional tariff rate. This special safeguard can be applied until the end of the tariff reduction period.

Price controls are established via the Pignoracion Program, which operates during 8 months of the year. The National Rice Commission (CONA) establishes a yearly price band (for paddy rice, FOB mill). The CONA is composed of the MoA, producers, processors, retailers and other public institutions. Price bands are established both annually and for each of the two harvest periods (May and September), based on historic prices, varietals and production estimates. For millers, purchasing according to CONA price bands is not obligatory, but it is a requirement for participation in the Pignoracion Program.

In general terms, the Pignoracion Program is a financial services program benefiting rice producers and processors. Under the program, processors (factories, cooperatives, etc.) or producers buy or produces rice, then mill and either market the rice or hold it in storage. If held in storage, this rice can be pledged as collateral for loans from commercial or public lending institutions. For participants in the Pignoracion Program the cost of storage, interest and insurance costs are covered by the Government (MoA).

As rice constitutes one of the primary feed sources for the population, it is exempt from value-added tax (VAT).

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul 2014

Jul 2015

Jul 2016

Dominican Republic

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

162

170

160

150

0

140

Beginning Stocks

206

206

199

224

0

205

Milled Production

538

577

520

540

0

530

Rough Production

803

861

776

806

0

791

Milling Rate (.9999)

6700

6700

6700

6700

0

6700

MY Imports

15

19

15

17

0

15

TY Imports

15

19

15

17

0

15

TY Imp. from U.S.

14

19

0

16

0

15

Total Supply

759

802

734

781

0

750

MY Exports

0

18

0

16

0

12

TY Exports

0

18

0

16

0

12

Consumption and Residual

560

560

550

560

0

560

Ending Stocks

199

224

184

205

0

178

Total Distribution

759

802

734

781

0

750

(1000 HA) ,(1000 MT)