Small to medium sized mills prevail in Spanish milling industry

by Teresa Acklin
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   Although Spanish milling has experienced some consolidation over the years, small to medium sized mills continue to predominate.

   In the past three decades, the number of flour mills in Spain has declined by 78%, to 387 in 1993 from 1,722 in 1960, according to International Milling Association statistics. In the same period, Spain's annual milling capacity has fluctuated widely.

   In 1960, Spain's annual milling capacity was 11.2 million tonnes. In the next 10 years, that figure jumped to 12 million tonnes in 1970.

   The 1970s brought a 42% contraction in capacity, to 6.9 million by 1980. But the next decade saw capacity increase again, to 8.5 million tonnes in 1990. By 1993, Spain's milling capacity was 9.1 million tonnes a year.

   In recent years, Spain's flour production has been on the decline. In 1977, production topped 3 million tonnes, wheat equivalent, but has trended lower since 1981, according to International Wheat Council data. In 1990, the last year for which figures are available, Spain's flour production was only 2.4 million tonnes.

   The declining production has left the industry burdened by overcapacity. Industry-wide, capacity utilization in 1993 was estimated at only 35%.

   Of Spain's 387 flour mills, 248, or 64%, have capacities of fewer than 30,000 tonnes annually, which is the equivalent of about 100 tonnes a day on a 300-working-day year. Only 12 mills, or 3% of the total, have capacities in excess of 100,000 tonnes a year.

   The greatest concentration of mills is in the northern part of Spain, which is home to 136 facilities. The center of the country has 85 mills, with 72 in the south.

   Typically, wheat flour accounts for some 78% of the total value of food grain products milled for Spain's domestic market each year, according to industry sources. Byproducts account for 15% of the total value, semolina accounts for 3%, and rye flour accounts for about 2%.

   In the domestic market, 70% of the flour is consumed by bakers, and white bread is the predominant product. Biscuit manufacturers consume another 8%, with the remainder spread among household and other consumers. Spain's baking industry, like its milling industry, consists of mostly small enterprises.

   This small-business environment, combined with geographical dispersion, has tended to discourage vertical integration, which is minimal. Efforts to form trade organizations that would link the interests of the related sectors are hampered by the same factors.

   Logistical concerns are important to the milling industry in Spain basically because of high transportation costs, one miller said. For example, he said transportation costs eat up about 50% of the gross profit on a tonne of flour, while manufacturing costs account for only 15%.

   Spanish millers also have concerns about declines in the area planted to wheat since Spain's accession to the European Union in 1986. In Andalusia, a region in southern Spain where some of the best milling quality wheat traditionally is grown, wheat area has plummeted to 150,000 hectares from 750,000 ha in the past 10 years, one miller said.

   Nationwide, the area planted to wheat has declined by about 20% since the early 1980s, while oilseeds area has increased by about 50%. E.U. agricultural support policies tended to encourage this switch.

   Since 1990, Spain has imported more than 1 million tonnes of wheat each year to meet food and feed demand. Prior to 1990, Spain's wheat imports exceeded 1 million tonnes only twice in 30 years.