MANILA, APRIL 11, 2008
(STAR) By Ma. Elisa Osorio - As it considers an increase in the price of rice sold by the National Food Authority (NFA), the government is also expecting an increase in the cost of bread due to China’s refusal to sell milling wheat to the country.

Apart from bread, prices of poultry and meat products are also expected to soar because these depend on animal feeds that take up around 70 percent of the cost of production.

Analysts in Asia have warned that the Philippines, together with Bangladesh, where the poor currently spend around 70 percent of their income simply on food, will be among the first to be hit by rising global food prices.

“The pan de sal is getting smaller and probably the price of bread will increase,” Trade Secretary Peter Favila said in an interview.

Even the prices of noodles would most likely be affected.

According to Favila, he has received communication from his Chinese counterpart denying the country’s request for an allocation of around 200,000 metric tons of milling wheat, equivalent to 10 percent of the country’s total annual wheat consumption.

Local flour millers led by Ric Pinca, executive director of the Flour Millers Association, had warned of an increase in the price of pan de sal and other bread products unless the government helps mitigate the rising cost of flour.

“The government should put in place plans to mitigate the effects of the worldwide increase in the cost of wheat and other food grains on local consumers,” Pinca earlier said.

In response to the call of the millers, the Department of Trade and Industry asked China for milling wheat, but Favila said the Chinese government turned down the request.

“I am saddened that China did not grant our request and I have already received official communication to that effect. They politely denied our request. They did not give any reason. They just said the demand in China is also big,” the secretary explained.

The supply of flour in the global market is dwindling. The demand is at 600 million metric tons while the supply is only 87 million metric tons.

Favila said he has also communicated with a supplier from the United States. But while the supplier is willing to provide the country with wheat, this will be expensive, he said.

The trade secretary said they are studying the possibility of using coconut flour for pan de sal as an alternative, but he has also received information that a number of coconut trees have been damaged because of typhoons and it will take three years before the new trees will bear fruit.

Spring wheat is the raw material for the production of flour for pan de sal and loaf bread while soft wheat is for pastry and cake flour.

Prices of other grains and grain-based commodities such as corn soybean and soybean meal have also gone up.

Wheat prices from other exporting countries are most likely to move up as well to take advantage of prevailing premium prices.

With the cost of grains on the rise, prices of products dependent on these grains are expected to go up as well.

Meantime, local meat processors yesterday warned of more food price increases, following the issuance of a new policy by the Department of Agriculture (DA) that imposes import restrictions on meat products.

The Philippine Association of Meat Processors Inc. (PAMPI) said the DA’s new policy limits the raw materials that the meat processing industry can import for production.

In separate letters to Agriculture Secretary Arthur Yap and Undersecretary Bernie Fondevilla, who is also the executive director of the Minimum Access Volume (MAV) Secretariat, the group claimed that the new policy “will impact directly and immediately to the increase of food prices, specially at this time when alternative sources of food materials are badly required.”

According to PAMPI executive director Francisco Buencamino, the DA policy disallowed further issuances of the required MAV Import Clearance (MAVIC) effective April 1 and decided to allocate 50 percent of the MAV to livestock producers, leaving only 40 percent to importers/processors, with the remaining 10 percent to government as a discretionary volume for price stabilization purposes.

MAV refers to the minimum volume for specific agricultural products that member-countries of the World Trade Organization (WTO) can import with lower tariff. Importations in excess of MAV are still allowed albeit at a higher tariff rate, the PAMPI explained.

“Because the MAVICs have been refused us, the added costs of our importations will now definitely lead to price increases almost at all levels,” Buencamino said.

According to Buencamino, limiting the allocation of importers and processors to 40 percent of MAV is tantamount to a unilateral act of government reducing the allowable volumes to less than half of what can be legally availed.

Production must rise

Nations will move to increase food supplies but the world is living through a structural shift towards higher food prices that will be hard to reverse, the chief of a United Nations agency fighting rural poverty said.

A combination of high oil prices, rising demand for food in a wealthier Asia, the use of farmland and crops for biofuels, bad weather and speculation have pushed up food prices, prompting violent protests in a handful of poor states.

“Most experts do think higher prices are here for a longer term,” said Lennart Bage, president of the UN’s International Fund for Agricultural Development.

“We will see a supply response, so hopefully the prices will come down somewhat,” he said. “(But) according to experts in the field, prices will remain higher than in the past and what we see is most likely a structural shift to higher prices.”

Global food prices based on UN records rose 35 percent in the year to the end of January, accelerating an upturn that began in 2002. Since 2002 prices have risen 65 percent.

In 2007 alone, according to the UN Food and Agriculture Organization’s world food index, dairy prices rose nearly 80 percent and grain 42 percent.

Bage said the rapid increases had provided a strong signal that production must rise, and already there were signs of more planting taking place around the globe.

“There will be a supply response. On that there is no doubt. How far the supply response will go in pushing prices down, that is the question that we don’t have an answer to right now,” Bage said.

The international community must come together and take immediate measures to feed people facing hunger and focus on a long-term solution by investing much more in agriculture, said Bage.

“We have seen government interest in funding agriculture wane over the last 10-15 years in many countries. We have seen international development assistance aid to agriculture go down from 20 percent in the early 1980s to less than 3 percent now,” said Bage, who expects a meeting of finance ministers in Washington next week to address the issue.

India and Africa vowed on Wednesday to strive together for food security and called on the West to rethink some policies, such as diverting huge food stocks for biofuels, which has created shortages and driven up prices in poorer countries. - With Katherine Adraneda

Chief News Editor: Sol Jose Vanzi

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