Opinion: Export key to status of milling

by Morton I. Sosland
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Successive years of new records in world trade in wheat flour provide the basis for a positive assessment of the milling industry in those countries leading export trade. Yet, the data on flour exports and imports compiled by the International Grains Council (IGC) also provide significant insights into the state of milling in many nations that do not have a major role at this time in flour trade. Thanks to the quarterly assessments of flour exports provided by the IGC as part of its Grain Market Report, millers around the world have up-to-date information that may be studied as helpful in gaining understanding of how milling is faring in many nations. That is especially the case in combining the export information with the annual estimates of flour production which are also compiled by the IGC.

One of the most telling examples of information derived from these two data sets is the European Union. Combined all 28 member countries are forecast to export 1 million tonnes of flour in wheat equivalent in 2016-17, putting it in third place as a flour exporter. Yet, the E.U. as recently as 1996-97 shipped 6,249,000 tonnes. The current 1 million tonnes would be 7% of this crop year’s trade, contrasted with 56% two decades ago, thus underscoring the fall in exports that could have negatively affected European milling. Yet, five leading countries of the E.U. have maintained annual flour output near 19 million tonnes, offsetting the export loss.

The flour supply-demand situation in the United States is even more revealing. Recent American flour exports have been only 400,000 tonnes, which is barely 3% of global trade. That contrasts with America’s earlier role as the leading flour exporter. It shipped 2 million tonnes in 1984-85, which was a quarter of trade. Rather than having a negative effect, that drop in exports was countered by a rise in domestic demand as shown by production rising from 14 million tonnes in the mid-1980s to above 19 million currently. American millers benefited from growth in population as well as from increased consumer demand. In light of export uncertainties, U.S. and E.U. millers have reason to welcome their situations.

Yet, those countries that lead flour exporting have basis for hailing milling as evidence of returns available from a surge in shipments. The most striking example is Turkey, which has held the export lead for the past several years. This came after it competed with Kazakhstan in a period when the two countries alternated as global leader.

According to the IGC, Turkey in 2016-17 will export 4,650,000 tonnes of flour in wheat equivalent, representing 31% of the record. Considering that Turkey in the last years of the 20th century was exporting only about 200,000 to 300,000 tonnes of wheat flour, the current total reflects massive expansion of the milling industry as well as the companion enlargement of companies supplying locally and then internationally the equipment needed for efficient flour milling. It seems hardly possible to move that quantity of flour to foreign destinations when its milling industry is shown producing slightly more than 8 million tonnes.

A similar record in milling growth has occurred in Kazakhstan, once a part of the Former Soviet Union, which is expected to ship 2,850,000 tonnes in 2016-17. That is nothing short of amazing for an industry that is producing only about 4 million tonnes annually.

Much of the present-day record in global flour exporting reflects demand from the countries in Near East Asia that are besieged by internal conflicts of varying intensity and length. It is very similar to the way wars and internal fighting have exerted great influence on flour demand at different times and in different geographies in the period since World War II. These influences replace the earlier impacts provided by decisions to build or not to develop domestic industries that seek to keep pace with the growing popularity of flour-based foods.