Imported Flour Undermines Industry Growth

Imported flour has eaten whatever small growth the domestic industry is experiencing with prices substantially lower than the local produce that could lead to a further reduction in the capacity utilization of the already highly underutilized local flour mills, a local flour miller said.

Pilmico Foods Corp. president and chief executive officer Sabin Aboitiz, who blamed the influx of cheap Turkish flour said local industry players have already brought up this situation with the government. Pilmico is one of the country's largest flour milling companies. It is the food subsidiary of Aboitiz Equity Ventures.

''We want to stop the importation of Turkish flour. We have brought this up with the government and we are waiting for their decision,'' said Aboitiz.

According to Aboitiz, imported flour largely from Turkey has already cornered 10 percent of the 1.5 million metric ton local total domestic flour market.

Turkish flour is being sold in the domestic market at substantially lower prices and consumers have succumbed to such cheaper-priced alternative. The commodity is also brought in at a much lower price than its domestic price in Turkey.

The price of Turkish flour in its domestic market is pegged at $600 to $650 per metric but the declared import price of this commodity in the Philippines ranges from $350 to $400 per MT.

Aboitiz said Turkish flour is being sold at very low price, as low as R650 compared with locally milled of about R890 to R920 per bag.

Aboitiz said the Turkish exporters can afford to sell at lower prices because they are highly subsidized by their government. He said they have no problem with the imported Indonesian flour.

The industry is seen to experience flat growth this year from negative growths in the past years. However, Aboitiz said that whatever growth the industry may have been experiencing is also being eaten by imports.

''Imports have eaten up on our market share. Without them, we would have grown faster,'' he said.

Worse, Aboitiz said imports are going to affect the capacity utilization of flour mills which are now operating at 50 percent of their 4 million metric ton capacity. At 10 percent of the market, the share of Turkish flour is equivalent to the capacity of one milling facility.

Millers cannot just cut their prices because the price of wheat in the world market remains high. Trade of flour in Asean is duty-free while those from non-Asean countries, the duty rate is 7 percent.

The members of the local flour milling industry include: General Milling Corp., Liberty Mills, Pilmico Foods Corp., Gonzalo Puyat and Sons, Inc., RFM Corp.,

Universal Robina Corp., Wellington Flour Mills, Delta Milling, Morning Star, Philippine Foremost Milling Corp., and San Miguel Mills, Inc. Aboitiz' sentiment comes at a time of Indonesia's notification to the World Trade Organization for its decision to impose a 20 percent safeguard duty on imported flour over a 200-day period.

Indonesia said that imported cheap flour has threatened its domestic flour milling industry. It is conducting an investigation that could lead to the implementation of anti-dumping measures.

In Indonesia, Turkish flour has eaten up 14.2 percent of the market, estimated at 4.8 mmt.

Indonesia's intention to slap safeguard measure could be temporary pending analysis of its government.

An industry official said the Philippines could take a cue from Indonesian to begin looking on the influx of cheap flour into the country. The safeguard measure to be imposed by Indonesia would set the precedent that would lead other countries to protect their local flour milling industry, an official source said.

In its notification, Indonesia said the trend of import volume has been increasing around 9.7 percent during the period 2008-2011.

During this period, there was a significant increase in the volume of imports respectively in the period 2008-2009 amounted to 21.5%, and in the period 2009 to 2010 amounted to 20.24 percent.

Except in 2011, an increase in the volume of wheat imports during the period of 2008-2010 which resulted in an increase in the market share of imports of wheat flour from 100 index points in the year 2008, to 115 index points in 2010.

The increase in import volume during the period 2008-2010 was largely due to the declining prices of imported wheat flour into Indonesian territory. In 2011, the decline in import volume is considered attributable to the decision of the producers concerned to lower prices to increase sales and win back market share.