Canadian wheat sales to the Philippines are moving into top gear due to a lack of Indian and Chinese offers, and beginning to threaten the US hold in the Southeast Asian nation, a leading flour miller said on Tuesday.
Canada has been increasing its presence in the US-dominated market in recent years, but last year their sales slowed to a trickle after the Canadian wheat crop was decimated by drought. Output is up 45 percent at around 24 million tonnes this season.
In 2004, Canadian wheat might take up to 35-percent market share, up sharply from last year's minimal levels, said Antonio Moraza, president of Pilmico Foods Corporation, one of the Philippines' largest flour milling firms. "We are buying quite a bit from Canada. My last four cargoes have come from Canada each of around 44,000 tonnes.
The Canadians are a little more aggressive," Moraza told Reuters.
He said Canadian wheat was working out a few dollars cheaper compared with US supplies.
US hard wheat is quoted at about $190 a tonne FOB. He declined to give prices of the latest Canadian deals.
The Philippines does not grow any wheat. Last season, it was even forced to buy the grain from suppliers such as Ukraine and Britain after erratic weather sharply reduced harvests in leading producing nations.
While India is yet to decide on its grains export policy for 2004, China is struggling to rein in domestic food prices amid eroding grain stocks, and on expectations of reaping the smallest winter wheat harvest in 20 years.
The Philippines imports around 2.2 million tonnes of milling wheat and about one million tonnes for feed. Canada mainly supplies hard wheat to Asia for milling.
As Canada pushes its wheat, the US Wheat Associates fears its market share in the Philippines might drop to about 50 percent this year from last year's above 60 percent.
"We earlier bought some wheat cargoes from India and China but they are no longer selling," Moraza said. "The only other option is Australian wheat."
The Philippines normally buys small amounts of wheat from Australia but surging freight rates might force their buyers to bring in more Australian cargoes this year, Moraza said.
"Look at the freight rates it's no joke paying these kind of prices," he said.
The freight for a Panamax-sized cargo from Australia to Southeast Asia is around $35 a tonne, while it is $60 a tonne from the United States.
A surge in demand for raw materials and grains from China has pushed shipping costs to multiyear highs.
Moraza said surging freight rates coupled with firm global prices of wheat might reduce overall wheat import volumes but he declined to give a figure.
"We never had such a problem when both freight rates and prices were high. Volumes have to suffer," he said.
Moraza said flour prices in the domestic market had risen by around 20 percent since the middle of last year and prices could rise by another 10 percent.
Currently, flour made out of hard wheat was quoted at about 490 Philippine pesos ($8.70) for a 25-kg bag in the domestic market, while soft wheat flour was offered at around 440 pesos for the same amount.
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