Nothing is more likely to make a flour miller smile than to hear someone unfamiliar with the industry declare that a career in milling must be very unexciting. Such an assertion is usually made after looking at annual variations in industry production, which are often within a few percentage points. And then there’s daily capacity, which has been unchanged for eight years in a row. Yet, it is just this stability, which stems from flour’s role as the primary ingredient in making foods central to healthy eating, that provides the platform for large changes in the way the industry conducts itself. Here is an industry whose players compete vigorously within a marketplace that while seemingly quiet is strikingly dynamic. And the wild volatility of wheat is not even a part of this assessment of the principal drivers of the industry.
A careful examination of milling’s structure is facilitated by the Grain & Milling Annual published by this magazine and its two affiliates, World Grain and Biofuels Business. Key to milling’s past, present and future is the gradual, but inexorable, downward trend in number of plants. If historical drama is desired, nothing suits that better than the realization that 10,000 mills were operating at the start of the 20th century, which was the time when milling ranked in Bureau of the Census compilations as America’s largest industry. The Annual just issued counts 169 mills, down 5 from the prior year and 31 less than at the end of the last century in 2000. Considering that the net decrease in mill numbers in the decade of the 1990s was only 8, this accelerated rationalization signifies huge change.
Exploring why this has happened, especially in a period of output steadiness, requires a close look at what plants are being closed and where expanded and new ones are being built. As has been true for some time, the main reductions in numbers are in plants with daily capacity below 5,000 hundredweights. From 80 in 2000 to 57 in the newest compilation, these mills account for a major part of the reduction.
The remaining eight closings were in plants with more than 5,000 hundredweights of capacity, which fell to 112 from 120 in 2000, even though a net gain of 2 occurred in the latest year. The new compilation makes history by being the first listing where mills with daily capacity of 5,000 hundredweights and above account for two-thirds of the number. It was not until 1994 that mills of this size represented half of the number; the 25 per cent mark came in 1972. Yet, in 1972, these mills already represented 75 per cent of capacity. Currently, that capacity share is 94 per cent.
All the while that the number of flour mills has been on the decline, the largest mills counted separately, those with daily capacity of 10,000 hundredweights and above, have been on a steady rise in number and in share of capacity. The latest listing shows 69 mills of 10,000 hundredweights and above accounting for 74 per cent of industry capacity. That number increased five in the latest year. This is the primary factor, along with closings of smaller mills, explaining annual gains in average daily capacity of all U.S. flour mills. That average was 8,568 hundredweights in the newest compilation, against 7,556 in 2000 and 5,708 in 1990. Prior to the 1970s, the average was below 3,000 hundredweights.
This sort of shift leaves no doubt but that milling has embraced a belief the large plants offer advantages. After all, the average daily capacity of all plants larger than 10,000 hundredweights is 15,423 hundredweights, affirming this preference. Yet, this average for the largest mills hardly has changed in the past two decades, indicating once again how technology, location and industry dynamics join to make for a milling industry that is constantly changing in ways that an examination like this strongly underscores.