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Sri Lanka Equity Forum » Political and Socio-Economic Analysis » Philippines wheat imports forecast to decline

Philippines wheat imports forecast to decline

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1 Philippines wheat imports forecast to decline on Fri Mar 25, 2016 5:24 am



In Freight News 23/03/2016

The Philippines wheat imports are forecast to decline to 4.3 million tonnes in market year 2015-16 (down 16% from the previous year) due to ample stocks, but will rebound to around 4.8 million tonnes in market year 2016-17 due to an expanding population, continued economic growth, and low prices, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a March 19 report.

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 U.S. is its largest supplier. Milling wheat imports are exempt from Most Favored Nation (MFN) tariffs, while feed-wheat imports are levied a 7% duty. Milling wheat imports over the past several years have remained in the range of 2.1 million tonnes to 2.3 million tonnes per year, with the balance of total wheat imports consisting of feed-grade wheat. With incomes rising as a result of the strong performance of the Philippine economy, local industry contacts anticipate demand for milling and feed-grade wheat to steadily grow.

Increased food consumption as a result of campaign spending leading to the May elections, however, was less than expected. As a result, downward revisions were made to overall wheat consumption in market year 2015-16, although milling and feed-wheat demand are still expected to slightly grow from the previous year’s level. Market year 2015-16 wheat imports are expected to decline from the market year 2014-15 level due to ample beginning stocks. Current expansion of the flour milling industry, as well as the continued consolidation and modernization of the local hog and poultry industries, are expected to result in increased overall imports in market year 2016-17 (enhanced by record global wheat production and low prices).

Dry conditions and tightness in water supply in major grain producing areas adversely affected grain production in calendar year 2015. According to Philippine government data, paddy rice production contracted 4.3% from 18.97 million tonnes in calendar year 2014 to 18.15 million tonnes in calendar year 2015, while corn output declined 3.2% from 7.77 million tonnes in calendar year 2014 to 7.52 million tonnes in calendar year 2015. On a market year basis, rice and corn output are forecast to modestly increase through market year 2016-17 due to the expected return to more ‘normal’ weather conditions.

Under the Association of South East Asian Nations (ASEAN) Trade in Goods Agreement (ATIGA), corn imports have a 5% duty while rice tariffs are at 35% through 2015. The World Trade Organization’s (WTO) MFN tariff rate for corn is 35% for the in-quota limit of 217,000 tonnes, while the out-of-quota rate is 50%, through 2016. For rice, in July 2014 the WTO granted the Philippines request to extend quantitative restrictions on rice imports through July 2017. In exchange, the in-quota limit was raised to 805,200 tonnes (from 350,000 tonnes) and the in-quota tariff was reduced from 40% to 35% (the out-of-quota tariff remained at 50%), through July 1, 2017. On November 5, 2015, Philippine President Aquino III signed Executive Order No. 190 (EO 190) which put in effect the rice quota tariff and MFN tariff changes.

Despite strong demand from the consolidating hog industry and the growing broiler and layer operations, corn imports are expected to decline in market year 2015-16 due to adequate carryover stocks from market year 2014-15, as well as increased use of cassava (tapioca) as a substitute. No significant change in corn imports are forecast through market year 2016-17 as a result of increased feed-wheat consumption and comparatively high prices. For rice, the Philippines’ main staple, market year 2016-17 imports are forecast to decline from the previous year due to the expected improvement in local production.
Source: World Grain

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