Far East Asia Regional Review: Milling and Grain

by Emily Wilson
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Things are looking up for many of Asia’s economies, and a strong economy usually bodes well for the grain, feed and flour industries as consumers with more discretionary income traditionally buy more wheat-based products, convenience foods and meat products.

Wheat consumption is rising in many Asian nations at the expense of rice, traditionally the staple food. And as the feed industry in the region continues to grow, so does demand for corn — welcome news for exporters.

Indonesia, with the world’s fourth-largest population and the biggest market for wheat and commercial feed in Southeast Asia, looks to be stabilizing after months of political and economic chaos. Demand for and production of wheat flour continues to increase, pointing to higher wheat imports, and "significant volumes" of corn (maize) imports are expected, according to a recent report by the Foreign Agricultural Service of the U.S. Department of Agriculture.

Malaysia’s economy is quickly recovering from the economic turmoil of an outbreak of the Nipah virus in early 1999, which led to the destruction of more than 1 million pigs and which took a toll on domestic corn consumption, the FAS said. As the Malaysian noodle and biscuit sectors continue to expand to supply overseas demand, analysts expect increases in wheat and corn imports.

The Philippine economy is expected to slow down in 2001, resulting in reduced demand for meat and meat products and, consequently, a decline in feed grain imports. Growth in rice and corn production is expected to displace some wheat consumption.

In Thailand, rice exports continue to decline while wheat imports and consumption is on the rise. Thailand’s wheat and flour imports are expected to grow by 3% to 4% this year.

Vietnam’s rice exports could face many challenges this year as its markets for rice narrows, while wheat and corn imports continue to increase steadily, the FAS said. An increase in wheat consumption has helped push Vietnam’s milling capacity in 2000 to nearly 2,600 tonnes per day, from 1,600 tonnes per day in 1999.

The Vietnamese milling industry continues to expand, protected by 15% import tariff on wheat flour. "However, wheat flour millers are concerned they could face intense competition as the number of mills continues to increase rapidly," the FAS report said. "Some millers, especially the state-owned enterprises and joint venture companies, are encouraging the government to develop an appropriate policy on management of the wheat milling industry."

Vietnam’s animal feed industry continues to grow, with up to 30% of corn supplies coming from imports. To aid imports, the government removed the need to obtain import licenses.

South Korea has a relatively strong economic outlook, and demand for grain and feed imports should remain strong, the FAS said, regardless of swirling international food safety concerns involving livestock and genetically modified crops. "Per capita consumption of wheat is on the upswing, reflecting consumers’ demand for greater convenience in foods and eating patterns," the report said.

South Korea’s milling industry continues to consolidate, a result of overcapacity and financial burdens, and most mills are privately owned.

"The spirit of Korea to catch up with Japan in flour quality is losing steam," said one industry analyst, adding that South Korea’s flour quality is still quite good. Investments in new technology is limited, the analyst said, although overseas investors might consider strategic investments in South Korea as it eyes new markets in North Korea and Japan.

No major investments or renovations have been made in South Korea’s stable feed industry, where most feed manufacturing plants are state of the art facilities.

In Japan, the burst of previous bubble economies can still be felt and economic problems are far from resolved, one analyst said. But the economic situation has had no major effect on the country’s milling industry, which is considered the most stable of all the Asian nations. As a result, new flour milling projects in Japan are scarce.

"The main activity in capital spending for most Japanese flour mills is to keep their plants and flowsheets up-to-date by frequent remodels," the analyst said.

Wheat flour consumption in Japan has gradually increased in recent years due to a shift from rice to processed wheat products such as bread and pasta. However, low consumer confidence stemming from Japan’s lackluster economy has caused consumers to eat out less and simpify meals, and consumption is expected to be flat in coming years.