Soaring capacity for U.S. flour milling

by Teresa Acklin
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U.S. flour mills adding more than 6,600 tonnes of daily milling capacity by the end of 1996.

   U.S. flour millers currently have under way and are planning the largest capacity expansion in the industry's history, based on the results of a survey conducted earlier this year by World Grain's sister publication, Milling & Baking News.

   The survey, in which responses were received from milling companies accounting for more than 90% of the industry's capacity, placed the completed, under way and planned capacity expansion at a total of 6,636 tonnes of daily capacity in terms of flour. This is a 10% increase over the milling industry's daily capacity of 65,735 tonnes in terms of flour, as shown in the 1995 North American Grain & Milling Annual, the North American industry directory compiled by Milling & Baking News and World Grain.

   Implementation of all these plans would raise the total U.S. daily capacity to 72,371 tonnes in terms of flour.

   Assuming six-day operations per week as equivalent to 100% running time, the new capacity poses an annual flour production potential of 22.2 million tonnes, which is nearly 4.5 million in excess of the record U.S. flour output of 17.8 million tonnes in 1994.

   While the survey did not seek cost estimates, knowledgeable observers of milling estimated that adding this much capacity — roughly divided between totally new “green site” mills and additions to existing plants — would involve an outlay of between U.S.$200 million and U.S.$300 million. That would be the largest investment ever made in such a period of time in U.S. expansion of grain milling.

   The capacity expansion revealed by the survey is in two parts:

   • Capacity that actually was added since late 1994 or was planned for completion before the end of 1995 — 3,542 tonnes of new capacity.

   • Capacity that companies contemplate adding after the end of 1995 — an additional 3,094 tonnes.

   These parts add to make for 6,636 tonnes of new capacity, posing the possibility of an unprecedented increase in U.S. flour milling. At the same time, the survey disclosed only one milling company planning to reduce some of its capacity in the form of a 227-tonne cutback at an older plant in favor of adding to the capacity at a new mill under construction.

   Assuming that all of the capacity currently planned is completed, the U.S. wheat milling industry will see its daily capacity reach a record by a considerable margin. The daily capacity of U.S. flour milling first exceeded 45,360 tonnes in 1977; it went above 49,000 tonnes in 1982, exceeded 54,000 in 1988 and approached 59,000 for the first time in 1993. The possibility that daily capacity might exceed 72,000 tonnes by the end of 1996 signifies a considerable speed-up in the rate of milling expansion.

   As noted above, the survey of capacity plans was based on data in the 1995 milling directory, which showed an industry-wide total of 65,735 tonnes of daily capacity.

   The estimate that raising the daily capacity to 72,371 tonnes would mean potential flour output of 22.2 million tonnes was derived by multiplying the daily capacity figure by 307 days. This is the number used by Milling & Baking News to measure milling operations, which reflects production as a percentage of capacity.

   Thus, mills in 1994 ran at 92.7% of capacity, which relates the year's flour output of 17.8 million tonnes to the annual capacity of 19.2 million tonnes computed on the basis of 307 times December 1994 daily capacity of 65,585 tonnes. U.S. mills have run above 90% of capacity in each of the past four years, beginning in 1991. Operations have been above or within a hair's-breadth (less than 0.5 percentage point) of 90% for nine successive years.

   Assuming no change in flour production or in the flour supply as well as the completion of the capacity plans revealed by the survey, adding this much capacity would slash the running time of the U.S. milling industry to hardly 80% of capacity. That would be at least 10 percentage points below the recent operating average. This theoretical rate would be the lowest since 1981, when the average was 80.7%. For all practical purposes, the last time mills ran at this rate was during the 1950s and 1960s.

   A breakdown of the survey results indicates that U.S. daily milling capacity was to be increased by 3,542 tonnes during 1995. The 1995 total alone, excluding the 3,094 tonnes of new capacity in the post-1995 compilation, would be among the largest increases ever posted.

   The record capacity rise up to this year occurred in 1981, when mills added a net 3,901 tonnes of daily capacity, followed by increases of 3,721 in 1977. That means the 1995 capacity increase would be the third largest.

   In the past 24 years, the average annual change in milling capacity was an increase of 740 tonnes. Actually, in seven of the past 24 years, capacity has shown a net reduction.

   The survey also asked milling companies to categorize the “stage” of the various expansion plans. Four stages were listed, with the following results:

   • Work under way — 40% of new capacity.

   • Engineering plans nearing completion — 28% of new capacity.

   • Advanced planning stage — 20% of new capacity.

   • Under serious consideration — 11% of new capacity.

   The annual milling directory published by Milling & Baking News and World Grain compiles information from most mills showing a breakdown between durum milling capacity and capacity to produce other types of wheat flour. Thus, the 1995 directory daily capacity total of 65,735 tonnes includes about 58,500 tonnes of regular wheat flour and 6,850 of durum milling capacity.

   The record-breaking capacity expansion currently under way includes a net gain of 318 tonnes in durum milling capacity. In earlier years, durum milling expansion and new plant building accounted for a relatively larger share of the growth recorded in the industry's production. This time it would appear that practically all of the capacity increase is in regular wheat flour, and not durum.

   The 3,542 tonnes of new daily capacity that was scheduled to in production by the end of 1995 relates to nearly 1.1 million tonnes of annual capacity, while the 3,094 tonnes of daily capacity planned for 1996 represents an annual output potential of another 952,500 tonnes.

   This 2 million tonnes of new annual milling capacity is a little less than five times the average annual increase of 420,000 tonnes in flour production during the 10 years ended in 1994. That average annual output increase is remarkably in line with the average annual rise of 428,000 tonnes in domestic disappearance thus far in the 1990s. In the decade of the 1980s, the average annual increase in domestic flour use was 330,000 tonnes.

   In the past four years, the annual capacity estimate ran remarkably close to being 1.4 million tonnes in excess of actual production, according to the annual survey of flour milling by the Bureau of the Census of the U.S. Department of Commerce. In the past quarter of a century, this “excess” capacity had been as low as 1.08 million tonnes in 1987 and as high as 3.07 million in 1981. As the 1970s began, the average “surplus” was right at 2.2 million tonnes.

Milling capacity expansion highlights

(daily capacity in terms of flour)
Under serious consideration:735 tonnes
Advanced planning stage:1,293 tonnes
Engineering plans near completion:1,837 tonnes
Work under way or completed:2,998 tonnes
Total new capacity6,863 tonnes
Reduction in existing capacity -227 tonnes
Net total new capacity6,636 tonnes

U.S. mill projects by state, company

   All capacities in tonnes in terms of flour

   E = Expansion

   NM = New Mill

Company, Location, Project:
General Mills,Vallejo 23 E
Fisher Mills, Modesto 45 E
Cereal Food, Los Angeles 136 E
Fisher Mills, So. Calif. 91 NM
ConAgra, So. Calif. 454 NM
Gilt Edge, Richmond 5 E
Cereal Food, Ogden 113 E
Cereal Food, Salt Lake 45 E
Cereal Food, Wichita 136 E
Heartland Growers, Russell 272 NM
Cereal Food, Kansas City 113 E
Wall-Rogalsky, McPherson 104 E
General Mills, Carlisle 14 E
General Mills, Great Falls 14 E
Company, Location, Project
N.D. Mill, Grand Forks 45 E
ConAgra, Alton 363 E
Chelsea Milling, Chelsea23 E
General Mills, Kansas City 204 E
Amber, Kenosha 953 NM
Company, Location, Project
Bay State, Winona 109 E
Cargill, Lake City 227 E
Amber Milling, Rush City 227 Reduction
Amber, Houston 408 NM
ConAgra, Sherman 181 E
Morrison, Denton 91 E
ADM Milling, Beech Grove 136 E
Siemer Milling, Hopkinsville 318 NM
Cereal Food, Cleveland 136 E
Williams Brothers, Kent 27 E
General Mills, Buffalo 18 E
Cargill, Albany 136 E
Agway, Churchville 68 E
Clintondale, Howard 100 NM
ADM Milling, Camp Hill 363 E
Curry Flour, Palmyra 54 E
Amber, Mount Pocono 680 NM
Clintondale, Mill Hall 113 E
Southeastern Mills, Barnesville272 E
Southeastern Mills, Rome 109 E
Bay State, Mooresville 113 E
Italgrani, Ayer 23 E
Allen Brothers, Columbia 25 E
Allen Brothers, Greenwood 2 E

U.S. flour milling expansion projects

   (daily capacity in terms of flour in tonnes; converted from cwts

   totals may not add because of rounding.)

NameLocationcapacitytotal (net)
ADM MillingBeech Grove, Indiana136
Camp Hill, Pennsylvania363499
AgwayChurchville, New York6868
Allen BrothersColumbia, South Carolina25
Greenville, South Carolina227
Amber MillingMount Pocono, Pennsylvania*680
Houston, Texas*408
Kenosha, Wisconsin*953
Rush City, Minnesota**-2271,814
Bay State MillingWinona, Minnesota109
Mooresville, North Carolina113222
Cargill Flour MillingLake City, Minnesota227
Albany, New York136363
Cereal Food Los Angeles, California136
ProcessorsKansas City, Kansas113
Wichita, Kansas136
Cleveland, Ohio136
Ogden, Utah113
Salt Lake City, Utah45680
Chelsea MillingChelsea, Michigan2323
Clintondale MillsHoward, Pennsylvania*100
Mill Hall, Pennsylvania113213
ConAgra, Inc.Southern California*454
Alton, Illinois363
Sherman, Texas181998
Curry FlourPalmyra, Pennsylvania5454
Fisher MillsModesto, California45
Southern California*91136
General MillsVallejo, California23
Carlisle, Iowa14
Kansas City, Missouri204
Great Falls, Montana14
Buffalo, New York18272
Gilt Edge MillingRichmond, Utah55
Heartland GrowersRussell, Kansas*272272
ItalgraniAyer, Massachusetts2323
Morrison MillingDenton, Texas9191
North Dakota MillGrand Forks, North Dakota4545
Siemer MillingHopkinsville, Kentucky*318318
Southeastern MillsBarnesville, Georgia272
Rome, Georgia109381
Wall-RogalskyMcPherson, Kansas104104
Williams BrothersKent, Ohio2727
*denotes new greenfield mill location (all others expansion of existing facilities) **capacity reduction

Market growth, productivity cited as reasons for expansion

   In surveying U.S. flour milling companies about their plans to expand capacity, Milling & Baking News, World Grain's sister publication, sought information on the main reasons the companies decided to increase flour milling capacity.

   Three reasons stood out as being “very much a consideration” by 70% or more of the respondents (the latter in turn account for more than 90% of current industry daily capacity). These were:

   • ANTICIPATED MARKET GROWTH IN AREA SERVED BY MILL — 75% said this was “very much a consideration”; 15% said it was “somewhat of a consideration,” with only 5% either answering “not a consideration” or providing no answer.

   • IMPROVEMENTS TO PRODUCTIVITY — 70% said this was “very much a consideration,” while 30% described it as “somewhat of a consideration.”

   • ANTICIPATED CONTINUED GROWTH IN FLOUR CONSUMPTION — 70% cited this outlook as “very much a consideration,” while 20% said it was “somewhat of a consideration” and 10% did not answer.

   Other reasons listed for adding capacity were:

   • RESPONDING TO NEEDS OF SPECIFIC CUSTOMER(S) — 65% said this was “very much a consideration,” while 20% cited it as “somewhat,” 10% said it was not a consideration, and 5% provided no answer.

   • PLANNED ENTRANCE INTO NEW MARKETS — this reason was cited by 55% as “very much a consideration,” while 25% said it was “somewhat of a consideration,” and 10% each said it was “not a consideration at all” or did not answer.

   • PREEMPTIVE ACTION TO DETER COMPETITOR — 15% acknowledged this either as “very much a consideration” or “somewhat of a consideration,” while 60% said it was “not a consideration at all” and 10% did not answer.