Editor s note: Oregon Wheat helps host many international trade teams that visit the FNW each

summer. USW staff often provide background information about each country their milling and Baking industries and their use of US Wheat especially their Use of SWW. We believe that these country profiles will provide information that will be very informative to our readers. We hope this article will be the first in a series about current and potential customers for SWW. Joe Sowers Assistant Regional Director SE Asia for Us provided the material on the Philippines for this article

Introduction The fifty largest market for US wheat The Philippines is ranked as the fifth largest market For all classes of U wheat and is the second largest importer of both soft white and hard red spring wheat. In the 2011/12 marketing year, the Philippines imported nearly 2.1 million metric tons of wheat representing the highest sales in more than a decade. The US achieved a market share exceeding 97 of total Philippine milling wheat imports and accounting for 100 of the countrys soft wheat imports in the marketing year.US Wheat Associates celebrates5 years in the Philippines In 1961, Western Wheat Associates, one of the two organizations that later united to form USW, established an office in Manila. Since then, USW has maintained familial and long-term relationships with industry leaders in the Philippines. SW staff has provided Technical Assistance, such as intro-during new products and Innovative baking methods that supports use of US wheat and has created a strong industry preference for US wheat quality, service, and reliability. USW provides more marketing training than any competitor, with a resulting literacy of the US system that increases buyer satisfaction and helps support the dominant US market share. USW's investment in activities to increase wheat flour consumption, including wheat foods education and marketing campaigns, is further evidence of the USW's commitment to the Filipino industry. Given the continuing high market share, USW activities in the Philippines are a market development success story. CONSUMPTION Due to an array of contributing factors ranging from economics, to Cultural/ generational shifts and competition for disposable income growth in wheat-based food consumption over the last ten years has been flat. It is one of the few markets in

South Asia where consumption has not kept pace with population growth. Per capita wheat foods consumption shifting from wheat to rice has occurred in recent years, but statistics indicate that trend may be maturing. Philippine rice consumption is nearly six times greater than wheat. As in the rest of South East Asia, during the decade prior to the 1998 Asian economic crisis, diversification of diets in the Philippines led total wheat-based food consumption growth of an average 6 annually while rice averaged 3 , albeit from a much higher level than wheat. From 1999-2008, a shift back to rice occurred resulting from poor economic performance and government programs designed to keep rice prices stable, although at Higher levels than most of the rest of the Region. During that period, per capita wheat foods consumption grew by only0.7 annually while rice grew by 6 per year. A possible explanation for this shift is that high costs associated with price inelastic rice demand sapped already limited consumer purchasing power, leaving little disposable income for discretionary food options, of which, wheat based foods is included. This situation was especially prevalent during the 2008 booming commodity prices when prices for wheatbased products spiraled higher with world prices, leading to a 20 decline in wheat consumption. Although muted by government subsidies, rice prices also increased. Philippine prices increased 3 as world prices tripled, but Philippine rice consumption hit a record high, increasing 30 over the previous record in 2006. Consumption trends since 2008 indicate that rice consumption has hit plateau while wheat consumption growth has resumed. From2008 to 2011, annual rice consumption has fallen by nearly 1 while wheat consumption is up nearly 3, indicating positive per capita consumption growth for wheat and

Perhaps, a longer-term trend. OCTOB A 2 11study funded by the millers associations quantifying consumption of flour-based products showed that the main drivers of consumption (in order of priority) are cost, sense that

food is filling and energizing, healthfulness, and convenience. Survey respondents reported that rice is preferable to wheat on the first two factors, but that they are becoming more conscious of healthy foods, especially the higher-income consumer segments. Growth of niche bread sales has been, in part, driven by a demand for healthier products such as whole-wheat and multi-grain breads. USW and the milling industry can take some credit for this increased demand due to Their joint consumer promotional campaign. USW continues to work with the industry to promote consumption of healthy products. PHILIPPINE FLOUR MILLING INDUSTRY Twelve Flour milling companies operating 17 mills form the Philippines milling industry. Eleven mills are members of the two milling associations: The Philippine Association of Flour Millers Inc. (PAFMIL) and the Chamber of Philippine Flour Millers Inc. (CHAMPFLOUR).The mills from the two associations often purchase jointly to capture economies of scale and save on freight costs. In addition, some of the mills have limited silo capacity and are not able to accommodate an entire vessel of wheat. The total annual flour milling capacity of the Philippines is about million metric tons and the industry is currently operating at approximately 50 capacities. PAFMIL was organized in 1962 and is composed of seven flour milling companies operating nine milling plants that were established between 1958 and 1970. CHAMPFLOUR is composed of four flour milling companies operating six milling plants, which started operations between 1988 and 1990.Monde Nissin isn't a member of either association, and imports wheat independently. Monde Nissin Corporation, the largest noodle manufacturer in the Philippines, built a flourmill in 1998 to produce noodle flour for their own production. PHILIPPINE END PRODUCT INDUSTRY While noodles are the dominant end-use product in much of the South Asian region, end product consumption in the Philippines is largely constituted by bakery products with more than half of flour use destined for baked goods. Mid Columbia Producers Our mission is to provide value to producers and end users. MCP offers Grain handling and marketing tools Seed Grains

Complete tine of supplies Jor your fencing needs trol um products and delivery Hardware and Auto Parts Callus: 800)325-932 Main Office: 541) 565-373 Seed Plant: 888) 442-5556 541) 442-5555 Wasco Farm Store: 800) 442-5703 541) 442-570 Goldendale Farm Home Store: 509) 773-4906

Based on figures from industry sources, there are more than25, 000 bakeries operating in the Philippines. Lie small baking industry is in constant flux as people step in and out of the business in response to economy and other issues. Large volume bakeries, especially those in Metro Manila and Cebu, have expanded distribution and sales to other parts of the country. Expansion by this segment of the baking industry has resulted in elimination of the small and medium scale operations that are less efficient. Mass production of bakery products is now a trend among big bakery operations to reduce selling price and improve competitiveness. Three baking associations are currently active in the Philip-pines. Phil Baking represents about 20 companies that are the largest bakers in the country. Phil Baking estimates that their members produce 80 of the baked products sold in grocery stores. The Filipino-Chinese Bakery Association (FCBAI) is the oldest association comprised of bakeries of all sizes with estimated membership exceeding 80 bakeries. Formed in1966, FCBAI has maintained a strong relationship with US W operating the most active training facility for bakers in the Pippins. The Philippine Society of Baking (PSB) has over100 members made up of bakers and allied industry including ingredient companies and millers. PSB is largely focused nontechnology capacity building efforts. The noodle industry continues to grow, although at slower pace than in the past, achieving 7 growths in 2011.Long shelf life, convenience, affordable prices, and a complete meal are the qualities of noodles that make them attractive to consumers. The noodle industry utilizes about 22 of the countries

Highly important as large fast food chains began offering pasta. Fipinos prefer a softer bite, leading pasta producers to use aHRS/SW mix, rather than durum. Pasta consumes about 2 of total milling wheat imports. POPULATION & GROWTH RATE Fast-paced population growth and rampant urbanization rep-resent major population concerns in the Philippines, where the average woman bears four children and where 35 of the population is underage 14, but also presents opportunities for the agrifood industry. The Philip-pines is among the world's most rapidly urbanizing countries, and overcrowded cities present their own challenges. Population growth in the Philippines is double Thailand's 0.8. An estimated10 of the country's population, or nearly 11 million people, are overseas Filipino workers distributed in 182countries. The main reason for the continued exodus is poverty with estimates of Filipinos considered impoverished ranging as high as 45 .share than the regional average. In most Asian countries exports and savings play a more prominent role than is the case in the Philippines. Rising poverty rates in the Philippines postconsumer expenditure growth at risk. Sponsored by U.S. Wheat Associates USDA Foreign Agriculture Service in cooperation with the State Wheat Commissions.

PHILIPPINE ECONOMY The Philippine economy is growing at a healthy pace and steady rates of growth are expected in the medium term. The Philippine economy weathered the2008/09 global recession better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively re-salient domestic consumption, and large remittances from its overseas workers. Growth in 2011 is estimated at 4.5 and forecast to grow at 3.8 in 2012.Consumer expenditure accounted for 73 of GDP in 2011, a much higher share than the regional average. In most Asian countries ex-ports and savings play a more prominent role than is the case in the Philippines. Rising poverty rates in the Philippines postconsumer expenditure growth at risk