Josh Sosland
In seeking to divine where U.S. flour production is headed in the wake of the latest production data, it is important first to note appreciatively annual outturn reached a record high in 2017. It was the first time in three years that annual production reached a new peak. Additionally, the year-to-year gain of 2,693,000 hundredweights recorded in 2017 was the largest such increase recorded in four years.

Beyond this record, millers would be hard pressed to find much encouragement in the annual flour production data issued Feb. 1 by the U.S. Department of Agriculture. Poring over the numbers and comparing them with historical production figures, what stands out is how minutely flour production is changing from one year to the next.

While the best since 2013, last year’s increase was well under one per cent. In the current decade, the average annual change either upward or downward (averaging the absolute value of yearly changes) is only 3,257,000 hundredweights, on pace to be the smallest going back to the 1940s. Production swings averaged almost 10 million hundredweights per year in the 1980s, 8.5 million in the 1990s and 6.2 million in the 2000s. Even in the earlier decades of the 1950s, 1960s and 1970s, annual changes averaged more than 4 million hundredweights per year (during a generation in which annual flour production ranged between 220 million and 280 million hundredweights).

In short, nothing in the U.S.D.A. data suggests flour production is doing anything other than treading water. While the impact of flour imports and exports remain to be seen, per capita consumption of flour appears to be under continued pressure. At 131.6 lbs in 2016, per capita consumption was down 3.4 lbs from 2013 and down 10% from the record 147 lbs reached in 1997.

A seeming bright spot in the 2017 flour production data was an uptick in the flour milling operating rate. In the fourth quarter, mills operated at 88.4 per cent of capacity, the highest rate of grind in 13 quarters dating back to the end of 2013. Operating rate for the year was 86 per cent, outwardly a solid improvement from 84.9 per cent in 2016.

Taking into account key “facts on the ground,” though, the improved rate of grind appears to be largely illusory, at least as a predictor of future trends. The figures were based on daily milling capacity holding of 1,620,000 hundredweights in 2017, unchanged from the year before. While last year may have provided a brief respite from steady milling capacity additions (daily capacity was 100,000 hundredweights smaller as recently as 2011), mill construction projects already announced point to an additional 26,000 hundredweights of daily capacity coming on line before the end of 2019. Applying 2017 flour production to the existing capacity plus capacity under construction would generate an operating rate of 84.6 per cent, the lowest rate of grind since the early 1980s. Even absent the adjustment for additional capacity under construction, U.S.D.A. groupings covering seven states — Kansas, North Carolina, Colorado, Oklahoma, Minnesota, Maryland and Virginia — had average operating rates in 2017 beneath 80 per cent. The states account for 404,000 hundredweights of daily capacity, equating to a quarter of the U.S. total.

The production data mirror sluggish trends in the consumer marketplace for flour-based foods. While demand for bread and several other products remains soft, manufacturers of fast-growing products such as snack bars and energy bars that appear well suited for flour seem powerfully drawn to alternative ingredients that do not bear the perceived baggage of wheat flour. That millers and bakers are well aware of the difficult market environment is evident in the seriousness with which the industry is exploring the possible launch this year of a major checkoff program to fund a range of activities aimed at shoring up public perceptions of bread and other grain-based products. The latest data should do nothing but fortify the resolve of industry executives considering bold action aimed at restoring the position of the sector’s products as the cornerstone of the American diet.