Millers see flour prices rising

MANILA, Philippines - Prices of flour-based products, particularly bread and noodles, will likely increase as the industry continues to face a challenging year amid high costs of wheat in the world market.

The Philippine Association of Flour Millers (PAFMIL) said prices of wheat, the raw material in making flour, have shot up by about 50 percent as supply in the US remains tight due to the dry weather.

The Philippines is one of the biggest importers of US high protein spring wheat, sourcing about 95 percent of total wheat imports.

“As far as flour prices is concerned, it will be going up as a result of wheat prices in the world market. And there’s no other way to recover but to also raise prices of flour products,” PAFMIL executive director Ric Pinca told The STAR.

“There will be an effect on the industry using flour such as bread, pasta, noodles, pastry, and cakes. As to how much, we don’t know yet,” he added.

Wheat prices have been going up since May at $5.40 per bushel and increased further to $8.12 per bushel this month.

Because of this, local companies have slowed down their importations and are awaiting how things will go in the world market in the months to come.

“We still have to buy no matter what the price would be because we need it and we have mills to operate. It’s just that right now, we tend to buy slowly,” Pinca said.

While the Philippines is also sourcing its wheat from Canada and Australia, importers can not just hike its procurement from the two countries to compensate for the lack of supply from the US.

“The US and Canada have the same situation, both suffering from drought. In Australia, their wheat don’t have the protein level that fits our consumers’ preference,” Pinca said.

As supply tightens, flour prices are expected to increase by about P30 to P50 per bag monthly and will soon trickle down to flour-based products.

Apart from higher prices of raw materials, PAFMIL said the country’s flour industry continues to face a challenging year due to the entry of new competitors that intensifies competition in the local flour business.

 “That will continue in the next years as the industry is getting a lot more competitive now. There were only 12 flour mills

two years ago, and now we already have 20,” Pinca said.

San Miguel Corp. remains to be the market leader with a market share of about  20 percent. It is followed by the Philippine Flour Mills, Pilmico of the Aboitiz Group, and Universal Robina Corp.

 “Companies are trying to get as much market share as they can. Competition is also somewhat tempering the price movement. They cannot just increase their prices because of the fear of losing,” Pinca said.

Last year, the flour market grew by almost five percent on the back of a robust economy and increased purchasing power from consumers.