Turkish Pasta Challenges Venezuelan Wheat Milling Industry
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Wheat consumption estimates for marketing year (MY) 2022/23 will increase by 5.2 percent from the previous marketing year to 1.2 million metric tons (MT) of Wheat grain equivalent (WGE), based on rising imports of Wheat due to an expected recovery of the Venezuelan economy. The national milling industry is expected to rebound in pasta and Wheat flour production due to the regime’s priority of increasing local processing capacity. This is expected to continue to decrease Venezuela’s dependence on imports of pasta and finished Wheat from Turkey and Brazil. Lower imports of finished Wheat products are offset by increasing Wheat grain imports as raw material for the milling industry.
Due to current global uncertainty and supply disruptions, the Venezuelan milling industry will likely translate rising Wheat prices into higher consumer prices if commodities become less available in the market. In MY 2021/22, the Wheat consumption estimate remains unchanged from the USDA official of 1.15 million MT. Driven by a regime policy, the domestic industry tried to increase production, but local pasta was not satisfactorily sold in the market, given the competitive prices of pasta from Turkey.
In calendar year (CY) 2021, the domestic Wheat industry and the regime agreed to increase demand for domestically produced pasta progressively. The objective was to achieve a supply balance of 50 percent domestic and 50 percent imported pasta through price reductions and product availability. This agreement was partially fulfilled, bringing the national production to 13,000 MT per month (39%) versus 20,000 MT per month (61%) of imported pasta in MY 2021/22.
In addition, the regime’s promise to purchase national pasta from the industry to supply the CLAP program (Local Committees for Supply and Production) was not accomplished. Imports of duty-free Turkish pasta with a better market outlet than national pasta contributed to higher local inventories.
According to the AgFlow data, Venezuela imported 0.17 million tons of Wheat in Jan-May 2023. In May, the key suppliers were the US (52,503 tons) and Brazil (26,400 tons). Since CY 2021, all Venezuelan hard Wheat imports have been of U.S. origin, all durum Wheat from Mexico, and some soft Wheat from Canada. In terms of imported Wheat products, the total Wheat flour imported was 171,522 MT in CY 2021, a decrease of 20 percent compared to CY 2020. Of the total imported, 65 percent was from Turkey, 26 percent from Brazil, and 9 percent from other countries.
All types of Wheat grain and all Wheat products (ex., pasta) are exempt from customs duties and VAT. This is a result of a policy still in place which took effect on August 6, 2021 and was published in the official gazette 6,636. Because there is no national production of Wheat, imported Wheat is always tariff exempt. However, a custom service tax remains at a fixed charge of 1 percent. A new decree is expected in April 2022, which will replace Decree 4552.
Turkish Wheat Planting Ambition in Venezuela
Turkey was set to begin Wheat cultivation in Venezuela, according to Agriculture and Forestry Minister Vahit Kirişçi, amid concerns of a global shortage of grain sparked by the Russia-Ukraine war. “Produce 100 kilograms of Wheat and take 70 of it for your purposes and leave 30 for us,’’ Maduro said. Pointing out that Turkey is home to 5 million migrants, the agriculture minister said the country was “in need of more land for farming.”
Turkey has been exerting efforts to ease a global food crisis by negotiating safe passage for grain stuck in Black Sea ports. But Ankara has been met with resistance as Ukraine maintains Russia is imposing unreasonable conditions, and the Kremlin says free shipment relies on an end to sanctions imposed on Russia.
Other sources: USDA
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