Flour data output data eveal quandary

by Morton Sosland
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Considering all that happened last year in grain-based foods, both as internal structural change and as an array of external forces affecting consumer demand, the solidity just revealed in the single number often used to define how the industry is faring is truly striking. That single number is production of wheat flour by U.S. mills, which is widely acknowledged as portraying in the broadest possible way the reality of demand for all food products made using wheat flour. To have that output total for 2015 nearly identical to the two previous years is an outcome that appears to fly in the face of all that transpired. The latter’s rush seemed almost to guarantee considerable change was at hand. Instead, flour production in 2015 reached 424,894,000 hundredweights, hardly different from 424,949,000 in 2014 and 424,550,000 in 2013.

Before delving into the reasons and consequences of flour production holding within a hair’s breadth of a new record it is worthwhile to consider what happened in the past year. Most important perhaps, it was the year following the implementation of a significant restructuring of the milling industry’s leadership, with a single newly-organized company now having nearly twice the capacity of the prior largest miller. The ten largest milling companies now account for 86 per cent of daily capacity, and their number includes a new company among the top three and, for the first time in many years, ownership of one of the ten largest millers is by a foreign company.

At the same time these major changes were under way, the industry faced a consumer marketplace where a plethora of forces were intent on discouraging eating of wheat-based foods, often for spurious reasons. As a consequence, 2015 stands as the year, perhaps unlike any other, in which maintaining record flour foods demand is remarkable.

In reaction to this combination of positive and negative forces, which appears unprecedented, the industry itself reflected optimism by adding daily capacity. What enthusiasm prevailed and for what reason, the result was a drop in mill runs to 84.7 per cent of average quarterly capacity during the year. Considering that mills operated near 90 per cent of capacity in each of the three previous years emphasizes how hopes for the evolution of the flour foods market stretched beyond reality in encouraging new capacity. Indeed, the average mill operating rate in 2015 fell to the lowest since 2001. This revelation serves as a warning against overambitious expansion, instead of replacing equipment to assure efficient operations.

If one is looking for the unusual in 2015 flour milling statistics, most appealing is the increase in the number of mills, by two, to 170 mills operating. Yes, gains in the number of mills have occurred rarely in the past, but this increase came from the modern era’s low since the count began. Even with the increase, the one constantly rising number did not reverse or even slow, and that is the average daily capacity of all U.S. mills. The latter reached 9,046 hundredweights in 2015, marking the first time 9,000 has been exceeded. That average was 7,556 at the beginning of the 21st century and exceeded 4,000 hundredweights for the first time in 1979.

A new order of state flour production also has clearly emerged in this year’s data. Kansas, the state that ranked No. 1 in flour output from just before the beginning of World War II, has slipped to third behind California and Minnesota. The leadership of California reflects not just that state’s population growth, but affirms that the location of mills has been leaning toward population centers.

No comments on 2015 milling statistics are complete without saluting the National Agricultural Statistical Service of the U.S. Department of Agriculture for the efficient, and, yes, helpful way the agency has assumed responsibility for gathering this quarterly flour output data. It is a great boost to analysis of this important information to have it compiled in a responsible manner.

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