Required Report - public distribution

**Date:** 04/30/2004

**GAIN Report Number:** TW4017

TW4017

**Taiwan**

**Grain and Feed**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

American Institute in Taiwan

**Prepared by:**

Chiou-Mey Perng & Eric Trachtenberg

**Report Highlights:**

Taiwan's wheat demand is expected to fall slightly to 1.13 million
metric tons in 2004/5. Although importers may experiment will small
imports of feed wheat, the United States is expected to keep a 90+
percent share of the wheat market during the forecast period. Taiwan's
demand for corn imports in 2004/05 is forecast at approximately 5.0
million metric tons, only slightly lower than 2002 -- 2003 levels. This
decrease will come from falling Taiwan broiler production resulting from
the 2005 liberalization of chicken meat imports, although it will be
mitigated by a slight recovery in swine production. Rice imports are
expected to remain steady at the quota-fixed 144,720 tons, with the U.S.
remaining the dominant supplier in the public tenders while Thailand
supplies most of the private sector imports.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Taipei \[TW1\]

\[TW\]

[SECTION I. COMMODITY SITUATION AND OUTLOOK
3](#section-i.-commodity-situation-and-outlook)

[Wheat Situation & Outlook 3](#wheat-situation-outlook)

[Table 1. Wheat Production, Supply and Demand, 1,000 MT
3](#table-1.-wheat-production-supply-and-demand-1000-mt)

[Production 3](#production)

[Consumption 3](#consumption)

[Stocks 4](#stocks)

[Trade 4](#trade)

[Policy 4](#policy)

[Corn Situation & Outlook 6](#corn-situation-outlook)

[Table 2. Corn Production, Supply and Demand, 1,000 MT
6](#table-2.-corn-production-supply-and-demand-1000-mt)

[Production 6](#production-1)

[Consumption 6](#consumption-1)

[Stocks 7](#stocks-1)

[Trade 7](#trade-1)

[Policy 8](#policy-1)

[Rice Situation and Outlook 10](#rice-situation-and-outlook)

[Table 3. Rice Production, Supply and Demand, 1,000 MT
10](#table-3.-rice-production-supply-and-demand-1000-mt)

[Production 10](#production-2)

[Consumption 11](#consumption-2)

[Stocks 11](#stocks-2)

[Table 4. Taiwan Rice Stocks Levels, 1994-2004, 1,000 MT
11](#table-4.-taiwan-rice-stocks-levels-1994-2004-1000-mt)

[Trade 11](#trade-2)

[Imports 11](#imports)

[Table 5. Import Summary Table for 2002-2003 Quota Fill
12](#table-5.-import-summary-table-for-2002-2003-quota-fill)

[Exports 13](#exports)

[Table 6. Food Aid Statistics Table for 2003 (on a milled basis)
13](#table-6.-food-aid-statistics-table-for-2003-on-a-milled-basis)

[Policy 13](#policy-2)

[Marketing 14](#marketing)

[Table 7. Taiwan's Rice Purchase Programs
15](#table-7.-taiwans-rice-purchase-programs)

[SECTION II. STATISTICAL TABLES 16](#section-ii.-statistical-tables)

[Table 8. Rice Retail Prices 16](#table-8.-rice-retail-prices)

[Table 9. Tariff Rates for Grains 16](#table-9.-tariff-rates-for-grains)

[Table 10. Meat Production for 2000-2004 in 1,000 mt
17](#table-10.-meat-production-for-2000-2004-in-1000-mt)

[Table 11. Feed Production for 2000-2004 in 1,000 mt
17](#table-11.-feed-production-for-2000-2004-in-1000-mt)

[Table 12. Non-Grain & Feed Reports Bibliography
17](#table-12.-non-grain-feed-reports-bibliography)

#   {#section .unnumbered}

# SECTION I. COMMODITY SITUATION AND OUTLOOK

# Wheat Situation & Outlook

## Table 1. Wheat Production, Supply and Demand, 1,000 MT

+-------------+--------+--------+-------+--------+---------+---------+
| PSD Table   |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Country     | Taiwan |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Commodity   | #      |        |       |        | (1000   |         |
|             | ###### |        |       |        | H       |         |
|             |  Wheat |        |       |        | A)(1000 |         |
|             |        |        |       |        | MT)     |         |
+-------------+--------+--------+-------+--------+---------+---------+
|             | 2002   | R      | 2003  | Es     | 2004    | F       |
|             |        | evised |       | timate |         | orecast |
+-------------+--------+--------+-------+--------+---------+---------+
|             | USDA   | Post   | USDA  | Post   | USDA    | Post    |
|             | Of     | Es     | Off   | Es     | O       | E       |
|             | ficial | timate | icial | timate | fficial | stimate |
|             | \      | \      | \[    | \      | \[Old\] | \[New\] |
|             | [Old\] | [New\] | Old\] | [New\] |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Market Year |        | 0      |       | 0      |         | 07/2004 |
| Begin       |        | 7/2002 |       | 7/2003 |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Area        | 0      | 0      | 0     | 0      | 0       | 0       |
| Harvested   |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Beginning   | 270    | 285    | 249   | 290    | 279     | 282     |
| Stocks      |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Production  | 0      | 0      | 0     | 0      | 0       | 0       |
+-------------+--------+--------+-------+--------+---------+---------+
| TOTAL Mkt.  | 1003   | 1153   | 1000  | 1224   | 0       | 1130    |
| Yr. Imports |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Jul-Jun     | 1003   | 1044   | 1000  | 1080   | 0       | 1080    |
| Imports     |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Jul-Jun     | 842    | 968    | 0     | 980    | 0       | 980     |
| Import U.S. |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| TOTAL       | 1273   | 1438   | 1249  | 1514   | 279     | 1412    |
| SUPPLY      |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| TOTAL Mkt.  | 24     | 0      | 20    | 0      | 0       | 0       |
| Yr. Exports |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Jul-Jun     | 24     | 0      | 20    | 0      | 0       | 0       |
| Exports     |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Feed Dom.   | 100    | 68     | 100   | 152    | 0       | 50      |
| Consumption |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| TOTAL Dom.  | 1000   | 1148   | 950   | 1232   | 0       | 1130    |
| Consumption |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| Ending      | 249    | 290    | 279   | 282    | 0       | 282     |
| Stocks      |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+
| TOTAL       | 1273   | 1438   | 1249  | 1514   | 0       | 1412    |
| D           |        |        |       |        |         |         |
| ISTRIBUTION |        |        |       |        |         |         |
+-------------+--------+--------+-------+--------+---------+---------+

## 

## Production

Taiwan's wheat production is negligible.

## Consumption

Taiwan's wheat demand is expected to fall slightly to 1.13 million
metric tons in 2004/5, mostly because of lower feed wheat imports.
Taiwan's overall wheat consumption is basically stable, with more than
95 percent used for milling. Consumption of milled products may increase
slowly, despite already high per-capita levels. Supporting this is high
noodle consumption and a dynamic wheat food market driven by Taiwan's
6,000 bakeries, convenience stores, and supermarkets. Intense
competition between food manufacturers and strong public interest in new
food items encourages a high number of product introductions. This
boosts demand for wheat-based products, which is supported by Taiwan
miller's production of specialty flour.

## Stocks

Taiwan stock levels for 2004/05 are expected to be 282,000 tons, which
is near the average of recent years.

## Trade

Since Taiwan does not produce wheat, all demand is met by imports.
Although importers may experiment will small imports of feed wheat, the
United States is expected to keep a 90+ percent share of the wheat
market during the forecast period. In 2002/3, the U.S. had a 93 percent
share, while Australia supplied just under 7 percent.

Taiwan imports mostly U.S. #1 wheat, approximately 60 percent is HRS or
DNS, while 28 percent is HRW, 11 percent Soft or Western White Wheat,
and 1 percent Durum. The U.S. market share for milling wheat is expected
to increase because of the introduction of U.S. Hard White Wheat into
export channels. The superior milling characteristics and price
competitiveness of Hard White Wheat are expected to cut the market share
of Australian prime hard wheat. As of April 2004, Taiwan has imported
20,000 mt of U.S. Hard White Wheat for milling and for trial use in
Chinese food manufacturing.

In 2003 and 2003, feed wheat imports from India totaled 68,000 and
152,000 tons, respectively. These imports by Taiwan swine producers were
primarily a result of high corn prices in 2003. The average feed wheat
CIF price was \$130/mt versus \$160/mt for corn.

Taiwan imports a very small amount of wheat flour that only accounts for
2 percent of the total flour supply. Flour imports in 2003 totaled only
17,000 tons, up 2,000 tons from a year earlier. All but 2,000 tons of
the total came from Japan.

## Policy

###### Cross-Straits Trade

The most serious potential threat to U.S. wheat exports is an opening to
PRC flour, wheat or processed products. Although liberalization
continues to be delayed by icy cross-straits relations, local industry
sources expect Taiwan to eventually lift to import bans on PRC products.
Currently, Taiwan authorities review these restrictions every six
months, with the next review scheduled for September 2004. Taiwan
authorities also consider liberalization petitions from local companies
or industrial groups every two months. However, the reelection of
Taiwan's pro-Independence President makes it unlikely that that Taiwan
will reward China with wheat or wheat product market liberalization any
time soon. In addition, the continuing freeze on cross-straits political
contacts will make it more difficult to resolve the phytosanitary issues
for wheat. Finally, the potential damage caused to Taiwan millers by
flour and processed product imports will also likely delay Taiwan's
market opening.

If imports were allowed, PRC products could compete strongly in the
Taiwan instant noodle market. Taiwan's largest two instant noodle
producers have invested heavily in Mainland China and plan to ship from
the PRC if Taiwan ends its import ban. In preparation for
liberalization, one instant noodle company already uses the same brand
names for products sold on both sides of the Taiwan Strait. Since a
potential flood of Chinese products would greatly influence the Taiwan
flour and instant noodle market, this will also increase Taiwan's
reluctance to lift the ban quickly.

Although the entry of PRC products would likely disrupt the Taiwan wheat
market, direct sales of Chinese wheat and wheat flour would face stiffer
competition. The dominant position of U.S. wheat in the market and
technical support offered by U.S. Wheat Associates will make Taiwan
millers and food manufacturers reluctant to switch to alternative
suppliers.

In the long-run, PRC wheat and products are expected to affect U.S.
wheat exports to Taiwan by cutting demand for HRW, WW and SW wheat while
possibly boosting it for DNS wheat. Since China produces middle protein
wheat and little high protein wheat, Taiwan millers anticipate stiff
competition in the low-end flour market, where flour is used for making
cookies and gluten products that account for 12 percent of the total
flour market. On the other hand, Taiwan millers hope to supply high
quality flour to the Mainland if China reciprocates a Taiwan market
opening. Outside of the milling sector, China's potential for feed grain
production has stimulated Taiwan feed miller industry interest in
importing PRC feed wheat, especially if corn prices remain high.

[Taiwan Buying Practices and Investment Plans]{.underline}

In the meantime, the Taiwan flour milling industry continues to use its
long-standing collective group purchasing system under which importers
pool their funds and jointly import large grain shipments. To increase
Taiwan's milling competitiveness, the industry is considering the
construction of a NT\$1.5 billion or \$45 million (current exchange rate
is \$1 = NT\$33.4) flour mill with an annual capacity of 600,000 tons of
wheat at Taichung's harbor in central Taiwan.

# Corn Situation & Outlook

## Table 2. Corn Production, Supply and Demand, 1,000 MT

+--------------+--------+--------+--------+--------+--------+--------+
| PSD Table    |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Country      | Taiwan |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Commodity    | ###### |        |        |        | (1000  |        |
|              | # Corn |        |        |        | HA     |        |
|              |        |        |        |        | )(1000 |        |
|              |        |        |        |        | MT)    |        |
+--------------+--------+--------+--------+--------+--------+--------+
|              | 2002   | R      | 2003   | Es     | 2004   | Fo     |
|              |        | evised |        | timate |        | recast |
+--------------+--------+--------+--------+--------+--------+--------+
|              | USDA   | Post   | USDA   | Post   | USDA   | Post   |
|              | Of     | Es     | Of     | Es     | Of     | Es     |
|              | ficial | timate | ficial | timate | ficial | timate |
|              | \      | \      | \      | \      | \      | \      |
|              | [Old\] | [New\] | [Old\] | [New\] | [Old\] | [New\] |
+--------------+--------+--------+--------+--------+--------+--------+
| Market Year  |        | 1      |        | 1      |        | 1      |
| Begin        |        | 0/2002 |        | 0/2003 |        | 0/2004 |
+--------------+--------+--------+--------+--------+--------+--------+
| Area         | 10     | 10     | 10     | 10     | 0      | 0      |
| Harvested    |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Beginning    | 1329   | 1330   | 1387   | 1185   | 1537   | 1160   |
| Stocks       |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Production   | 50     | 50     | 50     | 50     | 0      | 0      |
+--------------+--------+--------+--------+--------+--------+--------+
| TOTAL Mkt.   | 4758   | 5055   | 4800   | 5075   | 0      | 5000   |
| Yr. Imports  |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Oct-Sep      | 4758   | 5115   | 4800   | 5100   | 0      | 5000   |
| Imports      |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Oct-Sep      | 4220   | 4569   | 0      | 4100   | 0      | 4100   |
| Import U.S.  |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| TOTAL SUPPLY | 6137   | 6435   | 6237   | 6310   | 1537   | 6160   |
+--------------+--------+--------+--------+--------+--------+--------+
| TOTAL Mkt.   | 0      | 0      | 0      | 0      | 0      | 0      |
| Yr. Exports  |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Oct-Sep      | 0      | 0      | 0      | 0      | 0      | 0      |
| Exports      |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Feed Dom.    | 4550   | 5000   | 4450   | 4900   | 0      | 4800   |
| Consumption  |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| TOTAL Dom.   | 4750   | 5250   | 4700   | 5150   | 0      | 5025   |
| Consumption  |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| Ending       | 1387   | 1185   | 1537   | 1160   | 0      | 1135   |
| Stocks       |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+
| TOTAL        | 6137   | 6435   | 6237   | 6310   | 0      | 6160   |
| DISTRIBUTION |        |        |        |        |        |        |
+--------------+--------+--------+--------+--------+--------+--------+

## Production

Taiwan is not expected to produce corn in any significant quantities in
2004/05. In recent years, domestically produced corn only accounted for
less than one percent of total corn consumption.

## Consumption

In 2004/05, nearly 95 percent of Taiwan's 5.0 million tons (4.8 million
tons) of corn consumption will likely go for feed use, with the
remaining 200,000 tons wet milled to produce corn syrup. After relative
stability through 2003/04, Taiwan's feed corn consumption is expected to
contract slowly over subsequent years because of falling poultry
production. In 2004/05, increasing Tariff Rate Quotas (TRQ) for imported
meats are likely to cut feed demand only by 1 to 2 percent because of
Taiwan's strong swine sector, which is expected to recover from a
Porcine Circovirus (PCV) outbreak. Over time, the competitiveness of
Taiwan pork products will limit imports mainly for processing or to
supply the market during occasional shortfalls. When the TRQs end in
2005, industry sources expect the total poultry meat imports to total
only between 80 to 100,000 tons. The local feed industry forecasts that
the 2005 liberalization of pork belly, variety meat, and chicken meat
imports will cut total feed demand to 7 million tons in 2005 from 7.6
million tons in 2000.

Approximately 45 percent of Taiwan's feed production goes to the poultry
sector. Taiwan's poultry sector is not expected to face serious disease
problems because of an effective quarantine system. In February 2004, an
outbreak of H5N2 Low Pathogenic Avian Influenza (AI) only had a very
small effect on poultry production -- producers only lost 55,000 birds
of a total population of 130 million birds. Though AI temporarily
reduced poultry meat consumption, this loss in grain consumption was
offset by increased pork production.

## Stocks

Taiwan stock levels for 2004/05 are expected to be 1.1 million tons,
which is near the recent the historical average.

## Trade

Taiwan's demand for corn imports in 2004/05 is forecast at approximately
5.0 million metric tons, only slightly lower than 2002 -- 2003 levels.
This decrease could come from falling Taiwan broiler production
resulting from the 2005 liberalization of poultry imports, although it
will likely be mitigated by a slight recovery in swine production.
Although high corn prices may stimulate more feed wheat imports, these
shipments are not expected to have a major impact on Taiwan's corn
market.

In 2004/05, the United States is expected to remain Taiwan's major
supplier of corn, although high prices may slightly erode market share
by encouraging experimentation with feed wheat or corn from new origins.
In 2002/03, the United States had an 89 percent share of Taiwan's total
corn imports, while Argentina had 8 percent, Mainland China 1 percent,
and Thailand 0.6 percent. This was down from the almost 100 percent U.S.
market share in 2001/02. High corn prices are also expected to spur
small corn imports from non-U.S. sources, with the largest competitor
being Argentina. Thai corn is also expected to enter Taiwan while
shipments from the Philippines, Indonesia and India are also possible.

During the forecast period, the largest threats to the U.S. corn market
in Taiwan are the possibility of PRC corn exports to Taiwan and a
steeper than expected decline in Taiwan's broiler sector. In the
short-term, tightening PRC corn supplies reduce the immediate threat of
large-scale corn exports to Taiwan. For more on the PRC corn situation,
please see GAIN CH4005. However, a major animal disease outbreak in
China that sharply reduces corn consumption there could increase PRC
interest in corn exports. Over the longer-term, increases in PRC corn
production or quality combined with the use of export subsidies will
likely increase pressure on Taiwan to open the Taiwan market.

[Corn Substitutes]{.underline}

Although high corn prices may encourage some small imports of other feed
grains such as feed wheat or barley, it is unlikely that these products
will see large gains in market share. In 2002, Taiwan's feed inclusion
rate for corn was approximately 65 percent (down by 1 percent from the
previous year) based on corn supply and feed production figures. The
feed inclusion rate of other feed grains combined was 4 percent (up by 1
percent from the previous year), including approximately 182,000 tons of
barley (203,000 tons in 2001), 46,000 tons of sorghum (36,000 tons in
2001), and 68,000 tons of feed wheat (2,000 tons in 2001).

The Taiwan feed millers imported feed wheat for the first time in 2000.
Feed wheat imports are expected to displace Australian barley because of
the drought in Australia during the previous two crop years. Taiwan
stopped the use of rice for animal feed after entering the WTO in
January 2002.

[Development of Non-Feed Uses for Corn]{.underline}

The U.S. Grain Council (USGC) office in Taiwan has been developing the
Taiwan bioplastics and ethanol markets, which could eventually become
major outlets for U.S. corn or Value Enhanced Grain exports. USGC is
also exploring ways to increase the use of biodegradable plastics to
meet demand created by growing environmental restrictions on the use of
non-biodegradable products. Beyond plastics, USGC is also working to
facilitate the use of ethanol in Taiwan, although prospects for success
remain uncertain.

## Policy

[Cross-Straits Trade]{.underline}

In October 2002, Taiwan allowed the entry of PRC corn for the first
time, giving China its first opportunity to enter the Taiwan market. So
far, Taiwan has only authorized limited imports of Chinese food products
to make up for local shortages. PRC corn has only been allowed entry
during three periods:

-   October - December 2002, with imports of 71,000 tons

-   November 2003 - January 2004, with imports of 65,000 tons.

-   March - May 2004, with no imports expected because of high PRC corn
    prices.

After May 2004, the market will likely be closed again. Taiwan
authorities review these restrictions every six months with the next
formal review scheduled for September 2004. Taiwan also review petitions
submitted by industry groups. Several feed millers with investments in
China have linked up with Taiwan swine producers to petition the
island's authorities to permanently end the import ban.

Although periodic market openings to PRC corn may continue, allowing its
entry permanently is a major step that would only likely occur after
lengthy deliberations. There are several reasons for this caution: One,
Taiwan commercial feed millers/corn importers have resisted the
introduction of PRC corn because it will undermine the group buying
arrangements, which have allowed companies to import large cargoes on
favorable terms. Two, the PRC has not proven to be a reliable supplier
to other markets because it has cancelled shipments with little advance
notice. Three, PRC corn is of uncertain quality, which could complicate
attempts to calculate feed rations. Four, China appears to be
subsidizing corn exports, which is contrary to their WTO Accession
Agreement commitments. The export subsidy was the major reason why PRC
corn was competitive in Taiwan in 2003.

If the ban were lifted, the geographic proximity of Northeast China to
Taiwan could allow smaller shipments, faster delivery and lower carrying
costs for Taiwan importers compared to U.S. corn. PRC shipments could
also make it possible for small firms to import corn independently of
the traditional major buying groups. On the other hand, U.S. feed grain
suppliers may be able to use containerized shipments to supply Taiwan
when ocean freight costs rise, allowing them to compete more effectively
with small PRC corn shipments. The very low container backhaul rates to
Taiwan from the U.S. could make this an attractive prospect for U.S.
grain exporters.

[Livestock Initiatives]{.underline}

To adjust to post-WTO trade conditions and 2005 import liberalization,
Taiwan's livestock and feed industries are working to improve the
competitiveness of Taiwan poultry and swine production. The National
Animal Industry Foundation (NAIF) was formed in January 2000 to support
the differentiation between locally produced chicken and pork products
from imported products by establishing logos related to freshness and
taste. The Taiwan Council of Agriculture (COA) is also attempting to
improve the quality of domestically produced meat and poultry products
in order to compete more effectively with imported products. COA has
also worked to reestablish Taiwan's Food and Mouth Disease (FMD) free
status in order to resume Taiwan's pork exports to Japan. Despite COA's
efforts, FMD free status without vaccination is still at least one or
two years away.

[Biotechnology Update]{.underline}

On February 23, 2001, the Taiwan Department of Health (DOH) promulgated
regulations on bioengineered food labeling and registration. Initially,
these regulations only applied to soybeans and corn and their products
but will likely expand to other products in 2004. Taiwan's bioengineered
food safety approval and labeling regulation took effect on January 1,
2003. Since this time, no bioengineered soybean and corn may be
produced, processed, prepared, packed, and imported or exported unless
they are registered. All bioengineered varieties of soybeans and corn
must be registered and approved by the Food Sanitation Bureau (FSB) of
the Department of Health (DOH).

Corn food products made of non-bioengineered materials can be labeled
\"Non-Genetically-Modified\" on a voluntary basis. The labeling
regulations will not apply to products that do not contain pieces of
transgene(s) or protein such cornstarch, corn syrup and corn oil. Taiwan
will use a 5 percent tolerance level by weight to determine a product's
bioengineered status. Corn foods sold at traditional \"wet\" markets and
at restaurants will not require labeling.

Taiwan has approved 11 of the most widely commercialized bioengineered
corn and soybean events. It is currently drafting a basic law to cover
all products derived from modern biotechnology. Completion of the draft
law is expected by June 2004 when it will be sent to the Legislative
Yuan (parliament) for consideration. In the meantime, Taiwan has been
increasing its funding for biotech food regulation. It recently
allocated a two-year capacity building budget of NT\$1.4 million or
\$420,000 for conducting food safety assessments. This figure is up
several times from earlier levels.

[U.S. -- Taiwan Goodwill Missions]{.underline}

In September 2003, Taiwan importers signed a Letter of Intent to import
a minimum of 7.5 million tons of corn and 3.2 million tons of soybeans
in 2003 and 2004. These non-binding commitments are fulfilled by private
Taiwan importers rather than government agencies. Signing ceremonies for
these agreements typically take place in Washington, D.C. Taiwan has not
yet proposed a similar agreement beyond 2004.

#  

# Rice Situation and Outlook

## Table 3. Rice Production, Supply and Demand, 1,000 MT 

+---------------+-------+-------+-------+--------+--------+--------+
| PSD Table     |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Country       | T     |       |       |        |        |        |
|               | aiwan |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Commodity     | ##### |       |       |        | (1000  |        |
|               | ## Ri |       |       |        | HA     |        |
|               | ce, M |       |       |        | )(1000 |        |
|               | illed |       |       |        | MT)    |        |
+---------------+-------+-------+-------+--------+--------+--------+
|               | 2002  | Re    | 2003  | Es     | 2004   | Fo     |
|               |       | vised |       | timate |        | recast |
+---------------+-------+-------+-------+--------+--------+--------+
|               | USDA  | Post  | USDA  | Post   | USDA   | Post   |
|               | Off   | Est   | Off   | Es     | Of     | Es     |
|               | icial | imate | icial | timate | ficial | timate |
|               | \[    | \[    | \[    | \      | \      | \      |
|               | Old\] | New\] | Old\] | [New\] | [Old\] | [New\] |
+---------------+-------+-------+-------+--------+--------+--------+
| Market Year   |       | 01    |       | 0      |        | 0      |
| Begin         |       | /2002 |       | 1/2003 |        | 1/2004 |
+---------------+-------+-------+-------+--------+--------+--------+
| Area          | 307   | 307   | 290   | 272    | 0      | 264    |
| Harvested     |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Beginning     | 112   | 370   | 245   | 385    | 280    | 451    |
| Stocks        |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Milled        | 1271  | 1271  | 1140  | 1164   | 0      | 1027   |
| Production    |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Rough         | 1803  | 1803  | 1617  | 1651   | 0      | 1457   |
| Production    |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| MILLING RATE  | 7049  | 7049  | 7049  | 7049   | 0      | 7049   |
| (.9999)       |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| TOTAL Imports | 106   | 76    | 135   | 151    | 0      | 126    |
+---------------+-------+-------+-------+--------+--------+--------+
| Jan-Dec       | 135   | 76    | 125   | 151    | 0      | 126    |
| Imports       |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Jan-Dec       | 82    | 52    | 0     | 115    | 0      | 70     |
| Import U.S.   |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| TOTAL SUPPLY  | 1489  | 1717  | 1520  | 1700   | 280    | 1604   |
+---------------+-------+-------+-------+--------+--------+--------+
| TOTAL Exports | 94    | 94    | 90    | 49     | 0      | 87     |
+---------------+-------+-------+-------+--------+--------+--------+
| Jan-Dec       | 90    | 94    | 100   | 49     | 0      | 87     |
| Exports       |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| TOTAL Dom.    | 1150  | 1238  | 1150  | 1200   | 0      | 1200   |
| Consumption   |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+
| Ending Stocks | 245   | 385   | 280   | 451    | 0      | 317    |
+---------------+-------+-------+-------+--------+--------+--------+
| TOTAL         | 1489  | 1717  | 1520  | 1700   | 0      | 1604   |
| DISTRIBUTION  |       |       |       |        |        |        |
+---------------+-------+-------+-------+--------+--------+--------+

(PSD Note: Due to U.S. West Coast Port Lockout in late 2002, exports for
2002 were moved into 2003. This reduced 2002 rice imports to 76 tmt
instead of the full quota amount of 126 tmt. In addition, 29,229 mt of
the 2003 public imports were delivered in 2004. It is anticipated about
the same amount of public quota rice entered into Taiwan in the
following year because Taiwan tenders for U.S. new crop rice which
available in the market after September. As a result, imports were 151
tmt and 126 tmt in 2003 and 2004, respectively.)

## Production

Rice production is expected to fall by 12 percent to a historical low of
slightly more than 1 million tons because of an ongoing drought in
southern Taiwan. However, area planted will only shrink by 3 percent to
264,000 ha. To accommodate the 144,720 mt (brown basis) of imported rice
now allowed entry, Taiwan planned to cut its rice production from 2001
levels by 10 percent in 2002, by 20 percent in 2003 and 22 percent in
2004. However, in 2003, production did not fall as planned and prices
fell to some the lowest prices in a decade. For example, the retail bulk
in January 2002 was NT\$35.97/kg while in October 2003's it was
NT\$28.86/kg. To put a floor under prices, COA increased its purchases
of rice to balance the market. Since October 2003, rice prices have
recovered and the retail bulk price of rice was NT\$34.93/kg as April
2004. Higher prices have also enabled Taiwan to release publicly
imported rice to the market quickly in 2004. So far, Taiwan has released
130,000 mt of centralized imported rice to the local market, equivalent
to 1.4 year's worth of public imports.

## Consumption

Total domestic rice consumption in 2002 and 2003 is estimated to fall
slightly because of the falling quantity of rice available for feed use.
The table rice consumption forecast remains at 1.2 million tons.

## Stocks

Taiwan ending rice stocks are expected to fall to 317,000 tons because
of declining local production and increasing sales of rice imported by
the public sector. This reversed a 2003 build-up in stocks to 431,000
tons that was the result of slow sales of publicly imported rice and a
larger than expected harvest. Ending stocks in 2004 are expected to be
the lowest in a decade, although they are still expected to equal 31
percent of yearly consumption. Stocks have fallen by 43 percent since
Taiwan joined the WTO in January 2002, which is in line with a Council
of Agriculture plan to cut stocks by 40 percent after accession (see
GAIN TW0015).

## Table 4. Taiwan Rice Stocks Levels, 1994-2004, 1,000 MT

  ------------- -------------- ------------- ------------- --------------
  YEAR          1994 -- 2001   2002          2003          2004
                Average                                    (forecast)

  Ending Stocks 554            385           431           317
  ------------- -------------- ------------- ------------- --------------

## 

## Trade

## Imports

In 2003, Taiwan switched its import regime to a Tariff Rate Quota (TRQ)
system from the Minimum Market Access (MMA) system used in 2002, its
first year in the WTO. The total quota amount remains at 144,720 mt on a
brown rice basis (equivalent to 126,000 tons on a milled rice basis). Of
this total, 65 percent is reserved for the government purchases and 35
percent for the private trade. All grain dealers who have registered
with COA and have a grain dealer license may bid for rice import quotas.
The out-of-quota tariff rate is NT\$45/kg for rice and NT\$49/kg for
processed rice products, with conversion factor of 1.15 to convert from
milled or processed products to brown rice.

Taiwan's change to a TRQ system was submitted to the WTO in October
2002. In December 2002, it passed enabling legislation without prior
consultation with WTO members, triggering a formal objection from the
U.S., Australia, and Thailand in the WTO. The objections were based on
Taiwan's lack of consultation, the removal of previous negotiated WTO
headnote language and associated concessions, as well as the extremely
high out of quota duty.

## Table 5. Import Summary Table for 2002-2003 Quota Fill

  ------------- ---------- --------- --------- -------- --------- --------- --------- --------
  Origin        2002                                    2003                          

                Public     Private   Total     Import   Public    Private   Total     Import
                Trade (mt) Trade     Imports   Share    Trade     Trade     Imports   Share
                           (mt)      (mt)               (mt)      (mt)      (mt)      

  The United    70,068     29,279    99,347    68.6%    70,068    4,676     74,744    51.7%
  States                                                                              

  Thailand      0          18,362    18,362    12.7%    6,000     31,056    37,056    25.6%

  Australia     24,000     2,244     26,244    18.1%    8,000     268       8,268     5.7%

  Egypt         0          0         0         0.0%     10,000    14,265    24,265    16.8%

  Japan         0          332       332       0.2%     0         298       0         0.2%

  Other         0          447       447       0.3%     0         18        18        \--
  Countries                                                                           

  Grand Total   94,068     50,664    144,732   100%     94,068    50,581    144,649   100%

  Quota Fill    100.008%                                99.951%                       
  Rate                                                                                

  Source:                                                                             
  Council of                                                                          
  Agriculture                                                                         
  (COA)                                                                               
  ------------- ---------- --------- --------- -------- --------- --------- --------- --------

###### Private Trade

Thailand had a 61 percent share of the 2003 rice private trade, followed
by Egypt (28 percent), the United States (9 percent), and Japan and
Australia (each less than 1 percent).

Under the TRQ's "System Three" quota bidding system, Taiwan has already
successfully allocated all 50,652 mt (brown basis) of 2004 quota rights
to local importers, with the bid prices ranging from NT\$9.680/kg to
NT\$12.999/kg (brown basis). The specific quota allocation results for
the private trade are reported in GAIN TW3049, TW4006 and TW4017. Prices
in 2004 were higher then in 2003, but the spread of successful bids was
lower. The cost for quota rights in 2004 reflects conditions in the
local and international rice markets -- the larger the difference
between the domestic and international prices, the more expensive quote
rights become.

Under System Three, importers bid for quota rights that are sold to the
highest bidders first. In 2003, Taiwan's first year under the TRQ
system, the private quota was 100 percent filled. Taiwan did not even
have to use its quota reallocation mechanism, which redistributes unused
quota rights. Only a few quota holders who had not imported rice before
September 15 had to apply to extend their quota rights to the end of
year.

[Public Trade]{.underline}

The United States continues to dominate the public rice trade, with a 75
and 67 percent share in 2002 and 2003 public imports, respectively.
Egypt began to participate in the rice tenders in 2003 and took an 11
percent share, while Australia only captured a 9 percent share. A major
drought pushed down Australian market share from 26 percent in 2002.

The 2004 public tender schedule for public imports was reported in GAIN
TW4007, which is scheduled to run March-September. As of mid April,
Taiwan has tendered and contracted for 8,850 mt of medium brown grain
(U.S. supply) and 1,500 mt of milled glutinous long grain (Thai supply)
and are continuing tenders for 1,500 mt of milled glutinous long grain
and 1,000 mt of milled glutinous short grain.

[Tight Supplies of Glutinous Rice]{.underline}

Taiwan produces approximately 65,000 mt of glutinous rice a year, with
domestic supply and demand generally balanced. In 2004, glutinous rice
prices increased sharply because of the timing of the Chinese New Year
and the Dragon Boat Festival, which both come before the Taiwan spring
rice harvest. This generally only happens every four years. As a result,
prices surged above NT\$46/kg in from a low of NT\$34/kg in January and
noticeably higher than the three-year average of NT\$43/kg. To stabilize
prices, COA has tendered for glutinous rice, which will mostly come from
Thailand. Although glutinous rice tenders are not expected to exceed
4,000 tons in 2004, these tenders will reduce the opportunity for other
rices to enter Taiwan through public channels. In 2000, Taiwan granted a
special import permit for 1,500 tons of PRC glutinous rice to fill a
one-time shortfall.

## Exports

Taiwan has stopped selling surplus rice onto the world market at
discounted prices after WTO entry, ending virtually commercial exports
after May 2002. Total 2002 rice exports of 94,000 tons were all
contracted for prior to WTO entry. Taiwan plans to send 100,000 tons of
rice (milled basis) as food aid to needy countries each year to control
stocks.

## Table 6. Food Aid Statistics Table for 2003 (on a milled basis)

  ------------------------------------ ----------------------------------
  Destination                          Tonnage

  Jordan                               5,000

  Tuvalu                               36

  Haiti                                3,000

  Indonesia                            33,100

  South Africa & Lesotho               500

  Peru                                 40

  Mongolia                             7,000

  Total                                48,676

                                       

  Source: Council of Agriculture (COA) 
  ------------------------------------ ----------------------------------

## Policy 

Imported rice continues to be inspected on a lot-by-lot basis for
pesticide residues, heavy metal and aflatoxin by the import inspection
authority, BSMI. This raises some national treatment concerns as Taiwan
rice does not appear to be subject to such inspection. In March 2004,
the Agriculture and Food Agency (AFA) under the Council of Agriculture
was established in charge of pesticide residues monitoring in
domestically produced agricultural products.

## Marketing

The introduction of imported rice has resulted in the diversification of
the Taiwan rice market into different origins and varieties. Taiwan
customers now have the choice of many different types of rice, including
Calrose, Koshihikari, Jasmine or Tamanishiki. With exception of
specialty rices, Taiwan customers prefer local freshly produced and
milled rice. Calrose doesn't fall in the specialty rice category and
goes to institutional use, which accounts for 65 to 70 percent of total
rice distribution. Institutional use is also stimulated by the lack of a
price premium for Calrose on the Taiwan market. However, many Taiwan
millers prefer marketing a 20/80 Calrose/Taiwan rice mix to increase
profits. However, specialty rice such as Jasmine Thai rice or Missouri
rice, Koshihikari, organic brown, rice with germ, and certified Taiwan
good quality rice are priced higher than general rice varieties. The USA
Rice Federation has launched its consumer promotion activities in 2004
to promote 100 percent pack U.S. rice to increase consumer awareness of
U.S. high quality rice.

The diversification of rice products and the presence of new premium
varieties has made local consumers increasingly concerned about false
labeling of commercially packed rice. To help ensure that people get
what they pay for, COA is conducting research on how to better monitor
rice freshness, varieties, and origins to ensure more truth in labeling.
Current rice labeling guidelines require that commercially packed rice
list rice origin, local production county for Taiwan rice, or both for
mixed origins. There is an ongoing project to build a \"rice DNA
fingerprint data bank\" to cover rice varieties from Taiwan, the United
States, Australia, Thailand, and Mainland China. DNA fingerprints will
help prevent false labeling on rice packages.

Taiwan rice millers are using different market strategies to respond to
the post-WTO market. Large millers are both importing and investing in
new milling/packing facilities to improve rice quality in order to
compete with imported rice. One top local miller has taken out newspaper
ads for imported U.S., Japanese, Australian, and Thai rice sold under
his brand. Some millers claim that they will stick with locally grown
rice and segregate the market from imports though advertising. COA is
training its staff to inspect packaged rice in retail outlets to improve
domestically grown rice quality in order to be able to compete with
imported rice.

######## Guaranteed Rice Purchase Prices

Two voluntary programs exist under which farmers can sell rice to Taiwan
central authorities for pre-established prices: the guaranteed purchase
program, and the price guidance program. Sales under these programs are
limited to certain quantities per hectare. If a farmer were to sell the
maximum per-hectare quantities allowable under these two programs,
program sales would roughly equal half of production.

The basic purchase program has not changed fundamentally since 1993.
However, in October 2003, Council of Agriculture (COA) allocated a NT\$2
billion (approximately \$600 million) from the Import Relief Measure
funds to purchase additional paddy rice to stabilize the local rice
market. The eligible amount of import relief purchase is set at 2,360
kg/ha. This was calculated on the five-year average production level of
4,600 kg/ha minus the 1,440 kg of guaranteed purchases. The import
relief purchases were triggered by declining paddy rice prices that
slipped by 18 percent below the five-year average level of NT\$15.6/kg.
These lower prices were a result of Taiwan's larger than expected rice
harvest and implementation of Taiwan's WTO commitment to import 144,720
tons of rice. The import relief purchases pushed up the paddy rice price
to NT\$16.2/kg on December 12, 2003, and to NT\$20.57/kg by April 29,
2004.

Taiwan plans to use the import relief purchase mechanism again if rice
prices for the fall crop dip below the "acceptable level" of
NT\$16.6/kg. Farmers have been pressing to increase the import relief
purchase price to NT\$23/kg to their reflect production costs, but the
request was refused because it would have likely pushed Taiwan's AMS
above WTO limits. Higher payments would have also created an incentive
to increase production further, creating more downward pressure on the
rice market while pushing up stocks levels and complicating plans to
dispose of domestically produced rice.

# 

## Table 7. Taiwan's Rice Purchase Programs

+------------+------------------+------------------+------------------+
|            | **Guaranteed     | **Guidance       | **Import Relief  |
|            | Purchase**       | Purchase**       | Purchase**       |
|            |                  |                  |                  |
|            | **(paddy         | **(paddy         | **(paddy         |
|            | basis)**         | basis)**         | basis)**         |
+------------+------------------+------------------+------------------+
| Variety    | Price NT\$/kg    | Price NT\$/kg    | Price NT\$/kg    |
+------------+------------------+------------------+------------------+
| Japonica   | 21               | 18               | 16.6             |
| rice       |                  |                  |                  |
+------------+------------------+------------------+------------------+
| Indica     | 20               | 17               | 15.6             |
| rice       |                  |                  |                  |
+------------+------------------+------------------+------------------+
|            | Quantity kg/ha   | Quantity kg/ha   | Quantity kg/ha   |
+------------+------------------+------------------+------------------+
| The Spring | 1,920            | 1,200            |                  |
| crop       |                  |                  |                  |
+------------+------------------+------------------+------------------+
| The Fall   | 1,440            | 800              | 1,360            |
| crop       |                  |                  |                  |
+------------+------------------+------------------+------------------+
| Total      | 3,360            | 2,000            |                  |
+------------+------------------+------------------+------------------+

# SECTION II. STATISTICAL TABLES

## Table 8. Rice Retail Prices 

  ---------------------------- ------------ ------------------- ----------
  Prices Table                                                  

  Country                      Taiwan                           

  Commodity                    Rice, Milled                     

  Prices in                    NT Dollar    per uom             100 kg

                                                                

  Year                         2003         2004                \% Change

  Jan                          2945         2994                2%

  Feb                          2973         3239                9%

  Mar                          2988         3285                10%

  Apr                          2965         3493                18%

  May                          2945                             -100%

  Jun                          2925                             -100%

  Jul                          2915                             -100%

  Aug                          2913                             -100%

  Sep                          2906                             -100%

  Oct                          2886                             -100%

  Nov                          2926                             -100%

  Dec                          2950                             -100%

                                                                

  Exchange Rate                33.06        Local Currency/US   
                                            \$                  

  Date of Quote                04/27/2004   MM/DD/YYYY          
  ---------------------------- ------------ ------------------- ----------

## Table 9. Tariff Rates for Grains

+---------------------+---------------------+--------------------------+
| HS Code             | Grains              | Current Tariff (%)       |
+=====================+=====================+==========================+
| 1001.10 & 1001.90   | Wheat               | 6.5                      |
+---------------------+---------------------+--------------------------+
| 1101.00             | Wheat Flour         | 17.5                     |
+---------------------+---------------------+--------------------------+
| 1005.10             | Corn                | 0                        |
+---------------------+---------------------+--------------------------+
| 1007.00             | Sorghum             | 0                        |
+---------------------+---------------------+--------------------------+
| 1003.00             | Barley              | 0                        |
+---------------------+---------------------+--------------------------+
| 1006                | Rice                | NT\$49 per kg\*\*        |
+---------------------+---------------------+--------------------------+
|                     | Source: Taiwan      |                          |
|                     | Customs Tariff      |                          |
|                     | Schedule            |                          |
|                     |                     |                          |
|                     | \*\*Out of Quota    |                          |
|                     | rate for            |                          |
|                     | unprocessed rice.   |                          |
|                     | Private Sector rice |                          |
|                     | imports will enter  |                          |
|                     | through the System  |                          |
|                     | 3 auction quota     |                          |
|                     | allocation system   |                          |
|                     | with a price        |                          |
|                     | ceiling at          |                          |
|                     | NT\$23.26 per kg    |                          |
+---------------------+---------------------+--------------------------+

##  

## Table 10. Meat Production for 2000-2004 in 1,000 mt

  -----------------------------------------------------------------------
  Production    2000       2001       2002       2003       2004
                                                            (forecast)
  ------------- ---------- ---------- ---------- ---------- -------------
  Pork          921        962        935        893        895

  Poultry       727        697        697        685        670
  -----------------------------------------------------------------------

Source: Council of Agriculture

## Table 11. Feed Production for 2000-2004 in 1,000 mt

+-----------------+---------+---------+---------+---------+----------+
| Feed Production | 2000    | 2001    | 2002    | 2003    | 2004     |
|                 |         |         |         |         | (f       |
|                 |         |         |         |         | orecast) |
+=================+=========+=========+=========+=========+==========+
| Total Compound  | 7,693   | 7,730   | 7,563   | 7,544   | 7,460    |
| Feed Produced   |         |         |         |         |          |
+-----------------+---------+---------+---------+---------+----------+
| by commercial   | 5,232   | 5,015   | 4,921   | 5,083   | 5,060    |
| producers       |         |         |         |         |          |
+-----------------+---------+---------+---------+---------+----------+
| by integrated   | 2,460   | 2,715   | 2,642   | 2,461   | 2,400    |
| producers       |         |         |         |         |          |
+-----------------+---------+---------+---------+---------+----------+
| Note: Feed      |         |         |         |         |          |
| production      |         |         |         |         |          |
| estimates are   |         |         |         |         |          |
| based on the    |         |         |         |         |          |
| preliminary     |         |         |         |         |          |
| official data   |         |         |         |         |          |
| for 2002        |         |         |         |         |          |
|                 |         |         |         |         |          |
| Source: Data    |         |         |         |         |          |
| for 2000-2001   |         |         |         |         |          |
| feed production |         |         |         |         |          |
| are official    |         |         |         |         |          |
| numbers from    |         |         |         |         |          |
| the Council of  |         |         |         |         |          |
| Agriculture     |         |         |         |         |          |
+-----------------+---------+---------+---------+---------+----------+

## Table 12. Non-Grain & Feed Reports Bibliography

  --------- ---------- --------------------------------------------------
  GAIN \#   Date       Title

  TW2011    3/25/02    Biotech Corn and Soybean Events Registration
                       Update

  TW3023    07/07/03   OIE accepted Taiwan's FMD-Free with Vaccination

  TW3029    8/15/03    Poultry Annual

  TW4001    12/30/03   Oilseeds and Products Annual

  TW4005    01/31/04   Livestock Semi-Annual
  --------- ---------- --------------------------------------------------