Evolution of an Argentine Mill

by Teresa Acklin
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Since its founding in 1853, Molinos Cabodi has emerged as one of Argentina's largest and most modern flour milling companies.

By Yadira Calderon and Eric Schroeder

   One hundred and forty-five years ago, a Frenchman by the name of Don Sebastian Roques traveled thousands of miles across the ocean to establish a horse-driven flour mill near the town of Rojas, Argentina. Two stones pulled by a horse may not have seemed like much, but little did he know that the founding of this mill would begin an evolution into one of Argentina's most important flour milling companies.

   Molinos Cabodi Hnos. S.A., a leader in today's milling industry in Argentina, had a humble beginning. The mill operated under horse-driven power from its founding in 1853 until 1872, when it was converted to steam power and expanded. Then, in 1897, Mr. Roques sold the mill to his son-in-law, Don Juan Cabodi, who, with new partners, added noodle manufacturing to the company's functions.

   Despite a fire that destroyed the mill in 1922, the owners moved forward, immediately rebuilding the mill with new flour and noodle processing equipment from Switzerland. A modern, 170-horsepower diesel engine and metal silos with storage capacity of 3,600 tonnes were constructed in 1936, laying the foundation for further expansion to come. In 1944, the Cabodi family assumed complete ownership of the mill.

   It was in 1948 that the company again expanded, installing 18 mill stands that increased flour production to 1,200 bags a day. In 1957, with a growing facility and an energetic team, the Molinos Cabodi Hnos. S.A. Co. name was established.

   In 1977, 124 years after the establishment of the first mill on site, the current mill began production. What has transpired for the past 20 years has meant continued growth and productivity for Molinos Cabodi.

   In the early 1960s, Julio Cabodi, current president of Molinos Cabodi, and his nephew, Jose Maria Fernandez Cabodi, began to place great emphasis on the gathering and conditioning of wheat and the quality of wheat acquired. The two built underground silos, which were the least expensive silos of the time, with the idea of storing wheat for long periods without moving it. In order to do this, the silo had to be filled, closed hermetically and then left alone as the grain consumed the oxygen.

   Molinos Cabodi was one of the first mills to have the capacity to collect and store all the grain that was to be used throughout the entire year. Even today, the mill can store 130,000 tonnes of wheat, which is a large percentage of the annual grind of 160,000 tonnes.

   The milling industry remained fairly stable for the next 20 years until 1983-84, when the wheat market was liberalized and uncertainty prevailed. With the disappearance of the National Grain Council, millers believed there would be problems receiving and storing grain.

   Jose Maria Fernandez Cabodi, vice-president and active in Molinos Cabodi since 1956, said overcoming this potential problem was made easier by the fact that wheat producers knew they could trust Molinos Cabodi.

   “Trust placed in the company by the wheat suppliers was key to our growth, as was our reputation that we paid them on time and the good service provided by the wheat purchasing department,” said Mr. Cabodi. “The suppliers turned to us then and still do today, three to four months before the harvest, requesting space in our storage areas.”

   Molinos Cabodi has ample storage, and the millers make sure that all wheat suppliers receive a spot. The mill stores the wheat, with producers selling to the mill throughout the year. Cash selling prices are based on prices at the “Pizarra de Buenos Aires,” the Argentine futures market; those prices in turn are influenced by market prices for U.S. hard red winter wheat at the Kansas City Board of Trade.

   “This system has worked for us,” Mr. Cabodi said. “Some suppliers store 20,000 to 30,000 tonnes of wheat without signing any documents. Our word is worth as much as a contract.”

      The Production Process.

   Currently, the Molinos Cabodi facility in Rojas, 260 kilometers northwest of Buenos Aires, is one of the 10 largest mills in Argentina, with a milling capacity of 510 to 530 tonnes per day. The company also has offices in Buenos Aires.

   Each year brings different weather conditions to Argentina's wheat-producing regions, and the mill makes its purchasing decisions after examining wheat quality in the various zones. The search for wheat begins in the region near Rojas to reduce transportation costs.

   Selecting the wheat can often be a delicate job; as recently as two to three years ago, heat and rain in the Rojas area created fungus problems in local supplies, forcing Molinos Cabodi to purchase wheat from areas 200 kilometers away. But the increased transportation cost was offset by the mill's ability to produce and sell higher quality flour, according to Mr. Cabodi.

   The production process at Molinos Cabodi begins with the arrival of the wheat from the best regions. Trucks wait their turn in the specially designed unloading area. A pneumatic sampler is used to make sure that quality control is maintained on each truck and its load.

   Samples are sent to the laboratory, where all incoming raw material, as well as flour production, is tested. Once samples are approved, the trucks are unloaded and the grain is directed to the appropriate silo based on the sample results. The grain is conditioned and protected with cooling equipment to control humidity and temperature and inhibit the growth of live organisms.

   A separate facility that exists on the site is the 10,000 tonne wheat blending silo, one of the most modern in South America. The silo is controlled entirely by computers that operate directly from the laboratory. Whereas many mills blend flour after it is milled to get the specific customer product, Molinos Cabodi uses equipment at the high-tech blending silo to blend the wheat for the desired customer end product. This blending and mixing process is very methodical, and in order to achieve the high quality of end products customers want, a series of well-organized computer steps must be carried out.

   Initially, the silos receive computer commands from the laboratory. The computer then runs various programs to blend the wheat. Each of the silos has a closing valve, and the laboratory inputs information in the computer so the silo opens at a 10% level. This amount is used to create the blend. If a silo runs out of wheat, the computer automatically searches the other silos to look for similar wheat characteristics. If no compatible wheat exists, the blend is automatically stopped to avoid problems.

   A Windows-based computer program also controls all stages of flour production. The program was developed by an Argentinean and was implemented in 1996, simplifying problem solving and increasing efficiency. The company, working with a French milling consultant, in the past three years also has changed the mill diagram to gain greater control over production.

   The Molinos Cabodi mill operates with three shifts, each shift working eight hours per day, Monday through Sunday. The mill is shut down three days a month for maintenance and is closed two weeks a year for fumigation.

   Buhler A.G., Uzwil, Switzerland, supplied most of the equipment at the mill, including the new wheat dampening system. The mill itself is installed in a six-level building and has a pneumatic system complete with the most modern equipment available. A backup stream of energy is available through the output of three MAN diesel motors generating 380 volts with a total of 1,650 kVA.

   The flour bagging plant at the mill has been in operation since 1987. Operating with conveyor belts and three lines loading flour into bags, the plant has a total capacity of 1,000 bags per hour.

   The bulk flour loading plant has evolved alongside the baking industry. The plant has special versatility in quality handling and can load flour at a rate of 60 tonnes per hour. Five trucks are available with specially equipped hoppers to handle the bulk flour loadout.

   Molinos Cabodi produces four basic types of flour. Flour “000,” which has good absorption and development properties, is the highest quality flour and is used for making pan bread and sweet flours. Flour “0000” is another basic flour type and is used for noodle manufacturing. Pre-mixes are also produced at the facility. The pre-mixes have been formulated for manufacturing through a direct system that requires only water, yeast and fat.

   The flour products are produced based on the client's request concerning gluten, ash content and Falling Number. Workers at Molinos Cabodi will not add anything to the flour unless the client specifically requests it. Bakers in Peru, one of the mill's flour export destinations, prefer to have iron added to the flour they purchase.

   By giving the customer only what is required, the Molinos Cabodi mill can eliminate various production steps that are not necessary for the particular product. As a result, processing costs and other expenses are reduced.

      Further Evolution.

   Mr. Cabodi and Juan Carlos Laporta, current chief executive officer of Molinos Cabodi, are quick to point out that the company is not about to be complacent and stand by as new technologies are developed. They fully expect to be a part of the technological advances and market growth.

   “Ten years ago we manufactured three or four types of flour, and it was for baking in general,” said Mr. Cabodi. “Baking now is more detailed. Wholesale bakers often request a specific type of flour, ARCOR (a leading cookie manufacturer) wants a different kind, and in still different conditions, sweet breads need a special flour.”

   One project currently in the planning stages is a flour silo that will have the capacity to store 4,000 tonnes. The company wants to be able to handle different flours and add necessary additives according to customer needs. In order to accomplish this, a new fully-automated flour storage facility will be completed in a year and a half.

   The new flour silo project is economically feasible because Argentina has changed, says Mr. Cabodi. Inflation has disappeared, and it is now possible to make long term plans.

   Interest rates have fallen to as low as 9.5% after being close to 25%, allowing for more investments. With improved investing opportunities, international banks have stepped in and purchased national banks, creating competition that has been extremely positive for the milling industry as a whole and for the country, he says.

   At the same time, the future does not look as bright for some of the smaller mills, Mr. Cabodi said. The milling industry has become more attractive to foreign investors, who are establishing large milling companies in Argentina. This competition has reduced industry margins and is pushing companies such as Molinos Cabodi toward greater efficiencies, while smaller mills are being put up for sale.

   Another benefit that will add to Molinos Cabodi's growth is the development of a dry port in Rojas. The new port will allow for the processing of customs clearance and deliveries. Shipment to Brazil will initiate in Rojas and be transported by train. All paper work, rail car loading and weight control will take place in Rojas, a distinct advantage for the Molinos Cabodi mill.

   According to Mr. Cabodi, the whole process of exporting wheat and flour became a lot easier after Mercosur, the 1991 agreement designed to integrate the economies of Uruguay, Argentina, Brazil and Paraguay. In addition to the opening of markets for goods, capital and labor under Mercosur, Argentina privatized the railroads, which also benefited milling companies.

   Before Mercosur, Molinos Cabodi, as well as many other mills, did not export to Brazil. Tariffs were too high and it was impossible to penetrate the market. Whereas Brazil produced 6 million tonnes of wheat before Mercosur, the number is now down to about 3 million tonnes, while wheat imports have risen from 2 million tonnes to 6 million tonnes in the same time frame.

   With the implementation of Mercosur, Molinos Cabodi began to export 300 tonnes of flour a month to member countries. That figure has increased to 1,500 tonnes per month currently, and mill officials are interested in reaching 2,500 tonnes. Flour is sold to Brazil, Peru and Chile, with Brazil the largest market.

   Better technology and increased demand for wheat quality are a couple of elements that have allowed Molinos Cabodi to expand the amount of wheat it handles and to promote improvements in wheat quality, both for domestic and export markets. The mill is now able to demand the wheat quality it needs and purchase the wheat directly, without dealing with intermediaries.

   Molinos Cabodi is currently in the process of implementing ISO 9000 standards, Good Manufacturing Practices and quality control programs. The process is expected to be completed in about three years.

   “We want to critique the work we do, all concepts involved in production and standardized system for the product,” said Mario Manghi, director of wheat storing and conditioning at Molinos Cabodi. “We took a longer and more difficult route because it should help us. We want everyone involved in the mill to do a better job, we are all responsible and contribute to the final quality of the product. We want to create a level of consciousness in our employees.”

   Yadira Calderon is associate publisher and editor of PanAmericano, World Grain's Spanish language sister publi-cation for the Latin American grain-based foods industry; Eric Schroeder is assistant editor of World Grain.

A look at Argentina

   In South America, Argentina borders the South Atlantic Ocean, between Chile and Uruguay. Buenos Aires is the capital.


   Demography: Population 34,673,000 (1996); Spanish official language; 90% Roman Catholic religion.


   Geography: Total area 2,766,890 square kilometers; mostly temperate climate, arid in southeast.


   Government: Republic: President is Carlos Saul Menem.


   Agriculture: Wheat, maize, sorghum, soybeans and sugar beets are widely produced. Agriculture accounts for 6% of gross domestic product.


   Wheat and flour: About 13 million tonnes of wheat are produced annually and only about 20,000 tonnes are imported; flour production from 1992-94 averaged 3.2 million tonnes per year. Wheat exports are a major source of income for Argentina, and in the past two years total wheat exports have increased from 4.5 million tonnes to 8.7 million tonnes. Maize and other coarse grains have also seen similar increases in exports.


   Economy: Argentina is rich in natural resources and benefits from a highly literate population and a strong export-oriented agricultural sector. Exports have flourished in the past several years because of the formation of Mercosur, including a particularly large increase in demand from Brazil. Likewise, gross domestic product has risen by an average of 6% per year during the years 1991 to 1997. Future economic growth in Argentina will be determined by movements towards increasing production growth and foreign direct investment, as well as lowering interest rates and inflation.


   G.D.P. per capita: U.S.$8,100 (1995 estimate) Currency: Argentine Peso. March 3, 1998 exchange rate: 1 peso per U.S. dollar. Exports: U.S.$20.7 billion (f.o.b., 1995 estimate); meat, wheat, maize.


   Imports: U.S.$19.5 billion (c.i.f., 1995 estimate); machinery and equipment, chemicals.