Flour milling in Scandinavia
July 01, 1993
by Teresa Acklin
Scandinavia consists of three countries Sweden, Norway and Denmark and they are closely related. Similar languages enable easy communications, and open national borders mean citizens can move freely among the countries for recreation, education or employment.
Even though people may move easily among the Scandinavian countries, goods and agricultural products face strict custom barriers. As a member of the European Community, Denmark and its trade are governed by E.C. rules, and its agriculture is regulated through the Common Agricultural Policy. Norway and Sweden are not members of the E.C., but are members of the European Free Trade Association, which does not coordinate the agricultural policy of its member states. As a result, Norway and Sweden have very distinct agricultural policies, each of which is different from that of Denmark.
In Sweden and Norway, the food industries in general, and the flour milling industries in particular, are nationally focused. Consequently, practically no flour is imported to or exported from Sweden and Norway.
Denmark's flour milling industry functions within the E.C. framework, and the movement of flour between Denmark and other E.C. members varies according to changing competition. In 1992, about 8% of flour consumed in Denmark came from Germany.
The flour milling industry in Sweden is not regulated by the government. It is a free industry operating in an isolated domestic grain market. Swedish-grown grain is protected by heavy duties on imported grain, and 93% of all grain used by the Swedish flour milling industry is domestic. Only some high-protein bread wheat and durum wheat are imported by the flour milling industry from Canada and the U.S.
The import duties also cover flour and flour-based products. No flour is imported, and imports of flour-based food products are insignificant.
Sweden's flour exports are subject to an export restitution that relates to the import duties on grain. However, because there are no nearby open markets, flour traditionally has not been exported on a regular basis.
In 1989, the Swedish parliament decided to abolish all agricultural regulations over a five-year period, including all export subsidies on agricultural goods. This decision received broad political acceptance and was supported by Swedish farmers.
To protect Swedish farmers and industry, import barriers will be retained on goods subject to export subsidies by other governments. The import barriers eventually will be discontinued to conform to agricultural trade rules negotiated in the Uruguay Round.
Sweden applied for E.C. membership in 1990, and formal negotiations are under way. The pending status of Sweden's E.C. membership and the Uruguay Round's unclear outcome have delayed the Swedish deregulation program. At the same time, the C.A.P. is undergoing revision and restructuring. This situation has created some uncertainty for Sweden's farmers and agro industries regarding the rules that will apply in the future.
Baking in Sweden is highly industrialized, with industrial bakeries using more than 50% of all flour in Sweden. Home baking also is significant, and a total of 22% of all flour is household flour.
Sweden's flour milling industry is competitive, and consolidation has been substantial since World War II. Today, nine industrial milling companies operate 14 mills, and about 75% of total milling capacity is integrated with industrial baking activities. Sweden's high labor costs have forced the milling industry to become labor-efficient, and most mills are computerized, running partly without human supervision.
The pressures from competition and high labor costs have enhanced the relative efficiency of the Swedish flour milling industry. Because of that efficiency and Sweden's somewhat isolated geographical location, the industry does not expect any major changes in the business climate if Sweden one day enters the E.C.
The flour milling industry in Norway is regulated in the sense that grains can be traded legally only by the state. The system has its origin in the depressions after World War I and in the fact that historically, only very little of the grain needed could be grown in Norway because of climatic and other natural reasons.
As a result, grain procurement during most of this century has been regarded as a state security issue and is controlled by a public-sector monopoly. The state agency, Statens Kornforetning (Statkorn), handles all grains in Norway.
For many years, only about 10% to 15% of the food grains (wheat and rye) needed in Norway was grown domestically. Now, domestically grown grain represents up to 50% of the needed supply. The increase was spurred by modern production methods and high support prices paid to farmers about three times the world market price and about double the price paid to farmers in the E.C. and in Sweden. Canada, the U.S., Sweden and the E.C. are the main suppliers of Norway's food grain imports.
The flour mills in Norway cannot buy grain from Statkorn and become owners of grain. Instead, they operate under a toll milling contract with Statkorn.
Statkorn supplies grain to the mills, which negotiate the toll for milling and transportation with Statkorn. The mills sell flour and byproducts to bakers, the food industry, retailers and feed manufacturers on behalf of Statkorn and at prices set by Statkorn. Some 40 days later, payment for the sold quantities is sent to Statkorn minus the toll. The mills assume the risk of bad debts.
Milling in Norway always has been mostly industrial, based on the country's reliance on imported grain. Historically, very little small-scale flour milling occurred because of the lack of locally grown supplies. The milling industry today consists of nine industrial mills located close to harbor areas. The industry's structure has changed little over the years, and only one mill has been closed over the past couple of decades.
Norway's milling industry operates under three commercial groupings. Mollesentralen I/S in Oslo is a jointly owned sales company for the five private mills in eastern Norway and covers eastern Norway. Stormollen A/S in Bergen, which is a state controlled company, operates three mills along the west coast and covers western Norway. Nordkronen A/S in Stavanger, with one mill, is owned by the consumer cooperative and supplies flour to most of the cooperative shops and bakeries throughout Norway. Statkorn distributes flour to the northern part of Norway, and production of that flour is allotted to all the Norwegian flour mills.
Because of this system, Norway's flour mills are not in fierce competition, as are mills in most other European countries. Still, the Norwegian milling industry is very up-to-date. All mills are computerized and most run without human supervision. There are many reasons for this: tough supervision from Statkorn, very high labor costs and the historic industrial orientation of the milling industry.
Norway's baking industry is less industrialized than in Sweden. One reason is that Norway's population is dispersed in mountainous terrain, and road transportation is difficult. Home baking is popular, and 30% of all flour in Norway is sold in consumer retail packing.
Norway has not applied for membership in the E.C., but a national debate is ongoing over whether the country should apply. If Norway were to harmonize itself to the E.C.'s present rules, the one sector that would face very fundamental adjustments is farming. Steep reductions in, or elimination of, existing farm supports would be required, and given the unfavorable growing conditions, the cuts would devastate the farming community. However, as the future of the C.A.P. is debated, it is possible policies could be developed to accommodate regional differences in production capability.
Whereas the future of the farming sector is uncertain if Norway enters the E.C., the flour milling industry probably would adjust well in the more-competitive environment. The mills' location in harbor areas would provide for processing of grain imports, and the milling industry itself is reasonably efficient.
Denmark is fully integrated in the E.C., and the conditions for the Danish flour milling industry do not differ much from those in Germany or in other northern E.C. nations.
Denmark is a rich agricultural country with ample grain production. Because most grain, including wheat, is used for feed, most of the wheat grown in Denmark consists of feed wheat varieties. Denmark imports about 20% of its milling-wheat needs mainly from other E.C. countries. Apart from the aspect of quality, the earlier harvest in the southern E.C. makes it economical for Danish mills to import from France and also Spain.
Baking of wheat bread in Denmark is dominated by small bakeries, and Danes appreciate tasty, fresh and crusty bread. Small bake shops in Denmark are open on Sunday mornings, and the bakers typically close on Mondays. However, baking of rye bread, as well as cakes, is highly industrialized. Cake manufacturing is a large Danish export industry, and Danish butter cookies can be found throughout the world. The industrial bakeries take a total of 55% of all flour in Denmark, the small bakeries 28%, and 17% is household flour.
Flour milling in Denmark, as in the rest of the E.C., is very competitive. Today, 10 mills remain operating, and further mills may be closed. Consolidation has been substantial, and 95% of the milling industry is controlled by two companies, Havnemöllerne A/S and Valsemöllen A/S. Havnemöllerne A/S is a subsidiary of the major Swedish milling company Nord Mills AB, which is owned by the Swedish farmers cooperative. Valsemöllen A/S is part of the Swedish private milling group Abdon Mills.
The C.A.P. in 1993 will undergo substantial reforms, and subsidies to farmers will be reduced dramatically. The price levels of E.C. grains harvested in 1993 also will be lowered dramatically, and they will come much closer to world market levels. Gradually, only the most efficient farmers will survive. The effects are designed to be the same in all E.C. countries, so that there should be no changes in the competitive balances among the E.C. countries, their farmers and agri industries.
By Rolf Abdon, Abdon Flour Mills, Helsingborg, Sweden.Grind, production, import and export figures in tonnes (1991 data)
|No. of mills||14|
|Annual wheat grind||547,000|
|Percentage of wheat imported||7|
|Annual wheat flour production||450,000|
|Wheat flour exports||32,000|
|Wheat flour imports||2,000|
|Domestic flour use:|
| ||Industrial and small bakeries||70%|
|Annual per capita flour consumption||60.6 kg|
|No. of mills||10|
|Annual wheat grind||361,000|
|Percentage wheat imported||20|
|Annual wheat flour production||263,581|
|Wheat flour exports||3,992|
|Wheat flour imports||25,583|
|Domestic flour use:|
| ||Industrial bakeries||55%|
|Annual per capita flour consumption||62.4 kg|
|No. of mills||9|
|Annual wheat grind||318,500|
|Percentage wheat imported||50|
|Annual wheat flour production||255,900|
|Wheat flour exports||n/a|
|Wheat flour imports||n/a|
|Domestic flour use:|
| ||Industrial bakeries||70%|
|Annual per capita flour consumption||70 kg|
|Source: International Milling Association.|