Dan Basse of AgResource Company speaks during a panel discussion at the IAOM MEA Conference in Addis Ababa, Ethiopia.
Photo courtesy: IAOM MEA
Photo courtesy: IAOM MEA
Representatives of many of the Ethiopian Millers Association’s 350 member companies were able to enjoy unprecedented contacts with leading global technical experts, traders and equipment suppliers. The country’s milling sector has been steadily industrializing to cope with 20 million tonnes of annual cereals production. A record 2 million tonnes of wheat imports came into the country in 2016 to compensate for the drop in domestic cereals production due to the worst drought in decades.
Africa Panel
The milling industry’s challenge of feeding economically growing African countries was the theme of the opening panel discussion.
“Africa is number two in the rate of wheat consumption growth after Southeast Asia,” said Dan Basse of AgResource Company. “Sub-Saharan African demand is increasing the most. Average caloric intake of rest of the world is leveling off, but Africa is still increasing.”
He added, “The world on average needs 1.8% more food per year but is producing 2.8% more.”
Panel moderator Martin Schlauri, managing director of Bühler’s African Milling School in Nairobi, pointed out that 70% of the grain used by East Africa’s industrial millers is imported, and milling to feed the region’s 330 million people accounts for nearly one-third of electricity consumption.
Abubakar Bakhresa, executive director of Said Salim Bakhresa & Co. Ltd., the region’s dominant milling group, commented on the need to upgrade skills.
“We used to send millers to Mysore, India or Europe for training but now can we send them to Nairobi,” he said. “We are sending millers from all our mills.”
The key to efficiency is standardization of operations, observed Nick Hutchinson, group managing director of Unga Holding.
“We must introduce ways to measure efficiency,” he said. “Another challenge is maintenance. We need competent people.”
Local grain supply also was discussed. Esubalew Kefale of Ethiopian biscuit producer Ahadukes Food Products observed that in Ethiopia wheat is not segregated well in the marketplace.
“It is difficult to maintain quality standards,” Kefale said. “Biscuits need two types of grain quality. The flour millers’ association is providing training but the problem is raw material.”
Government Intervention
Brad Allen of Ardent Mills speaks at the IAOM Conference.
Photo courtesy: IAOM MEA
Photo courtesy: IAOM MEA
Mohamed Reza Mortazavi, director of the Iranian Federation of Food Industries, said that in 2012 there was a brief period of market liberalization allowing millers to buy 80% of the wheat crop, but that since 2013, an election year, Iran’s government has been buying 85% of the wheat crop at above- market prices, including 11.5 million tonnes of wheat from this year’s bumper crop. Farmers received $375 per tonne while government allocates the wheat at just over half that price to millers in order to keep bread and pasta prices low. Including 5 million tonnes of carryover, government stocks are at 16.5 million tonnes. But the country only needs 8 million tonnes for subsidized bread and 2 million tonnes for pasta.
Essa Al Ghurair, chairman of Essa Al-Ghurair Investments, LLC, cited Egypt’s introduction of debit cards for social welfare recipients to replace heavily subsidized bread. Beneficiaries are happy to be able to buy higher quality baked goods or cooking oil. The innovation may reduce wheat consumption and wastage in the wheat import-dependent country.
Gunhan Ulusoy, chairman of the Turkish Federation of Flour Industrialists, remarked that cereals purchases and sales by the Turkish Grain Board vary according to crops and markets but are limited in most years to 2 million to 3 million tonnes, depending on the need to support farmgate prices. Turkey’s position as the world’s number one wheat flour exporter has mostly to do with logistical convenience of importing low-cost Russian wheat and a highly-efficient milling sector. Half of Turkey’s 3 million tonnes of flour exports are going to strife-torn Iraq and Syria, he said.
In Lebanon, wheat imports and wheat flour sales are mostly on a free market basis, said Patricia Bakalian, CEO of Bakalian Flour Mills. However, the government has intervened in the past to subsidize flour prices when world wheat prices have spiked.
Overabundance of Wheat
From left, Merzad Jamshidi, KFF Mills; Essa Al Ghurair, Essa Al Ghurair Investments; and Dr. Mebrahtu Meles, Ethiopia's state minister for industry.
Photo courtesy: IAOM MEA
Photo courtesy: IAOM MEA
Russia, with a 70-millon-tonne wheat crop, has displaced Canada and the U.S. as the top wheat supplier to the world. Global wheat prices are now set in the Black Sea, not the U.S. Gulf.
The U.S. had “practically perfect planting and harvesting conditions” said Ian Flag, regional director of U.S. Wheat Associates. “U.S. supply is 17% above the 10-year average.” HRW carryover stocks of 29.5 million tonnes are nearly a record.
Low world prices mean that Australian wheat growers will store their crop longer than usual, commented Nick Poutney, regional manager for GrainCorp.
“They will not plant as much next season,” he said. “There is a large increase in take-out of pulses in rotation. Crop size is getting large enough so bulk vessels shipments instead of container loads will become feasible.”
In contrast to other leading export origins, both France and the Baltic region saw smaller crops.
“There is a big lack of wheat in France,” Jean-Pierre Langlois-Berthelot of France Export Cereales informed the gathering. “Production of 28.2 million tonnes of milling wheat is 24% below the average. Usually the country exports more than 50% of its crop. There is a lot less wheat to export this year than in other countries.
“In France, everything went wrong in May. The cycle of vegetation of wheat was totally disrupted by rain. Average yield was 7.5 tonnes. Low radiation meant unusually low test weights. The average is 45 grams per 1,000 kernels but this year’s crop is only 37 grams. High ash content is unusual as well.”
Langlois-Berthelot also predicted that due to the low French yields combined with depressed prices from the global glut, half of French wheat growers could go bankrupt without a French government or E.U. rescue.
Indrek Aigro of Copenhagen Merchants, Denmark, noted that a cold February resulted in winter kill in Baltics.
“There is 5 million tonnes smaller production so we will have 5 million fewer tonnes of exports,” he said. “There is a loss of 7 million tonnes of quality milling wheat. There is only 9 million tonnes of milling quality wheat compared to 14.5 million tonnes last year, so 5.5 million tonnes less.”
Next years event in Dubai
In his welcome speech, IAOM regional director Ali Habaj explained a revamping of the IAOM MEA website to provide a platform for new and used machinery and employment opportunities in the sector. The postings will be in English, Arabic and Persian.
Habaj announced a return to Dubai, United Arab Emirates as the site of the 28th IAOM MEA Conference and Expo in the fall of 2017.
David McKee’s grain industry consultancy, Key International LLC, provides market research, feasibility analysis, technical studies and project guidance to companies and organizations. He may be reached a t[email protected].
||| Next page: Ethiopia's Italian connection |||
Ethiopia’s Italian connection
Ocrim CEO Alberto Antolini (right) with Alessandro Milan, a famous Radio 24 journalist, who moderated the event from Ocrim’s headquarters in Cremona, Italy.
Photo courtesy: Ocrim
Photo courtesy: Ocrim
Ocrim SpA, the Italian embassy, and the Ethiopian Millers Association co-sponsored a gathering that drew more than 200 participants and included a live video conference with a panel of Italian food entrepreneurs in Cremona. Sergio Antolini, vice-president of Ocrim, noted that his company has been in Ethiopia for 35 years, having supplied many of the first industrial wheat mills in the country.
Given the presence of 12 Italian equipment companies exhibiting at the IAOM, the transfer of milling and pasta production technology was one of the main themes.
Pasta has been popular among Ethiopia’s urban consumers since its introduction after the first contacts with Italy 120 years ago. In the last decade an increasing number of food enterprises, particularly milling companies, have installed new pasta production lines, but wheat quality and availability is a constraint.
In the past, semolina millers and pasta producers could import their own durum in containers, but foreign exchange controls and the government monopoly on commercial wheat imports prevent this option now.
Tiberio Chiari of the Italian Agency for International Cooperation (AICS) observed, “Ethiopia is importing 40,000 tonnes of pasta per year, so there is a demand for quality.”
Ocrim Vice-President Sergio Antolini addresses the crowd in Addis Ababa.
Photo courtesy: Ocrim
Photo courtesy: Ocrim
Ethiopia’s state minister for industry, Mebrathu Meles, outlined Ethiopia’s ambitious goal to attract foreign direct investment and become “the leading country for light manufacturing in Africa.”
He noted that Ethiopia offers a wide range of agro-ecological zones where almost anything can be grown, and so is seeking to attract agro-processing investment. Noting that Italy is a successful model of development of light industry and high value agricultural products, he asserted, “We have a long-term relationship with Italy. We should maximize it.”
AICS general manager Ginevra Letizia said Italy has committed to invest $180 million over five years in agro-industrial support, particularly the building of infrastructure.
Meles elaborated on the government’s own support for infrastructure, outlining plans to build four major agro-industrial parks around the country to house food processing companies. The first such park is under construction.
AICS senior economist in Ethiopia, Andrea Ghione, validated the concept.
“Industrial parks are clusters for processors and a pull for producers,” Ghione said. “They can provide a steady demand for certain products with certain quality. There are opportunities for agro-processors.”
Ghione further observed that the agro-industrial parks will provide some economies of scale in warehousing and require aggregators to deliver standardized quality raw materials like grains in 16.5-tonne trucks as the minimum marketing unit.
Ocrim presented Captain of the Year awards to food manufacturers Bira Food Complex and K.O.J.J. Manufacturing, as well as the Oromia Agricultural Research Institute for their contributions to development of the cereals value chain in Ethiopia.
