High costs, weak demand drag flour milling prospects

MANILA, Philippines - Local flour millers expect to book losses this year and the industry is not expected to recover by 2009 due to rising import costs, narrowing market and weakening purchasing power of consumers. "We hope to rebound soon, but with the way the commodity market is shaping up, recovering next year might be an overly optimistic projection. Perhaps 2010 would be a more realistic target for recovery," said Ric Pinca, executive director of the Philippine Association of Flour Millers. Higher global wheat consumption and low supply has prompted the 20 percent increase in wheat import costs to $600 per metric ton in June from $500 per metric ton in March. Millers find it hard to cope as Republic Act 7581 or the Price Act allows them to raise prices by only ten percent per month. Flour millers hiked flour prices in August from a range of P946 to P957 per 25-kg bag to P955 to P970 for hard flour, and from P847 to P858 to P870 for soft flour. The prices, however, were rolled back on Sept. 15 at the request of the Trade and Industry Department when major bakeries sought lower flour prices, warning that they would either have to increase the price of bread or shrink the pandesal further if higher prices remain in place. Wheat prices started to soften in July, but another wheat price spike is expected in October or November due to supply issues. If the the price hike takes place, the local flour market will feel the impact around January or February next year. - GMANews.TV