The United States' unique position in world flour production

by Morton Sosland
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Annual changes in flour production in most nations are quite small, frequently 1% or less. In its estimates of national flour output, the International Grains Council provides an invaluable array of statistics affirming that in both developed and developing countries changes from year to year in the past decade indicate steadiness in wheat flour demand. Only in those instances where large swings have occurred in exports do annual fluctuations in output reflect other than what appears to be stable domestic markets. Indeed, the claim probably could be made that wheat flour consumption is the steadiest of all the major global food categories.

Yet, there is one remarkable exception to this apparent stability in flour production which occurs in a most unexpected place — the United States (U.S.). It is in the U.S. that flour production reached a historical high in 2000 of near 19 million tonnes and subsequently fell in four years to a recent low of 17.5 million. The disappointment with this drop among millers as well as all of grain

based foods was intensified by how U.S. flour output had climbed in the preceding two decades. From 12.6 million tonnes of flour production in 1980 to the 2000 peak, U.S. output registered an increase of nearly 50%. That percentage gain was twice the population growth in that same period, reflecting a climb in per capita consumption that is without parallel among developed countries.

No wonder then that the U.S. milling industry expressed grave concern as a substantial part of the 1980-2000 gain was lost in only four years. Without delving into the dietary changes caused by the brief but powerful popularity of low-carbohydrate dieting, it is important to note that this worrying situation prompted millers to join with bakers in an effort to halt and then to reverse this sudden and unexpected downturn. Even though a considerable amount of money was invested in activities like the Grain Foods Foundation, the results through 2007 have exceeded all expectations. From that 2004 low, output in 2007 has soared more than 1 million tonnes, or 6%. Most of that increase came in the past calendar year, with production up 4.4% in one of the sharpest annual increases ever posted. The dimension of that increase is heightened by noting that flour output in a country like Japan changes less than 1% annually, holding at 4.6 million tonnes in successive years.

Preliminary estimates for 2007 place U.S. domestic consumption of flour at very near the same as annual production. U.S. millers in the past year benefited from a marked increase in flour exports, primarily in the form of expanded relief shipments to the Middle

East, but the rise in exports was very nearly matched by a similar increase in imports of flour and flour-containing products. While U.S. flour output in 2007 ranked second to the 2000 peak, domestic disappearance reached a new high. Per capita flour use in the U.S., estimated tentatively at 63 kilograms, was up 2 kilograms from the prior three years, but was still below the peak of 68 attained in 1997. Not only is the U.S. unique in the degree of output fluctuation from year to year, but its consumption variations are larger than anywhere else.

U.S. millers, who also in 2007 enjoyed the highest rate of operations in relation to capacity — near 90% — in a long while and a significant increase in average flour extraction — up to 75.6%, against 75% in 2006 — have no good explanation for the relative volatility of their market in comparison to the rest of the world. One explanation may be that highly developed consumer markets, where food accounts for 10% or less of personal expenditures, as is the case in the U.S., have increased sensitivity to consumer whims. If that’s the case, then millers everywhere have a clear vision of how and where marketing needs to be directed.