BEIJING, CHINA — China’s milling sector has become more modern and concentrated in a five-year growth spurt, driven by investment by its biggest players, some of them among the world’s largest processors of wheat. 

The country is the world’s leading producer and consumer of wheat. It is also the world’s leading wheat miller, with more than 2,000 flour mills, including 300 large-scale modern plants, with a total capacity of 240 million tonnes (wheat equivalent) per year.

China’s biggest wheat miller, Wudeli Flour Group, which has 20 mills across the country, is also the world’s largest, with what will soon grow to daily capacity of 80,000 tonnes. In its 2019 annual report, milling machinery manufacturer Bühler highlighted its relationship with Wudeli. 

“By any standards, the growth of Wudeli Flour Group from a family mill to a global manufacturer in just 30 years is impressive,” it said. “Zhiguo Dan was just 17 when he opened his first mill with his sister, brother, and father in 1989. Today, he is president of a company that operates (20) plants with a daily wheat processing capacity of 45,000 tonnes.” It noted that “under existing expansion plans, daily output is set to rise to 80,000 tonnes a day in the coming years, sufficient to supply one-third of China’s flour needs.” 

China’s biggest wheat miller, Wudeli Flour Group, which has 20 mills across the country, is also the world’s largest.

Its growth includes the Sept. 19, 2021, launch of production at its largest single plant, with a daily processing capacity of 6,000 tonnes, at Zhamadian City, Suiping County, in southern Henan Province. The five-story plant houses 347 roll stands supplied by Switzerland-based Bühler, supplier of around 80% of the equipment in the Chinese company’s mills. The total number of staff at the new plant is 250, a number that has been kept down by the use of automated management software. There is concrete storage capacity for up to 150,000 tonnes of wheat. 

The mill is designed to target growing urban demand for wheat-based food in the provinces south of the Yangtze River. Rice is the traditional staple crop in the region. However, Wudeli’s strategy is to locate its mills in grain producing areas, in contrast to some of its competitors, which have found locations close to urban customers. 

The next largest miller is COFCO Group, with daily capacity of 35,000 tonnes, which lists 21 wheat processing plants among the 43 installations belonging to its COFCO Grains division, which it says, on its website, has “developed into a grain and food company with a fully integrated value chain from the field to the table,” from a rice business started in 1952.

Singapore-headquartered Wilmar International Limited has daily wheat processing capacity in China of 35,000 tonnes. 

“Our China business is continuing on its growth plan,” it said in its latest annual report. “In 2022, we added a new edible oil refinery, a crushing plant, flour mills, rice mills, as well as oil, flour and rice packing plants.” 

Wilmar plans to “build multiple integrated food park complexes and site most of them in our integrated manufacturing plants throughout China to address the growing need for efficient and quality food production,” it said. “We will adopt an open approach so that we can attract a broad tenant mix and bring together strategic ingredients suppliers, other food manufacturers and service providers.” 

“The efficiency and scale of this approach will help achieve the synergies of the projects to produce good tasting, safe, consistent quality food products at lower costs,” Wilmar added. 

Chairman and Chief Executive Officer Kuok Khoon Hong said in his message in the report that “our Central Kitchen Food Park project is making good progress.” 

“Three projects, in Hangzhou, Zhoukou and Chongqing, have commenced operations in 2022, while another one in Xingping began operations in January 2023,” he said. “Another two food parks in Langfang and Shenyang will begin operations later this year.”

The daily milling capacity of Jinshahe Noodles Group is about 23,000 tonnes of wheat and a daily production capacity of 5,000 tonnes of noodles. It has more than 6,000 employees. Its headquarters is located in the center of the three provinces of Hebei, Shandong and Henan, giving it, according to its website, access to the “national high-quality wheat production base, which provides the company with high-quality grain sources, ensures the wheat flavor of dried noodles, and has a strong and smooth taste.” 

It names the retailers Wal-Mart, Carrefour, RT-Mart, China Resources Vanguard, and Tesco among its customers, saying it exports to more than 80 countries and regions in Europe, America, Oceania and Africa.

Taken together, the top four milling companies have a daily milling capacity which represents almost 60% of the consumption of wheat in China.

Flour consumption rising

In an annual report on the grains sector dated April 6, the USDA attaché, forecasting a slight increase in wheat consumption for food use in 2023-24, put the proportion of harvested wheat used for flour production each year at around 75%. 

“Wheat flour consumption is directly linked with economic growth,” the USDA said. “With China reopening from COVID, PRC officials are focusing on recovering and expanding consumption.

“Officials recently set the 2023 GDP growth target at 5% which should support industry’s projection that flour mill operation rates increase by 5% to 8% to 48% to 52% of capacity. The diet of many young people in China continues to shift to consumption of more convenient and on-the-go foods such as bread and bakery products, which will continue to drive growth in the coming year.”

Imports will remain above the historical average, as China’s temporary wheat reserve is projected to fall to 35 million tonnes, down 12% year-on-year.

In a July 5 update, the attaché forecast 2023-24 wheat imports at 10 million tonnes, 2 million lower than the USDA’s June estimates, “due to lower projected global supply.” The report pointed out that China’s 2022-23 “wheat imports of close to 14 million tonnes significantly exceed the 9.636-million-tonne tariff rate quota (TRQ) that is part of the country’s World Trade Organization accession commitment,” adding that “more than 40% of the imported wheat is from Australia as of now.”

Imports will remain above the historical average, as China’s temporary wheat reserve is projected to fall to 35 million tonnes, down 12% year-on-year, the report said. 

“The PRC (People’s Republic of China) didn’t use the wheat Minimum Support Program (MSP) procurement in the past three years due to strong domestic wheat prices, and sources report that authorities are eager to replenish storage levels as grain security remains a top priority,” the USDA attaché said.

“Most of the imported wheat is of higher quality and destined for flour production, and only a small percentage goes to feed mills,” the USDA added. “Current prices are favorable for imports; June quotes for July-October delivery of US soft red winter wheat (SRW) are $50 (RMB 350) per tonne cheaper than domestic wheat while US hard red winter wheat (HRW) are $21 (RMB 150) per tonne more expensive. Both are popular varieties in China for flour mills to blend into high-end products or for bakery.”

The attaché also forecast 2023-24 ending stocks at 139.7 million tonnes. 

“The industry believes China’s MSP wheat reserves are depleting quickly, but that overall government reserves are sufficient,” the report said.

Feed milling

Looking at maize feed, the report said corn consumption in feed is forecast to increase slightly in 2023-24, adding that “the ratio of corn in feed rations is expected to increase again from the previous year.”

“Low swine and pork prices in 2022 and the first half of 2023 have contributed to increased slaughter and declines in hog inventories,” the USDA attaché said. “MARA (Ministry of Agriculture and Rural Affairs) noted that in the first four months of 2023 there was a 9% year-on-year growth in slaughter. Due to these factors, FAS China forecasts marginal increase in pork production in 2023.” 

China’s feed industry has been importing large quantities of grain from Ukraine.

It added that trade data suggests that PRC chicken exports may remain steady in 2023 compared to 2022.

“Global highly pathogenic avian influenza (HPAI) outbreaks and the PRC’s HPAI restrictions are expected to impact imports of white feather broiler genetics, which may hamper domestic white feather broiler production in 2023,” the attaché said.

China’s feed industry has been importing large quantities of grain from Ukraine, according to a June 23 attaché report. Citing information published by the United Nations Joint Coordination Centre, it said that “as of June 20, approximately one-quarter of all grain and oilseed volumes shipped under the Black Sea Grain Initiative (BSGI) were destined for the People’s Republic of China (PRC), making it the single largest recipient of food and feed commodities.”

“Under the plan, which allows for commercial food and fertilizer exports from eligible Ukrainian ports, approximately 32.1 million tonnes of food and feed grains and oilseeds have shipped to world markets,” it said. “Of this volume, over 7.2 million tonnes were shipped to China, including 5.6 million tonnes of corn, 1.8 million tonnes of sunflower seed meal, 370,000 tonnes of sunflower oil, and 340,000 tonnes of barley.”

Chris Lyddon is World Grain’s European correspondent. He may be contacted at: [email protected].