In a time of great change in global flour milling, in the food industry and at Cargill, Inc., Cargill Flour Milling has adopted a strategy designed to place the business in the forefront of grain-based foods in ways that differ in many respects from the actions of its principal competitors. Hardly anything symbolizes those differences more strikingly than the investment Cargill Flour Milling and North American Grain is making in the development and breeding of new varieties of hard winter and soft wheats. Through seed cultivation and, eventually, contract production, Cargill plans to supply its own mills with wheat designed to produce flours for specific customer needs.
During the course of an interview with John Geisler, who recently assumed a leadership position in North American and European food ingredients and food applications, and Guy Shoemaker, president of North American Flour Milling, there emerged, almost as a mantra, a commitment by flour milling — as part of Cargill's wide-reaching food ingredients — to being "a customer solutions provider in the agri-food chain."
Mr. Geisler took this commitment a step further when he said, "We mean that we want to create distinctive values for the customers we serve." The two executives also made clear that this emphasis on understanding and reacting to what customers want is a shift in focus "from product line to customer orientation."
This focus on exploring and serving customers results from a major shift in emphasis at the top of Cargill, the world's largest privately owned company. With annual revenues well in excess of U.S.$50 billion, the group has shown amazing agility over the years in its periodic restructurings and its response to all sorts of opportunities across the many lines of business in which it is engaged.
Under Warren Staley, the recently named president and chief executive officer, along with an almost totally new top management team, it emerged during the discussion of flour milling's potential that Cargill had adopted the philosophy that customers' needs, first and foremost, guide production and marketing decisions.
"We are very capable of helping our customers in many special ways," Mr. Shoemaker said.
Technical service is one obvious way he cited, but he also said that "Cargill's ability to source wheat" is about to become quite special in view of the new strategy U.S. Flour Milling is following to develop varieties of wheat specially suited for producing flour that will respond to specific customer needs.
"We are designing for our customers wheats to meet their requirements," Mr. Shoemaker said, describing a unique program that had its origin in the 1993 acquisition of Goertzen Seed Co., a Kansas-based seed business with special expertise in the discovery and application of wheat germ plasm drawn from around the world.
The acquisition of the Goertzen business from Kenneth and Betty Goertzen was a joint venture initiative of Cargill's flour milling and North American grain divisions. For the past six years, the Goertzen resources have been totally dedicated to breeding wheat of specific quality requirements. The goal is to come up with varieties that have excellent attraction for farmers, while meeting very specific quality targets set by Cargill Flour Milling for its customers.
Mr. Shoemaker said the experimental lines presently being tested have progressed far enough that they are expected to be ready for commercial production in the 2002 wheat crop, which means planting in the fall of 2001.
The initial commercial area is expected to be about 125,000 acres (yielding more than 6 million bus with good weather). Seed will be made available on a contract basis to farmers who will agree to deliver production to designated country elevators where the wheat will be held on an identity-preserved basis for delivery to Cargill mills. Growers will be encouraged to enter into the contract production program by several considerations — competitive pricing of seed; excellent agronomic characteristics for the area where it will be grown; a guaranteed buyer at possibly a small premium, around 10@12c per bu over the market.
Cargill's acquisition in 1999 of Continental Grain Company's grain division provided added resources for gathering wheat from farmers in the initial hard wheat producing region, he noted.
The first hard wheats being developed in this program are designed to assure high quality protein, and are meant for production in south central Kansas and for grinding at Cargill's mills in Newton, Wichita and Wellington. Additional work on hard wheat is focused on growing in Colorado for use by the division's West coast mills.
At the same time, Goertzen has focused on the development of low-protein soft wheat designed to meet the requirements of Cargill's soft flour customers, especially those frustrated by erratic quality in soft flour for cracker and cookie production.
It was obvious that Mr. Shoemaker and Mr. Geisler are well aware of the problems that other millers, as well as seed companies, have had in past efforts to design a workable wheat breeding program along these lines. While acknowledging the problems of similar programs in the past, they voiced confidence in this undertaking because of the proprietary advantages provided by the Goertzen "bank" of germ plasm as well as the long time — at least 10 years — that is needed to develop an acceptable new variety of wheat.
When asked about the possibility of farmers not under contract obtaining the Cargill-developed seed, the two executives said this was not a problem because of the steep innovation curve. They believe they have a process that will have the next generation of better seed available by the time the earlier generation has begun to proliferate.
Regarding the possible impact of hybrid wheat on the Cargill breeding effort, it was pointed out that milling has limited resources to devote to seed development, and that this ruled out experimentation with hybrids. While hybridization of wheat appears to be some time in the future, the Cargill executives did not rule out its eventual occurrance, with the main limit now the cost of hybrid seed to farmers as compared to the expected per-bushel yield improvement.
Similarly, the expected expansion of interest in growing white wheat in Kansas was not seen as a hindrance to the company's own seed development efforts. The qualities that were currently being developed in new hard red and soft wheats could easily be adapted to white wheat, it was noted.
So far as hard spring wheat was concerned, the Cargill breeding program at Goertzen had devoted hardly 10% of its research to this class.
Most of the new wheat grown in the contract program will go to North American Flour Milling, Mr. Shoemaker emphasized. North American Grain's participation in the Goertzen program stemmed from the desire to have these same high quality wheats available for export market development, especially where they were particularly suited for blending with indigenous wheats lacking in the unique qualities promised by the research effort.
Grain officials also have expressed an interest in extending the wheat breeding program to develop grain suited for quite special purposes, such as waxy wheat for use in starch production in countries where wheat fits into this particular need.
Cargill also clearly focuses its breeding efforts on development of varieties that deliver improved value to producers by way of better agronomics, multifunctionality and desirable end use characteristics, all of which improve marketing opportunities.
When it comes to the promise of biotechnology and genetic enhancement, Mr. Shoemaker said that the flour milling group has access to the joint venture named Renessen that has been established by Cargill and Monsanto Co. to explore these very opportunities. He said it is likely that milling will become involved in this work only when one of its baking or other customers makes a specific request for genetic enhancement of wheat to serve a definite goal.
"We will look to our customers for direction in the area of genetically enhanced traits," Mr. Shoemaker stated.
Cargill Flour Milling, both in its U.S. operations and in its overseas mills, manages its own wheat positions and has a team of traders working with Cargill's worldwide wheat marketing group that handles wheat procurement. Though grain merchandising is one of Cargill's foundation businesses, Cargill Flour Milling is heavily dependent on the marketplace, over and above its own infrastructure, for wheat procurement.
"This arrangement works very well for us," Mr. Shoemaker explained, in noting that milling is focused on "variety specific" wheat procurement.
The milling business' wheat procurement is handled by two wheat teams, one located at the Minneapolis headquarters and the other in Kansas City, Missouri, U.S.