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Tuesday, September 16, 2003
RP flour prices increase
By Cherry T. Lim
THE triple whammy of increased wheat prices, higher international freight costs and the peso depreciation has led to the increase in flour prices in the country, according to flour millers.
“The prices of wheat grains in the world market have gone up tremendously in the past few months. GMC only raised prices three to four weeks ago,” said Ric Pinca, executive director of the Philippine Association of Flour Millers and an executive of General Milling Corp.
“We could no longer hold on to the old prices because they had become losing numbers. Couple that with the depreciation of the peso,” he added.
Raw material
Wheat is the raw material for flour milling. GMC, the top flour miller in Cebu and the Visayas, buys most of its wheat from the United States, he said.
The peso has been languishing at the 55 to the US dollar level due to political instability caused by a military mutiny and allegations of money laundering against the First Gentleman. The peso was trading at the 51-52 level at about this time last year.
Bakers in Cebu had complained to Sun.Star that last week, the price of flour had increased three times, resulting in a total increase of P80 per 25-kilogram bag.
For instance, the price of flour (called tercera) used for certain breads is now P485 per bag, according to one baker, who asked not to be named.
He said that with the increases, bakers might have to either increase the price of their bread, or reduce the size or weight of the bread in order to still make a profit.
Twice
In a long distance telephone interview from Manila, Pinca admitted that GMC had increased its prices, but said this had been done only twice and at two-week intervals.
Pinca explained that the US had been experiencing weather changes that had affected the harvest of wheat.
A local representative of another flour miller said wheat prices were played like stock market prices.
“World wheat prices are dictated by the US Wheat Board. They’re anticipating increases in demand for the coming holidays,” which is why prices have been rising, said the representative, who requested anonymity.
However, according to the US Wheat Associates, which undertakes market development under the United States Department of Agriculture and gathers prices from US wheat exporters, wheat prices now are actually lower than last year’s.
In its website, the prices of “number two grade or better” classes of wheat as of Sept. 12 in the Great Lakes, Gulf of Mexico and the Pacific Northwest regions ranged from $144 to $220 per metric ton, which are lower than the $153-$230/MT of a year ago.
The site acknowledged, however, that other factors like payment terms, quality factors, loading terms and delivery periods might affect these prices significantly.
An industry source said the country’s millers get much of their wheat from the US. But they also get wheat from Canada, Australia and China.
GMC’s Pinca added that freight costs from the United States to the Philippines had gone up from $18 per metric ton early this year to $31 per metric ton recently.
Bulk carriers
He cited rising fuel prices in the international market and demand for the type of vessels used in the transport of wheat—bulk carriers—for the increased shipping costs.
Japan is also using the bulk carriers to import coal from Australia to power its power plants “because they (Japan) are having energy problems,” Pinca said.
In addition, he said, China is also exporting steel products to the United States and Europe using these bulk carriers.
The flour millers could not say whether any more flour price hikes were forthcoming, saying these would depend on the weather in the US and the stability of the peso-dollar exchange rate.
Zaide Bation, chief of the DTI-Cebu Trade and Industry Regulatory Division, said that from January to August, flour prices had fallen from P430 per bag for soft flour and P470 for hard flour in January, to P380 per bag for soft flour and P410 for hard flour.
In early August last year, hard flour cost just P370 per bag and soft flour, P320.
According to Pinca, GMC’s market share for flour in the country is about 15 percent, ranking it “number three or four” among flour millers.
He said San Miguel Corp. and Pilmico Foods Corp. had bigger market shares.
(September 16, 2003 issue)
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