World Grain - July 2014 - 6

FROM THE EDITOR-IN-CHIEF

E.U.'s fate has role
in milling's future

S

ince flour mills operate in almost all of
the 28 member countries of the European Union, recent intense debate about
the role and future of the E.U. and its administrative arm, the European Commission, has
reverberated through the European milling
industry and deserves attention from millers around the world. Counting the E.U. as a
single entity, its annual production in recent
years has ranged between 725 million and
830 million hundredweights. That surpasses
by more than 70% the record 2014 output
of United States mills and is exceeded only
by China's unconfirmed annual output near
1 billion. Even putting these comparisons
aside, what is happening and may lie ahead
for European milling pose dramatic repercussions affecting its continuing influence as
central to global milling development and as
an area where many of the fundamentals of
modern-day operations evolved.
The present turmoil, primarily political,
raging in the E.U. reflects distinctly different
attitudes toward the role the central authority should have. On one side are those who
attribute economic shortcomings, mainly a
static economy and worries about deflation,
to the failure of the Commission and the European Central Bank to take the strongest
possible actions to gain increased control
over member countries. On the other side are
those urging that the Commission and Bank
reduce their interference in national economies to the point that business would be free
of many central controls.
Nothing is more important to this debate
than the Common Agricultural Policy and
the array of food regulations imposed from
Commission headquarters in Brussels. When
the E.U. was formed in the late 1950s with
six nations as members, it was the 1960
adoption of the CAP, with its crop price minimums and controls over marketing of wheat
and other grains, that gave substance to the
Union. For years, the CAP accounted for the
largest part of the budget, and its programs
exerted a huge influence not just on where
and how much wheat was produced, but how
much wheat and also flour were imported or
exported. As the result of E.U. subsidies, its

6

mills for a time beat the U.S. out of export
flour sales. But these programs changed, and
flour exports decreased with repercussions
for domestic mills.
Due in part to protection from international competition, E.U. milling continues,
as for generations, to be plagued by overcapacity. At its annual meeting held this year
in Edinburgh, the European Flour Millers'
Association estimated that the continent's
mills operate at 65% of capacity, turning out
35 million tonnes of flour, or 770 million
hundredweights. That run rate for the 3,800
milling companies in the association is unsatisfactory, even dismal, when compared
with the U.S. average at least 20 percentage
points higher.
While the association is circumspect in
addressing the overcapacity problem, it
has taken the lead in areas where it hopes
to bring about E.U. actions addressing subjects like food safety, product origin, wheat
marketing and futures hedging. Like its
counterpart in the U.S., the European association has not hesitated in promoting "the
sustainable, wholesome and healthy image
of flour-based products." It is working to
implement a co-financed promotion seeking to encourage consumption of European
flour products both within and outside the
Community. It leaves no doubt that if the
E.U. milling industry is to be profitable, it
must continue to "build on a high quality
reputation to sustain competitiveness."
Maintaining that status at a time when
the E.U. itself is under attack is formidable.
Recent elections in countries like France
and Britain produced majority votes opposed to the E.U. Britain's prime minister
has promised if he wins re-election in two
years' time to schedule a referendum on
continued membership. While the U.K. was
not one of the first members, its importance
to how the E.U. operates as well as having
a large flour milling industry affirms the
knife's edge on which such an important
global entity now sits.
Morton I. Sosland
Editor-in-chief

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