02 March 2015 | Online since 2003



12 September 2012|News

Market backdrop drives milling industry to tipping point


The European flour market is fragmented both in terms of participants and regions, resulting in increasing internal competition and a struggle for survival.

Despite the difficulties it faces, the EU milling industry continues to endure under conditions that would drive rapid consolidation in other sectors. The three keys pressures driving the evolution of the market are counterparty risk, volatility and margin profitability. Furthermore, EU players must counter increased competition from Turkey and Kazakstan, which have emerged as the leading global wheat flour exporters.

EU wheat and rye flour production has fallen in the last six years from an estimated 40 million tones, to roughly 34 million tonnes today.

The household use of flour has fallen from 18 %- 12%, displaced by the growth of industrial bakery. Consumer tastes continue to evolve towards more consumption of value-added processed bakery, but with a population that is both ageing and teetering on the edge of decline; opportunities for future domestic growth are limited.

Volatility in commodity prices and periods of increased scarcity in row-crop commodities also threatens the operations of many millers in the region, with margin profitability falling in the last six years. Increased volatility is a structural issue to which companies need to find both operational and strategic responses in order to secure margins and long-term competitiveness.

The operational response entails making use of risk management and hedging programmes. Strategically, companies need to have a more defined approach to volatility and reconsider how best to position itself in the value chain in order to better manage volatility.

The EU milling industry is suffering from reduced profitability and increasingly tough competition from Turkey and Kazakhstan, which have emerged as the leading global wheat flour exporters. In addition to proximity to export markets, Turkey and Kazakhstan both benefit from lower-than-average labour and energy costs compared to their European counterparts.

The governments of each country are also willing to employ varying levels of incentives to help sustain agriculture and agribusiness.

In general, we expect market dynamics and variability in the wheat value chain to lead to consolidation.

Possible strategic options for milling companies to adapt include integration with end producers such as a bakery or pasta producer; brand differentiation; stronger sourcing relationships through co-operative alliances or building a pan-European presence through M&A.

Download



Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


11 February 2015
CNC Turner/Miller - Co. Down - competitive rate
Our client is a well-established, specialist engineering company supplying quality, precision components to manufacturers acr...

1 March 2015
Full-time stud hand required
Full time stud hand required to assist with all daily tasks of running a small professionally run farm housing approx....

24 February 2015
Locum Consultant Rheumatologist
It comprises Barnet Hospital, Chase Farm Hospital, the Royal Free Hospital and more than 30 services in the community....

22 February 2015
Weekends catering staff
Home Farm Holiday Park is looking for a catering assistant. This job is based around Friday & Saturday evenings with abou...

27 February 2015
Senior Secretary
Within this role you will be providing confidential secretarial and administrative support to Directors and Managers with any...




Top stories you may have missed
2 February 2015 | Arable
Is EU membership damaging UK farming?

Is EU membership damaging UK farming?

Membership of the EU is damaging the British farming industry, according to...


29 January 2015 | Machinery and Equipment
Drones 'rapidly changing' agriculture

Drones 'rapidly changing' agriculture

BASIS has launched an accreditation for pilots of Unmanned Aerial Systems (...


23 January 2015 | Arable
UK wheat yields have potential to double

UK wheat yields have potential to double

UK wheat yields have theoretical potential to more than double over the nex...


23 January 2015 | Machinery and Equipment
Crowds flock to LAMMA 2015

Crowds flock to LAMMA 2015

Britain’s farmers flocked to Peterborough for the first day of LAMMA’15 to ...


22 January 2015 | Cattle
Don't blame supermarkets for milk crisis...

Don't blame supermarkets for milk crisis...

The crisis in the dairy industry is not the fault of supermarkets, accordin...


16 January 2015 | CLA
Families affected by HS2 face 'major wor...

Families affected by HS2 face 'major wor...

Transport Minister Baroness Kramer visited three rural businesses in Cheshi...


16 January 2015 | Machinery and Equipment
John Deere unveil new 6R tractor range

John Deere unveil new 6R tractor range

Spearheading the John Deere range of mid-size tractors from Mannheim, the n...


14 January 2015 | Animal Health
Monthly TB checks more effective than ba...

Monthly TB checks more effective than ba...

Regular testing for bovine TB could significantly reduce the number of infe...


12 January 2015 | News
Government regulations hampering UK agri...

Government regulations hampering UK agri...

Single-issue policy-making threatens to hamper, not help, the progress of U...


8 January 2015 | Cattle
2015: The year ahead for the beef market

2015: The year ahead for the beef market

2014 has been a “rocky old year” for the beef industry but better prices ar...