Wheat and flour milling in Brazil

by Teresa Acklin
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By Daniel Rachman

   Wheat consumption in Brazil is 8 million tonnes a year, with 5.5 million imported and 2.5 million domestic wheat. The primary source of imported wheat is Argentina, with the remainer imported mostly from Canada and the United States.

   Brazilian wheat is the soft variety and is grown in the southern part of the country. For breadmaking, mills blend domestic wheat with stronger imported wheat. Annual per capita consumption of wheat is 50 kilograms; this is lower than consumption in other Latin American countries, but traditional sources of carbohydrates in the Brazilian diet are maize, rice and manioc.

   The milling industry today consists of 235 mills, and of this total, 180 each have daily capacities of 50 tonnes or fewer. These small mills are located in rural areas near the wheat production areas, and their milling activity is irregular and depends on the volume of wheat available from the annual harvest.

   Of the other 55 mills, 15 each have daily capacities of 200 to 300 tonnes, 20 have capacities of 300 to 500 tonnes, and the remaining 20 are larger than 500 tonnes per day. These larger plants are located near major population areas, principally in ports for ready access to imported wheat at minimal transporation cost. The total installed capacity of these larger mills is approximately 11.5 million tonnes a year, of which 30% is excess capacity.

   As in other countries, the past two decades have seen a tendency for smaller mills to disappear because of competitive factors. Three main milling groups currently account for 46% of Brazil's total milling activity, and vertical integration of milling groups is relatively slight. ABITRIGO is the association representing the industrial milling sector.

   For more than two decades, Brazil's milling sector was under strict governmental control. The state monopoly was responsible for all wheat buying and distributed wheat to the mills at the same price, regardless of location or wheat quality. In addition, mills had a fixed quota to assure participation of all enterprises in the market, and flour prices were controlled by the state.

   The system also established that mills could only make two types of flour:

   • “Special” flour, with an ash content of 0.50%, which represented no more than 40% of total flour production; and

   • common flour, the remaining fraction that was unregulated regarding ash content.

   This situation existed until 1991, when the entire wheat industry was privatized.

   The free market has led to the development of new products and new mill construction. The milling industry also underwent a process of renovation and expansion of capacity to maintain competitiveness. Modernization of ports, including privatization of their operations, also plays an important role.

   Flour consumers have become more demanding, and international consortiums and investor groups have entered the market for crackers, noodles and industrial baked products. The freedom to select and use varying wheat qualities has enabled the mills to offer adequate qualities to their customers.

   The largest market for flour is for bakery use. This market represents 55% of the country's total flour consumption.

   In this market, 95% of the activity is artisan baking, producing bread of 50 grams called French bread, and 5% is industrial baking. The artisan baking sector consumes as much flour as premix for breadmaking.

   Lifestyle changes in the big cities have signaled an increase of bakeries found in large stores and supermarkets. An increase in the consumption of industrialized pan bread also has been seen.

   Brazil's second leading market is the noodle industry, followed by cookie manufacturing. These segments combined represent 25% of total usage of flour in Brazil.

   Noodle production in 1996 was estimated at 900,000 tonnes, which translates into per capita consumption of about 5.36 kilograms. In most cases, noodles are made with a white, high-gluten wheat flour, not with durum wheat semolina. But in the past three years, a market for imported noodles made with durum semolina has developed, and the first durum mill has been installed.

   The cookie industry has grown dramatically since the implementation of the economic stabilization plan, the Plano Real, in 1994. International groups have purchased local industries, and have demanded specific flours based on international standards. Brazilian cookie production is about 700,000 tonnes per year or 4.4 kilograms per capita.

   Finally, flour for domestic use represents 20% of the market. Home flour is mainly used to bake pastries or for homemade bread in some regions.This flour can be leavened, enriched or pure.

   Brazil's milling industry today needs investments in order to be competitive. Increased wheat storage availability and mechanization of the mills are the key points to improving flexibility, permitting mills to fulfill clients' needs. Another challenge is the development of domestic wheat adequate for industrial use, enabling mills to originate grain with the needed qualities.

   Daniel Rachman is technology manager for Santista Alimentos, Sao Paulo, Brazil. This article is based on his presentation at the March 1997 PANamericano conference in Mexico City, sponsored by World Grain's sister publication, Milling & Baking News.