Spain's accession to the European Union in 1986 as well as devaluation of its currency in recent years have resulted in some changes to its agricultural economy.
Agricultural policy. In the nine years since becoming a member of the E.U., Spain's agricultural policies gradually have been harmonized to comply with the Common Agricultural Policy. During this period, Spain has seen some crop production patterns shift as farmers reacted to program incentives that favored certain crops over others.
For example, the area planted to wheat has declined by about 25% since the early 1980s, while oilseeds area has increased by about 50%. E.U. agricultural support policies encouraged this trend.
Since 1990, Spain has imported an average of 1.25 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. France and the U.K. are the primary sources of these imports.
Encouraged by increases in area-based payments and relatively high intervention prices, Spanish farmers in recent years increased the area planted to durum. Production from 1992 to 1994 averaged slightly more than 1 million tonnes a year; some 70% to 80% of production is exported as semolina, primarily to North African customers.
In 1993, the E.U. established an area quota of 550,000 ha on Spanish durum plantings; area in excess of that level is not eligible for compensation. Consequently, the increases in durum area and production were curbed, and future expansion is not expected.
Feed market patterns also have been affected. The use of imported non-grain feed ingredients, in particular, has increased steadily as prices have become competive with barley, the traditional domestic grain used for feed. For example, in calendar 1993, Spain imported about 2.3 million tonnes of these ingredients, up 80,000 from the previous year.
Spain's devaluation of the peseta in the past two years also has affected agriculture. Even though E.U. support prices, in terms of ECUs, have declined under CAP reform, payments to Spanish farmers have increased in pesetas because of the devaluation. This has tended to more than offset higher input prices, particularly for imported fertilizers, and has made Spanish farming somewhat more profitable.
Flour milling. Spanish milling has experienced some consolidation over the years, but 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 varied 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.
Capacity contracted by 42% during the 1970s, to 6.9 million as of 1980. But the next decade saw capacity increase again, to 8.5 million tonnes in 1990. By 1993, Spain's annual milling capacity was 9.1 tonnes.
Meanwhile, Spain's flour production in recent years 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 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%, each 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, with 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 form of consumption. 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 to medium sized 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 Spain's milling industry because of high transportation costs. For example, transporation costs account for about 50% of the gross profit on a tonne of flour, while manufacturing costs account for only 15%.
Spanish millers also are concerned 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 reportedly has plummeted to 150,000 hectares from 750,000 ha in the past 10 years.
Spain has an active milling association, the Asociacion de Farbicantes de Harina de Espana. A total of 352 mills, accounting for 91% of the country's operating mills, belongs to the organization. The group includes a standing committee selected to assure a representative balance among Spain's regions and different mill sizes.
Agricultural trade. As with agricultural policy, Spain over time has harmonized its trade policies, duties and import restrictions with those of its fellow E.U. members. But some import restrictions imposed by other members on Spanish products, particularly horticultural goods, are being phased out over a longer period and will not be totally removed until 1996.