October 8, 2007

 

Philippines's San Miguel keen on domestic corn supply deal

 

 

San Miguel Corp is keen on signing a domestic corn supply agreement with farmers and the Philippine agriculture department to ensure a steady supply of the grain, a senior agriculture department official said Monday (Oct 8).

 

San Miguel Corp., the country's largest food and beverage conglomerate, imports around 150,000 tonnes of corn annually for its various businesses, which include corn-based feedmeal manufacturing and poultry raising.

 

The company is in talks with the agriculture department and the Philippine Maize Federation, or Philmaize, an organization comprising corn producers, said Agriculture Assistant Secretary Dennis Araullo.

 

An agreement may be signed within the year, Araullo said.

 

"The department's main objective here is to stabilise corn prices for the protection of our farmers. San Miguel, on the other hand, will benefit by acquiring a steady supply of corn directly from farmers," Araullo said.

 

San Miguel Corp. has already identified at least one corn-growing site from which it plans to buy corn, he said. The site is in Isabela province, Cagayan Valley, which is the country's major corn producing region.

 

SMC, along with Philmaize and the agriculture department, is now looking at other areas that could supply part of the company's annual corn requirement, which is met by imports and domestic corn produced by farmers and at its own contract growing area.

 

"This is beneficial for both the farmers and end-users like San Miguel, because we would be eliminating layers of traders in the process," he added.

 

A domestic corn supply pact would be advantageous for San Miguel, since its corn imports usually exceed the Philippines' duty-free import volume. Corn imports are subjected to a tariff of 35 percent.

 

Last month, SMC signed a memorandum of understanding with the agriculture department to build at least four grain centers in key Philippine corn producing areas.

 

The grain centers are expected to reduce post-harvest losses due to spoilage and spillage, which account for up to 15 percent of the country's corn output.

 

Each grain center, which will provide shellers and dryers, will cost PHP35 million-PHP40 million (US$782,000-US$893,000) to build.

 

The department has set a corn production target of 6.7 million-6.8 million tonnes for this calendar year compared to last year's actual production of 6.08 million tonnes, but production is still expected to lag demand by 1.8 million tonnes.