Millers gather in Middle East

by David McKee
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One of the world’s premier wheat milling industry events, the 2012 IAOM Mideast and Africa Conference and Expo, was held Dec. 5-8 in the cavernous, ultra-modern Abu Dhabi National Exhibition Center. The 23rd version of the highly anticipated trade show was a resounding success in the newly opened facility, with booth space and registration slots selling out well in advance.
Over the three days more than 600 participants from companies and organizations based in 51 countries visited the 100 exhibitors from 26 countries and sat through management and educational sessions featuring nearly 36 speakers on topics ranging from innovations in milling to the global economy and leadership skills.
Old friendships were renewed and new relationships initiated at the conference’s dinners, lunches and coffee breaks, generously sponsored by leading players in the international wheat industry.
On behalf of the joint hosts, H.E. Rashed Mubarak Al Hajeri chairman of the Abu Dhabi Food Control Authority, gave the welcoming address and Agthia Group’s CEO, Ilias Assimakopoulous, closed the proceedings.

EXHIBITION
Exhibitors covered all sectors from grain traders to manufacturers of packaging machinery but included a large core group of mill manufacturers. The strong presence of a dozen steel silo companies reflected the trend of several years running for private grain millers and government organizations in the world’s number one wheat importing region to enlarge their storage capacity in response to the increasing precariousness of supply and price volatility.
Similarly, rising dependence on wheat of variable quality from the Black Sea countries and more recently India and Pakistan has led to greater demand for flour additives which were offered by another 12 firms exhibiting this year. Many of these same companies also offer vitamin and mineral premixes since most Middle Eastern countries have embraced mandatory flour fortification as a public health measure.
Companies and organizations from six continents displayed products and services. As in the past, Turkish suppliers accounted for one quarter of all booth space. Twenty European firms, half of them German, were the second largest contingent. A new trend is the larger number of exhibitors from companies in the region besides Turkey. This year there were 11 including six from the United Arab Emirates, the host country.

TRADING SESSION
The speakers at the trading session on the final day enjoyed an especially large audience as millers sought to understand the circumstances surrounding the sudden spike in wheat prices again this year and the relentless market volatility of the past five years.
Six speakers focused on six major grain exporting countries and regions, all of which supply wheat to the Middle East and Africa with Bill Tierney, chief economist of AgResources, as moderator. In his own presentation on the global market outlook, Tierney focused on the “historic decline in wheat production and historic decline in stocks.” He emphasized that “essentially there is no stocks cushion to stop prices from moving sharply higher.”
Countries are depleting their stocks through exports, said Tierney, citing USDA’s forecast that India will export 6 million tonnes of wheat this year. “If E.U. wheat exports do not slow down, the E.U. will have to import more corn to replace wheat for feed.”
Swithun Still, director and senior trader of Solaris Commodities, Switzerland, covered the Black Sea countries, which in the last decade have emerged as a vital supplier of wheat to Middle East and African countries, after being a net grain importer during most of the 1980s and much of the 1990s.
“Egypt is almost a captive market for Russia,” Still noted. “It is almost a symbiotic relationship. Russia needs Egypt’s market, and Egypt needs Russian wheat.”
After exporting 26 million tonnes in 2011-12, Russia exported only 9 million tonnes through the first 11 months of 2012, with a maximum of 2 million tonnes expected in the final month. “Russia’s domestic price is now more attractive than the export price,” Still said, adding that ice and cold weather hinder logistics in the Black Sea, so that exports could slow even further.
Neither Russia nor Ukraine will outright ban exports as happened in 2010, but Ukraine could take “unofficial measures” to slow the outflow, he predicted.
Despite harvest shortfalls in two of the last three years, “it is expected and hoped that RKU (Russian, Kazakhstan and Ukraine) will be the world’s number one grain exporter during 2020-40,” Still said.
Nick Poutney, GrainCorp regional manager, presented the crop picture in his country. “Australia has done a lot of work in terms of making its export program more efficient in the last few years,” he said, noting that in 2011-12 wheat exports were a record 27 million tonnes out of a record 29-million-tonne crop. For 2012-13, his company’s crop estimate was for a more normal 20.3 million tonnes but with a higher share of milling quality.
Port grain terminal operators “will be allowed to sell up to 60% of port capacity up to three years in advance. Up to now it was only one year,” Poutney said. This will encourage investments in rail infrastructure, helping to relieve transportation bottlenecks, he said.
Returning to the theme of crop shortages, Jean-Benoit Gauthier of the Canadian Wheat Board (CWB) said that precipitation in Canada for the new crop is only 40% to 50% of normal, and Ontario is the only production area in the country that did not encounter major weather problems.
Though it has lost its monopoly on exports of wheat from the Canadian prairie provinces, CWB still operates 130 wheat purchasing stations and remains a key partner for many wheat growers, Gauthier told the audience.
Nebraska grain grower Dan Hughes, vice-chairman of U.S. Wheat Associates, touched upon the critical shortage of ground moisture, particularly due to lack of snow in much of the central Midwest and especially in his home state. However, he emphasized that “the U.S. wheat store is always open,” and he repeated the familiar U.S. Wheat refrain of “contract sanctity, market competition, transparent pricing and assured quality,” as reasons to buy American wheat.
Hughes encouraged the millers of the region to use higher priced but better quality wheat from the U.S. to blend with low-cost wheat from other origins to obtain the best possible price-to-quality mix, an argument developed in depth by Peter Lloyd, regional technical director of U.S. Wheat, during the educational session. Mark Samson, regional vice-president of U.S. Wheat, showed his country’s share of Middle East and Africa wheat imports at around 5% of a total of 37 million tonnes.
Moving on to Europe, there has been an increase of exports outside of the E.U. at the expense of intra-E.U. trade, noted Francois Gatel, director of France Export Cereales.
“Wheat is by far the largest crop in France with about 10 percent of all area, or roughly 5 million hectares,” he explained. French wheat yield was 7.4 tonnes per hectare in 2012 thanks to “high spring temperatures, a long growth period and an oceanic climate with a high spring temperature but not too hot summer.”
France ranks number five as a world wheat exporter with 11 million tonnes, half of which went to Algeria and Morocco in the most recent year.
Glencore trader Joost Viehoff introduced the South American crop situation which was very unclear at conference time. Every year a certain share of Argentina’s and Brazil’s wheat exports is delivered to ports in southern and east Africa and the Middle East. Brazil, at 7 million tonnes per year, is one of the world’s top wheat importers, but it nevertheless exported 500,000 tonnes to Iran in 2012.
Viehoff explained that exports are possible due to the different quality needed by mills at different times, adding that much of Brazil’s production is feed wheat quality.
The first day, Indrek Aigro of Copenhagen Merchants, Denmark, discussed how the Baltic region, including the former Soviet states of Estonia, Latvia and Ltihuania as well as Poland and northern Germany, had become a major wheat surplus zone.
IAOM MEA’s growing emphasis on management issues came out in the initial topics of the day. Hedging solutions were presented by Dr. Abedlatif Abada of Morgan Stanley, UAE. On this theme, Tierney suggested that millers cover some of their purchase risk with options contracts whose prices are unexplainably very low in relation to the current market volatility.
Former GAFTA President Wayne Bacon gave a talk entitled “The Hidden Contract,” focusing on the GAFTA 27 rules which form a part of every grain contract. They are “very seller biased, so buyers really have to understand what their risks are.”
Participants were pleased by the continuously refined formula of the conference.
“I have attended since the second one in Yemen, where there were 200 people,” said Mustafa Mustafa, group head of milling for Dangote Flour Mills, Nigeria. “It has been very good for my professional development as it has kept me up to date year by year about innovations. I appreciate the addition of managerial issues to the program.”
In his closing remarks, Assimakopoulous of Agthia Group congratulated IAOM for the “diverse and valuable insights from some of the industry’s most esteemed and influential professionals.” He then handed over the IAOM MEA banner to the Kamel Belkhiria, president of La Rose Blanche Group, Tunisia, where the 24th annual conference will take place Nov. 5-8, 2013 in the Mediterranean city of Sousse.
David McKee’s grain industry consultancy, Key International LLC, provides market research, feasibility analysis, technical studies and project guidance to companies and organizations. He can be reached at davidmckee59@msn.com.



IAOM Latin America District holds conference following ALIM
The International Association of Operative Millers (IAOM) Latin America District held its 36th annual technical conference Nov. 15-16 in Meridia, Yucatan, Mexico, with more than 50 millers from 11 countries attending the event at the Fiesta American Hotel. The conference was held immediately following the 30th annual Latin American Millers Association (ALIM) meeting.
The first day featured a pre-conference workshop on operational processes and applied technologies in grain processing. Andrea Saturno, president of FUNDAUNIPAP, a management consulting company, led the workshop.
Among the workshop topics were pre-cleaning, receiving, tempering, milling and aspiration. The millers took advantage of the opportunity to ask specific questions about their own operations and learn more about the various technologies available to make operations more efficient.
During the morning of the workshop, IAOM attendees were able to tour the ALIM expo as well.
The second day of the district meeting featured technical presentations coupled with presentations on new tools and technologies during the “What’s New” session. Presentations were on the U.S. wheat crop report, durum wheat milling, enhancing flour baking properties with enzymes, lateral detection of mycotoxins, the importance of laboratories to the industry and key performance indicators in flour milling.
Attendees had the chance to network during a reception on the first evening of the event.
The 2013 conference is being planned for Nov. 16-17 in Lima, Peru.


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