Swiss flour milling

by Teresa Acklin
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   With a 50% decline in the number of mills in the past three decades, the Swiss flour milling industry, like its counterparts in other developed countries, has experienced significant consolidation. In 1993, 121 mills operated in Switzerland, down from 240 in 1966, according to International Milling Association statistics.

   Meanwhile, annual milling capacity in 1993 was about 464,300 tonnes, wheat equivalent, basically steady from 465,300 tonnes in 1966. But that comparison masks some wider capacity variations during the period.

   In the four years between 1966 and 1970, annual Swiss milling capacity surged by more than 20,000 tonnes. But in the next 10 years, capacity declined by 32,000 tonnes to 455,800 tonnes in 1980. From that point, capacity began to increase slowly to its 1993 level.

   Currently, 51 Swiss mills, or 43% of all mills, are small, defined as having an annual capacity of up to 500 tonnes; another 51 are medium-sized, or those with capacities between 500 and 6,000 tonnes. The remaining 19 mills each operate with annual capacities in excess of 6,000 tonnes.

   Swiss mills serve a population of about 7 million and generally are dispersed throughout the country. The Swiss Millers' Federation represents 55 milling companies, a membership level that constitutes 76% of the domestic market. The industry also has seven regional federations that cooperate with the national group.

   Vertical integration among Swiss mills is relatively limited, although a few mills hold interests in bakeries or grain importing operations. One notable exception is the Coop-Gruppe, which is involved in production, milling and baking.

   At least 85% of wheat milled in Switzerland is home-grown, as individual mills may import up to 15% of their needs. Imported wheat originates mostly from Canada, France and the United States.

   In the past five years, Switzerland's annual wheat harvest has averaged 570,000 tonnes, and imports have averaged about 161,000 tonnes, according to U.S. Department of Agriculture data. Total use has averaged 799,000 tonnes, of which about 32% is feed use.

   Although the five-year average of ending stocks is 459,000 tonnes, or 57% of use, stocks have been declining steadily in recent years; from a high of 618,000 tonnes in 1989 — 78% of use — stocks at the end of the current season are expected to total fewer than 300,000 tonnes, or 34% of use.

   Switzerland's residents enjoy one of the world's highest per capita incomes. Even though agriculture accounts for under 9% of Switzerland's gross domestic product, it is an important sector for national security reasons.

   Switzerland's constitution includes provisions requiring a level of food self-sufficiency, and the Swiss government historically has been actively involved in most aspects of the industry through the Swiss Grain Administration. This involvement includes buying grain from private farmers and selling to private mills; the government sets the price each year after consultations with the affected parties.

   At the processing and finished product end, prices of flour and bread are determined by the market. But the government monitors these price levels and can order millers and bakers to advise of planned price increases and to justify them from an economic standpoint. The government also has the authority to set temporary maximum price limits on flour and bread.

   No restrictions exist on construction of new commercial mills, although new operators must register with the government and meet several requirements. The requirements include agreeing to hold, maintain and rotate wheat stocks; to buy domestic grain acquired by the government; and to comply with safety regulations.

   In recent years, the government has sought to reduce its costs related to its involvement in the grain industry. In 1990, for example, the government established a cap on the amount of grain eligible for guaranteed purchase from farmers; this cap generally reflects the average amount milled in the previous two years by commercial mills.