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FMD Trip Report – May 2002

Traveler: Paul B. Green, Marketing Consultant
Dates May 11-23, 2002

Purpose: Participate in USDA conference on Food Biotechnology In Colombo, Sri Lanka
Consult on wheat flour trade in Yemen
Consult with World Food Program Staff In Rome, Italy
Sri Lanka
The traveler attended the USDA Sponsored Asia conference on food biotechnology in Colombo, Sri Lanka where I represented NAMA with US Agricultural officers from Embassies throughout the region.   All expenses (except US airport transportation) were paid by FAS.  (Since I was not returning directly to the US, I paid the local travel agent in Sri Lanka for the additional travel expense related to NAMA FMD travel.)

A comprehensive report on the meeting is expected from the conference organizers in FAS.  This was the second conference for regional Agatts.   I felt this conference was more focused than the previous one for Europe, Africa and the Middle East in Tunis, in January that  I also attended.

The effort continues to be beneficial in presenting the challenges of biotechnology in the international arena to the Agricultural Attaché’s (Agatts) in a single forum, while discussing options for the US Government to deal with particular issues.  The conference brought the entire group up to the same level on the hurdles to be overcome in biotechnology related to individual country acceptance for domestic seed stock, trade in food commodities, labeling, tolerances, and international regulatory compatibility.  Ultimately, no simple answers were gleaned from the effort, but all Asian representatives of the US Government are now aware of the complexity of the issues and USDA Washington’s approach to these vexing topics.

NAMA’s particular interest continues to be in the trade in products that contain US government approved GMOs and specifically, corn and soy products.  The need for uniformity in regulations of the trade in GMO containing products is a high priority for NAMA, since we cannot meet constantly changing, overly burdensome or incompatible regulatory requirements by individual governments.  Particularly in food aid commodities, which are needed for direct distribution to needy individuals, there is a need for predictable and compatible regulatory approvals, paperwork and enforcement.  I conveyed that to the conference and it was well understood by the attendees.

I was able to consult with the Ag Counselor and the FSN (Foreign Service National) from the US Embassy in New Delhi, India regarding the status of clearances for US origin CSB in PVO programs.  They informed me that the main problems appear to be in vegetable oil (where GMOs cannot even be detected) and the fact that the Indians have long wanted to protect domestic oil interests, leads to the conclusion that there is some protectionism in the regulatory enforcement at this time.  They agreed to continue to keep us informed of the regulatory environment regarding GMOs in India and the effects on CSB shipments.

I also met with the WFP director for Sri Lanka, who gave me an update on the status of refugees and other needy individuals due to the civil war.  With peace talks proceeding next month, there is a hopeful atmosphere regarding the ability to implement development programs such as school feeding in the northern provinces.  The Director was encouraging that CSB/CSM would be appropriate products for such activities and we pledged to work with him as the peace process proceeds.

Yemen
US wheat flour imports continue to be nearly eliminated by new domestic milling capacity and imports of flour made from incredibly cheap wheat from India (and other sources), which can be imported into Yemen at prices far below either US or even EU flour.  Domestic millers have taken to importing virtually any origin wheats to blend and lower grist costs, in an attempt to compete with imported flour made from Indian wheat.  (Primarily in Dubai)

In consultations with the US Embassy’s temporary Commercial Officer, I was told the US and Yemen governments have agreed to sign this year’s 416(b) donation program soon.  I was told that Mary Chambliss had already sent the plan, which will include 50,000 MT of wheat, 30,000 MT of flour and 8,000 MT of non-fat dry milk.  While this is about the same as last year’s flour allocation, NAMA had hoped to increase the amount of wheat flour in what could be the last year of donated grain commodities (depending on the fate of 416(b) and efforts to use food For Progress for Yemen in future years).

There has been some resistance from commercial wheat buyers in Yemen to the donation of Soft White Wheat (SW), as the donations are thought to interfere with commercial trade.  Therefore, I met with some commercial importers to see if their opposition to SW could be translated into a switch of some of the wheat quantity to wheat flour.  The point I made was that if some (say 5-10,000 MT) of wheat could be switched to wheat flour, the higher value product could result in more cash resources for the GOY.  Unfortunately, I was unable to coordinate schedules to meet with the GOY Ministry of Planning officials to discuss this.  Therefore, I used the opportunity to get one of the commercial interests (Al Awdi) to express their opposition to SW imports.

Recommendation – NAMA should contact the Yemen Embassy in DC and Ellen Levinson to suggest a final donation amount of 40,000 MT of HRW wheat and 40,000 MT of flour to maximize the value received by the GOY.

The US Embassy continues to be very supportive of continuing donations of commodities to demonstrate support for the Yemen Government and hopes to continue some type of monetized donations following the end of the 416(b) Program this September.  We discussed the possibility of substituting Title I funded Food For Progress, which is also administered by USDA and the Commercial Officer was interested in how to begin that discussion.  I pledged NAMA’s support for continuation of a flour donation program and that we would initiate the discussion with FAS upon my return to DC.

Recommendation – NAMA should also begin discussions regarding additional flour donation support under the Food for Progress Program for 2002/03.

Fahem and Co. is nearing completion of its new bulk grain import facility in the deep-water port of Salif and expects to commission the silos this July.  A high capacity ship unloader will be added in the fall and they expect to be fully operational as an import terminal by the end of the year.  This is significant, because this will be one of the only facilities capable of transshipping large bulk carrier vessels into smaller coastal vessels past the Southern end of the Suez Canal.  World Food Program and USAID have been considering the need for increased prepositioning of both bulk and bagged commodities to assure prompt response to emergency needs.  It is possible that Salif would be an ideal position for such prepo.  I agreed to present that opportunity to the WFP and USAID staff during meetings in Rome later in the week.

NAMA has been watching the development of the wheat/flour situation in Yemen for some years.  Some companies that have been active in wheat and flour imports in past years are encountering difficulties in remaining viable.  I had predicted that only 3-4 companies seemed to have long-term financial viability following privatization of the wheat market and I still believe that to be the case.

Fahem and Co. seems to be the only company with full country distribution and multi-port import facilities.  They seem determined to invest in both bagging of whole grain and multiple milling facilities (Salif, Aden and perhaps others), with Australian wheat as their base in those mills.  Hayel Saeed Co. remains focused on Southern Yemen, with their Aden mill and bagging facility as their base.  They have diversified wheat sources, including Indian origin wheat for milling and US SW for bagging.  The third main competitor remains Al Awdi, which is primarily active in bagged wheat through the Hodeidah port and distribution from that location.  They are the largest importer of US SW and have recently purchased the Hodeidah bagging facility formerly in the hands of the Yemen Government.  Al Awdi also imports hard wheats from time to time, on behalf of Red Sea Flour mills.

Al Haddah also imports white wheat for bagging in Hodeidah and some wheat for milling at Red Sea.  All the parties, except Hayel Saeed stated that they have been continuing to import flour this past year, but in dramatically smaller amounts that previously.

In Aden, 2 new mills directly next door to each other will soon challenge the already operating 1000 MT per day flour mill of Hayel Saeed in the port.  A 400 MT Buhler mill is nearing completion and will be operated by Al Rowaishan Co.  This mill has taken nearly 2 years to complete, since there was several stoppages reportedly due to damaged equipment, disputes over the damage and credit arrangements.  Fahem and Co is building the third mill under construction.  It is a 1000 MT Buhler mill and ground has been broken for the silos, already.  Although Southern Yemenis are more used to loaf bread from bakeries than other regions of Yemen, there is clearly not 2400 MT of daily demand for white flour in Southern Yemen.  When the Fahem mill is completed, a bloody battle will occur in both the white flour market and the bagged white wheat markets.

Since all 3 mills will share the same public dock in Aden, using exclusive wheat unloading equipment, congestion and disputes over priority and equipment movement are virtually a given.  Hayel Saeed currently is using portable vacuvators and trucks to carry wheat from the dock to their mill, approximately 700 meters away.  There are rumors they are anticipating installation of a direct conveyor to replace the trucks, but no decision on that has been announced.  Meanwhile, the Al Rowaishan mill is directly behind the dock and a 1-200 meter conveyor for wheat is in place.  The Fahem mill, which is 800 meters on the other side of Al Rowaishan, is currently anticipating using a fleet of trucks (forty or more on the apron at the same time) for transfer of their wheat from the vessel to their facility, when it is completed.

Al Habbari’s grain import facility in Salif has reportedly been completed since December, but only now has received its first vessel.  Mr. Habbari is reportedly unable to finance direct imports, (The company’s financial situation appears bleak) so he has attempted to convince other importers to use the facility and pay him a fee for unloading.  The first vessel was a Panamax vessel booked by Al Haddah Co. with a potential freight savings of $10 per ton under conventional freight.  Unfortunately, the Salif grain unloaders apparently weren’t fully commissioned prior to the arrival of this vessel of 56,000 MT in early April.

The vessel, which was to have discharged at 7000 MT/day, is still in Salif on May 22, on demurrage for much of the elapsed time.  When the fixed unloader was found defective, portable unloaders were brought in from Hodeidah, but it is still taking a huge amount of time to finish the vessel discharge.  (This was SW for bagging.  Reportedly, only 3 of the 6 bagging lines are working). There have been charges and countercharges from all parties and it is likely that there will be disputes over responsibility for this fiasco.  It seems incredible that the first vessel to test the equipment would be of a type that could not be shifted to any other port in the country, meaning that if something went wrong, there were no alternatives.  The Al Habbari facility’s reputation has taken a dramatic hit and it will be interesting to see if it can be revived.

Rome
I visited WFP headquarters in Rome on the way back from Yemen to continue frequent consultations with the Resources (RD), Nutrition and The Global Food for Education divisions.  Having known these individuals from past meetings, we were able to have frank and open discussions of the WFP operational issues in a very cooperative manner.

The prime focus of the visit was to follow-up on the proposed focus on nutrition that was discussed with these individuals in January.  I was very pleased that there seems to be more discussion of nutrition at all levels of WFP since January.  Apparently the new Executive Director, Mr. Morris has expressed that nutrition priorities should be enhanced and that has led to some attention by the programming departments to the types of interventions that are appropriate.

In discussing the Afghan programs, both Ms. Bhatia and Ms. Mitchell indicated the desire that NAMA/WISHH immediately send a technical team to Pakistan and Kabul to test soy fortified wheat flour in both flat breads and nutritional cookies.  We have already asked the University of Illinois to prepare a proposal to undertake such a study, using FMD funds, but we will now make this an urgent project.  In fact, we agreed to explore offering a technical team for such research in all the bread eating countries in the region.  Ms. Mitchell thought Tajikistan might be a likely second destination where the soy fortified flour could be particularly effective.

Our previous trip had pointed out the institutional bottleneck to the nutritional focus in that direct support costs in the form of cash are made on a basis of tons delivered.  They would be less, if there were fewer tons shipped.  In that case, WFP officers, who must budget for the most resources possible, might have a bias toward more bulk commodities.  On the other hand, indirect support costs are on a value basis (7.8% overhead, presently), so there might not be any effect on those budgets from nutrition-based programming.  NAMA and WFP haven’t discussed the issue of direct support costs yet, but it does need to be addressed, to avoid an institutional resistance to our nutrition initiative.

Also at our previous meeting, Ms. Mitchell warned us that development professionals have criticized GFEI and other nutrition projects for not having measurable impact.  They suffer from the difficulty in isolating the direct effects of such efforts.   We informed her that we have been trying to make the case for crises and humanitarian disasters avoided, instead of trying to reach empirical conclusions.  If presented correctly, such evidence would justify nutrition-based projects such as HIV/AIDS, Maternal Child Health and School Lunch projects with major dietary enhancement factors.

During dinner with the US delegation to the WFP Executive Board meeting, Lauren Landis confirmed FFP’s interest in having NAMA demonstrate fortified products during the FFP world conference in Leesburg VA in late June.  I told them we would be interested in doing that and would follow up immediately upon my return to DC.

One more nutritional issue surfaced during the WFP meetings.  Ms. Mitchell pointed out their interest in the distinction between hunger and malnutrition in children.  They have an interest in making the case for nutritional interventions with children whose poverty leads to missed meals and sometimes chronic hunger, which interferes with concentration and school performance.  Even without the negative health affects of malnutrition, hunger can be very detrimental to individual development.

Mr. Age Erichson, Director of the logistics and shipping division of WFP indicated an interest in my proposal that they consider a prepositioning facility for grains and processed products through the Suez canal and that the Salif port in Yemen might be of interest.  He pointed out that WFP already has several places in East Africa where they bring in commodities and have used those ports for temporary storage.

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