There continues to be no commercial production of wheat or "small grains" (barley, oats, etc.) in the Philippines. As a result, the country is a major importer of milling-quality wheat and the United States is its largest supplier. Milling wheat imports over the past several years have remained in the range of 2.1 – 2.3 million tons per year, with the balance of total wheat imports consisting of feed-grade wheat. With incomes rising as a result of the strengthening Philippine economy, local industry contacts anticipate demand for milling wheat and feed-grade wheat to steadily grow through MY15/16. Post notes that the local milling industry's expectations for growth are reflected in the commissioning of two new mills in CY2013 and the current construction of an additional two mills, which would bring the total in the country to 17 with an aggregate capacity of well over four million tons. Post also notes that the continued consolidation of the hog sector, where small raisers are in the decline and large, technically sophisticated operations are expanding, supports increasing feed-wheat demand (provided it remains price competitive with corn).

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Philippines

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

876

876

788

788

0

950

Production

0

0

0

0

0

0

MY Imports

3,482

3,482

3,800

3,950

0

4,050

TY Imports

3,482

3,482

3,800

3,950

0

4,050

TY Imp. from U.S.

2,081

2,081

0

0

0

0

Total Supply

4,358

4,358

4,588

4,738

0

5,000

MY Exports

25

25

25

13

0

15

TY Exports

25

25

25

13

0

15

Feed and Residual

1,250

1,250

1,400

1,300

0

1,325

FSI Consumption

2,295

2,295

2,350

2,475

0

2,525

Total Consumption

3,545

3,545

3,750

3,775

0

3,850

Ending Stocks

788

788

813

950

0

1,135

Total Distribution

4,358

4,358

4,588

4,738

0

5,000

1000 HA, 1000 MT, MT/HA

Production:

There is no commercial wheat and "small grain" (barley, oats, rye) production in the Philippines.

Consumption:

According to a trade contact, the Philippine flour milling industry is undergoing its most substantial growth in more than two decades. Two new mills were commissioned in CY2013 representing the first significant capacity investment since 1998, and the first new entrants to the commercial flour market since 1990. There are currently 15 mills that compose the Philippine flour milling industry with an aggregate capacity estimated at over 4.1 million tons. In addition, two more mills are under construction and several existing mills are in the process of upgrading their facilities. The local baking industry is likewise undergoing adjustments according to industry contacts. Large volume bakeries have expanded their market share at the expense of smaller operations. Growing demand for mass produced, high-quality baked products is now a trend local industry contacts expect to see for the foreseeable future.

These recent developments indicate increasing and long-term wheat flour demand in the future. Food wheat consumption was raised in MY14/15 and is expected to modestly grow through MY15/16 as the new mills start operating commercially.

Also undergoing consolidation ahead of the full implementation of the ATIGA is the local feed consuming sectors. According to industry, small hog raisers have been declining while large operations, which use more sophisticated raising methods (e.g. modern animal health and nutrition technology, genetics and quality feed rations), have been expanding. The local broiler and layer industries have long been dominated by large, modern and fairly integrated commercial operations. The moderate growth of both these industries has driven the local feed industry's expansion in recent years.

The local hog industry accounts for an estimated 60-65 percent of the country's feed requirements, poultry with a 25-30 percent share and the balance divided by the local fishery subsector and other animal farms. Feedwheat demand by these industries is mainly price determined, i.e., more feedwheat is used if corn is more expensive and vice-versa.

The average domestic feedwheat price in CY2014 was P15.33/kilo ($0.34/kilo), three percent cheaper than the previous year's level, according to local industry associations. The average feedwheat price in CY2014 was technically equivalent to the average yellow corn wholesale price of P15.37 ($0.34).

Feedwheat demand was pared down in MY14/15 as some shifting to yellow corn likely happened as a result of increased local production. Feedwheat demand is expected to remain firm and increase modestly in MY15/16 due to the anticipated high global supplies and continued price competitiveness with corn.

Trade:

As a party to the Association of Southeast Asia Nations Free Trade Agreement (AFTA), Philippine exports to the region benefit from the lower common effective tariff applicable to products of ASEAN-members. All tariff rates on all products (with exemptions for a few sensitive products such as rice) in the ASEAN region fell to between zero and 5 percent in 2011 under the framework of the ASEAN Trade in Goods Agreement (ATIGA).

A review of tariffs on goods traded outside preferential agreements was completed in 2011. Executive Order 61 was then issued on October 17, 2011 (and took effect in January 2012), providing the updated tariff structure for the period 2011-2015. Tariffs beyond 2015 are likely to be retained pending the issuance of an Order superseding EO 61.

Several U.S. agricultural exports (including grains) to the Philippines face higher tariffs than competing products imported from ASEAN-member countries and/or ASEAN-FTA member countries such as Australia, New Zealand, China and India.

The Philippines was the 4rth largest U.S. wheat market globally in CY2014 with sales up 11 percent from the previous year reaching $698 million. Wheat was the top U.S. agricultural export to the Philippines in CY2014.

According to GTA data, in terms of volume, wheat imports in CY2014 declined marginally (1.2 percent) to 3.11 million tons from 3.15 million tons in CY2013. U.S. wheat imports, however, increased 20 percent from 1.96 million tons in CY2013 to 2.36 million tons in CY2014. U.S. wheat comprised 76 percent of overall wheat imports in CY2014, an improvement from the 63 percent share in CY2013. Australia came in second with a 17 percent share in CY2014.

Reporting Countries Export Statistics (Partner Country: Philippines)

UDG: Wheat, Group 60 (2012)

Annual Series: 2012 - 2014

Reporting Country

Unit

Quantity

2012

2013

2014

Reporting Total

T

3735633

3145468

3109180

United States (Consumption/Domestic)

T

1864119

1962062

2361084

Australia

T

1665330

346881

541547

Brazil

T

0

0

115204

Canada

T

109873

235871

91341

New Zealand

T

0

0

4

Romania

T

0

47662

0

Russia

T

0

127007

0

Taiwan

T

2

1

0

Thailand

T

0

0

0

Ukraine

T

0

236274

0

United Kingdom

T

0

0

0

Denmark

T

0

0

0

India

T

96308

189709

0

Belgium

T

0

0

0

Source: Global Trade Atlas

The following are wheat flour imports for the period CY2012-2014. Flour imports declined 26 percent from over 200,511 tons in CY2013 to 149,033 tons in CY2014. Turkish flour continued to dominate wheat flour imports with a 93 percent share in CY2014. Wheat flour imports represented roughly 6 percent of total wheat imports in CY2014, slightly down from the 8 percent share in CY2013.

Reporting Countries Export Statistics (Partner Country: Philippines)

UDG: Wheat Flour, Group 44 (2012)

Annual Series: 2012 - 2014

Quantity

Reporting Country

Unit

2012

2013

2014

Reporting Total

T

211646

200511

149033

Turkey

T

177800

155424

139035

Australia

T

10039

8053

8380

China

T

3285

0

979

South Korea

T

190

163

213

Japan

T

31

80

203

United States (Consumption/Domestic)

T

38

2488

139

Thailand

T

1

0

78

Hong Kong

T

58

146

6

Canada

T

0

0

0

Ukraine

T

480

1344

Others

T

19724

32813

0

Source: Global Trade Atlas

Overall wheat imports in MY14/15 were raised in view of the shifting diets of the expanding middle class, the increased domestic milling capacity and the anticipated spike in consumption as a result of increased campaign spending leading to Presidential elections in May 2016. For MY15/16, imports are likely to modestly grow from the previous year due to increased milling capacity and the growing feed demand by the local livestock and poultry industries.

Executive Order No. 61 (EO 61), signed in October 2011, adjusted Most Favored Nation (MFN) tariff rates on a range of agricultural products, including wheat. Milling wheat duties were removed by EO 61, but are still subject to a 12 percent Value Added Tax (VAT) on the subsequent flour sales, payable at the time the wheat is imported. Feed wheat imports, on the other hand, are subject to a 7 percent MFN duty and are not subject to VAT. Wheat flour imports are also subject to a 7 percent MFN tariff.

Under the ASEAN-Australia-New Zealand Free Trade Agreement, both milling and feed wheat imports to the Philippines from member countries are duty-free.

Stocks:

Wheat inventories are expected to increase modestly through MY15/16 as new mills start to operate commercially in the next two years. Wheat stocks are largely private sector-held.

Policy:

The Philippine Department of Agriculture (DA) formally ordered the imposition of anti-dumping duties on Turkish wheat flour imports by virtue of Department Order No. 10 dated November 17, 2014. The Department Order was based on the results of a formal investigation conducted by the Philippine Tariff Commission (PTC), which issued its report on November 11, 2014. The PTC found the imposition of anti-dumping duties in order after "having established that the threat of material injury to the domestic industry of such imports is imminent."

Antidumping duties (ranging from zero percent to 16.19 percent) were imposed on at least 17 Turkish companies that shipped wheat flour to the Philippines. The local industry has filed a motion to increase the antidumping duties with the DA, but the petition was denied in early CY2015.