OVERVIEW

Taiwan is essentially completely reliant on wheat imports with the United States maintaining a significant market majority of 78%. Strong demand for bakery products from both locals and mainland tourists helped to offset the negative impact of recent food safety scandals in MY2014/15. Still, Taiwan's wheat import demand for MY2014/15 is projected lower to 1.265 MMT due to food safety concerns. Taiwan's wheat import forecast for MY2015/16 remains high at 1,360 TMT.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Taiwan

USDA Official

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USDA Official

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USDA Official

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Area Harvested

0

2

0

2

0

3

Beginning Stocks

478

478

407

472

0

472

Production

0

4

0

5

0

7

MY Imports

1,296

1,385

1,350

1,265

0

1,360

TY Imports

1,296

1,385

1,350

1,265

0

1,360

TY Imp. from U.S.

926

1,007

0

900

0

1,000

Total Supply

1,774

1,867

1,757

1,742

0

1,839

MY Exports

57

56

50

50

0

60

TY Exports

57

56

50

50

0

60

Feed and Residual

60

39

60

0

0

0

FSI Consumption

1,250

1,300

1,270

1,220

0

1,300

Total Consumption

1,310

1,339

1,330

1,220

0

1,300

Ending Stocks

407

472

377

472

0

479

Total Distribution

1,774

1,867

1,757

1,742

0

1,839

1000 HA, 1000 MT, MT/HA

PRODUCTION

Taiwan grows only a small amount of winter wheat with planting in November and harvest in March. Total wheat output forecast for MY2014/15 is less than 5 TMT from just 3,000 hectares.

In response to the 2007/08 world price spike, a group of Taiwan farmers devoted itself to producing wheat locally and reducing Taiwan's import dependence. In 2012, Council of Agriculture (COA) initiated a wheat breeding program. Reportedly, COA's Agricultural Research and Extension Station imported some 700 varieties of wheat seeds from the International Maize and Wheat Improvement Center in Mexico with the goal of breeding wheat varieties that can adapt to Taiwan's climate and soil. Wheat was also included in COA's list of recommended rice rotation crops. As a rice rotational crop, farmers can grow wheat on fallow rice paddy fields and still remain eligible to receive NT$45,000 (less than US$1,500) per hectare fallow land subsidy.

Stocks

According to local industry sources, millers usually hold reasonable stocks onsite to avoid disruptions in operation because of shipping delays. Actual stocks are adjusted according to world wheat price trends. Ending stocks are stable at 472 TMT due less volatile world wheat price.

CONSUMPTION

Taiwan's wheat-based food market is dynamic with shifting applications/uses that help maintain the already high import demand for wheat. European style breads and bakeries are very popular; increasingly sought after are those products made of whole wheat flour and olive oil. Gift packages that include flour-based food items such as pineapple cakes are still hot items to Taiwan's booming tourists, particularly mainland Chinese travelers. Playing to a population increasingly aware of environmental issues, a local group has successfully promoted local food items, including wheat products, marketing a reduced carbon footprint – though local production will never be significant. Wheat products, however, are not immune to the reoccurring food safety scandals. In September 2014, a tainted lard scandal significantly impacted sales of instant noodles and moon cakes, traditional products which use lard. Reportedly, there was a 70% drop in domestic instant noodle sales.

Taiwan's milling wheat demand for MY2014/15 is therefore projected at 6% lower. In addition, as no feed wheat imports are anticipated, overall wheat consumption is estimated to drop 8% in MY2014/15 to 1,265 TMT. Still, recovery is anticipated and the wheat import forecast for MY2015/16 is estimated at 1.360 MMT.

TRADE

Taiwan is almost completely dependent upon imports for their wheat demands.

Imports

In MY 2013/14, Taiwan imported 1.385 MMT of wheat, of which 39 TMT was feed wheat and 48 TMT was (wheat equivalent) flour. Excluding 39 TMT of feed wheat imports, the United States held a 78% share of total imports of milling wheat, followed by Australia 20%, and other trading partners a combined 2%.

According to Taiwan Customs, total wheat imports of the first half of MY2014/15 amounted to 630 TMT, compared to same time period last year, a 48 TMT or a 7% decrease and no feed wheat imports. In comparison, there was 29 TMT of feed wheat imports in the first half of MY2012/13. The decrease in import is due in part to last September's tainted lard scandal which had significant impact on sales of instant noodles and tradition bakery products. MY2014/15 import, in response to a reduction of sales of concerned wheat-based food products, is estimated approximately an 8% decrease to 1.265 TMT. U.S. wheat import share is anticipated to remain at 78% of total milling wheat imports as a year earlier. According to Taiwan Flour Millers' Association (TFMA), import pace of U.S. wheat in current year is about the same as last year and imported U.S. wheat varieties are similar to last year as well. Import forecast for MY2015/16 will resume, estimated at 1.360 TMT and no feed wheat import is anticipated.

Taiwan imposes the same tariff of 6.5% on milling wheat and feed wheat compared to zero tariff for feed corn, soybeans, and other feed ingredients. This tends to discourage feed wheat imports except when high corn prices make feed wheat more competitive.

Taiwan Wheat Millers

At present, Taiwan has 21 mills operating, with one or two mills idle. The largest (and newest) flour mill began operation in October 2007 and has a daily milling capacity of 1,000 MT. Another mill recently expanded its daily milling capacity to 850 MT, superseded what was the second largest mill with a daily milling capacity 720 MT. One top wheat millers added new facilities to mill Japanese-type extra fine flour.

The Taiwan flour milling industry continues to import through its long-standing collective group purchasing system, under which companies pool their import volumes and jointly bring in large grain shipments to cut costs. During periods of high ocean freight costs and given the ready availability of empty backhaul containers, some mills seek opportunities to import wheat individually through containerized shipments, whereas Australian wheat imports are now all shipped via containerized shipments.

Demand for U.S. Wheat Varieties

According to TFMA, in CY 2014 approximately 55% of U.S. wheat imports under the TFMA's collective group purchases were comprised of 14% and 14.5% protein Dark Northern Spring (DNS) and Northern Spring (NS). About 30% of imports consisted of 13% or 12.5% protein Hard Red Winter (HRW) and NS. Low protein wheat, Soft White Wheat (SW) made up the remaining 15% of wheat imports from the United States. Compared to the previous year, high protein U.S. wheat import shares decreased 7%, medium protein and low protein U.S. wheat imports increased 4% and 3%, with fewer DNS imports and no Western White (WW) imports. Australian Prime Hard and Hard as well as Canadian Western Red Spring exports supplanted the U.S. DNS market share. Overall, U.S. wheat market share dropped by 4% to capture 78% of Taiwan's total milling wheat imports in MY2013/14.

Based on Taiwan's demand for high quality flour and superior milling wheat varieties, the United States will retain its market dominance and enjoy a conservative 78% share of total imports of wheat, all for milling, equivalent to approximately 950 TMT in MY2014/15 and 1,000 TMT in MY2015/16.

Flour Trade – 8 TMT Wheat Equivalent Net Exports in MY2013/14

Taiwan's wheat flour imports remain low, accounting for just 3% of the total flour consumption on a conversion 1.368. In MY 2013/14, Taiwan imported 48 TMT, mostly resourced from Japan, and exported 56 TMT of wheat equivalent flour, with Hong Kong a major export market. Taiwan imposes a 17.5% tariff rate on flour under HS 1101 and a 20% tariff on flour under HS 1103 while the tariff on wheat is 6.5%.

HS code

MY2013/14 Imports, TMT

MY2013/14 Exports, TMT

1101

17.6

17.2

1902-19

9.1

4.7 (2.3 to the U.S.)

1902-30

8.3

19.3 (3.7 to the U.S.)

1902-40

0

0

Total

35.0

41.2

Source: Taiwan Customs Data

Source: Taiwan Customs Data

POLICY

GE Concerns

Genetically engineered products are increasingly scrutinized by critical consumer groups, politicians, and media. The May 2013 USDA announcement that a small number of volunteer wheat plants in an Oregon field had tested positive for glyphosate resistant Wheat 71800 thankfully drew comparatively little media attention. However, Taiwan authorities implemented testing requirements on all U.S. wheat exports for a time; the policy has since been lifted. Also, industry groups, requested additional non-GE statement from USDA to accompany each U.S. wheat shipment to alleviate concerns. Currently, each U.S. wheat shipment is also accompanied by test reports or safety statements regarding maximum residue limits, heavy metals, Ochratoxin A and α-toxin.

Good Hygiene Practice Inspections and Traceability

Taiwan's Food and Drug Administration (TFDA) recently visited wheat milling factories and completed good hygiene practice inspections on sites. Wheat millers were included in the initial tranche of inspections as wheat is considered a staple food product. Because of recent food safety scandals, all wheat millers are required to initiate and complete traceability systems by July 31, 2015. Records for input source and output distribution shall be kept for 5 years.

Cross-Strait Trade Policy

Wheat, as an important staple food item, is considered a sensitive product by both sides of Taiwan Straits. On June 29, 2010, Taiwan and mainland China signed an Economic Cooperation and Framework Agreement (ECFA). The ECFA went into effect on September 12, 2010. The Cross Strait Trade goods Agreement, which may left import ban of agricultural products from mainland China, yet to complete, which is still in the tenth round of talks. Taiwan authorities stated that Taiwan will not liberalize imports of 830 agricultural products currently denied entry from China, including wheat products. Taiwan wheat millers, on the other hand, may look for opportunities to export specialty flour to mainland China which imposes high out-of-quota rate import duties.