Export flour business as an economic stimulant

by Morton Sosland
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Anyone with a longtime perspective on flour exporting may only shake their heads as to how this business has changed. The transformation has not been in the volume of flour moving in world trade, which has held up amazingly well and has even increased in the early years of the 21st century. And the change has not been primarily in the countries that have imported flour. Instead, it has occurred in the nations that dominate exporting, and it is here that a sorry story may be written. United States flour millers a half-century ago stood in the forefront of flour exporting. Currently, America is close to the bottom, a lowly position it has occupied and even seen worsen in recent years.

According to the International Grains Council, world trade in wheat flour in 2008-09 will total 10,955,000 tonnes in wheat equivalent. That volume, equal to 175 million hundredweights in terms of flour, is down slightly from the record of 11.9 million tonnes in 2007-08. Global trade has been above 10 million tonnes since the mid-1990s, contrasted with the export range of 5 million to 6 million tonnes in preceding decades. Indeed, global flour trade has been more dynamic than wheat. Exports of wheat and products in the current crop season are forecast at 122 million tonnes, slightly above the recent pace.

At one time, the leading wheat exporting nations also were the major shippers of wheat flour. In the last half century, the wheat leaders, especially the United States and the European Union, have held their grain dominance. That is not the case for flour, although the E.U. has done a relatively better job than America. In 2008-09, America’s flour exports are expected to slip to 450,000 tonnes in wheat equivalent (7 million hundredweights), while the E.U. is likely to increase to 1,350,000 tonnes. America’s share will be down to 4 per cent, where it has been for years, while the E.U. moves to 12 per cent. Not long ago, the U.S. and the E.U. together shipped nearly 70 per cent.

Accounting for how U.S. millers suffered such a setback is simple. America’s leadership in global flour was built in the immediate post-World War II years on the nation’s generosity in providing aid to war-torn nations. It was sustained by an export program known as P.L. 480, which financed shipments of products like wheat flour by accepting payments in foreign currencies and also by continued relief. These programs were cut by budgetary pressures. In their wake, first the E.U. and then other nations promoted flour exporting through subsidy programs of their own. More recently, export taxes favoring wheat flour over wheat prompted a surge in flour exports from Argentina. Other nations seized upon concerns about grain shortages when prices were soaring to take measures favoring flour.

The result is that flour exporting is now dominated by countries that were not even minor shippers just a decade ago. Kazakhstan, a nation that once was part of the Former Soviet Union, has been the world’s leading flour shipper for three years, forecast to move 1,850,000 tonnes in wheat equivalent this season. Neighboring countries like Russia, Ukraine, Pakistan and Turkey are also significant. United Arab Emirates annually ships more flour than American mills. Argentina has enjoyed a surge in flour exports as its location favors flour in shipments to Brazil.

While not all the importing countries receiving flour from these new shippers were good American customers in the past, many were. At one time, millers in Britain decided as a matter of national strategy to forego participation in export flour business, which was deemed too uncertain. No such attitude has even been considered by American millers whose search to build new markets long has been an industry hallmark. At a time when national attention is properly focused on ways to stimulate the economy, there is hardly a more positive undertaking than expanding export flour business.

This article can also be found in the digital edition of Milling and Baking News, June 2, 2009, starting on Page 7. Click here to search that archive.

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