Milling & Baking News - January 1, 2019 - 11

Business

Challenges in grain merchandising
detailed in Rabobank study
of grain origination assets. Yet they
are still experiencing profitability
challenges.
There is increased competition for
grain with processors, exporters, large
livestock operations and export terminals all competing for grain.
New entrants into the market are

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GRAND ISLAND, NEB. - Several
factors are challenging the current
grain merchandising model, and traditional grain companies will have to
transform themselves quickly if they
want to succeed, according to a new
report from Rabobank.
The report, "U.S. grain storage and
challenges to traditional grain merchandising," said it's not just on-farm
storage and producer marketing patterns that challenge the long-term viability of the existing merchandising
model. Those reasons often are given
as explanation by large and small grain
companies for poor earnings.
Stephen Nicholson, senior analyst
of grains and oilseeds at Rabobank,
said in the report that the situation is
far more complex.
"Contributing to a squeeze on margins are also the concentration of grain
origination assets and storage capacity
at the top grain companies, increased
competition for grain in the country
from many end users, sector players
with different objectives and business
models, increased competition for export business and more nimble players," Mr. Nicholson wrote in the report.
A smaller number of producers is
controlling a large amount of grain and
is effectively cutting out the elevator in
the middle. As such, they control production, logistics and storage, the report said, and become a viable seller to
processors and export facilities.
"In other words, they become a direct
competitor to the ABCs," Mr. Robertson said.
At the same time, major grain companies are controlling a larger portion

A smaller number of producers is controlling a large amount of grain.

strategically located and can attract
grain by paying higher prices to bypass the local elector.
"These facilities tend to be more
flexible, nimble, opportunistic, and
they fill niche market needs," Mr. Robertson said.
Other new players have entered
the U.S. grain market with the goal of
sourcing for their home country. Examples include Zen-Noh and Cofco's
purchase of Noble Grain and Nidera.
Increased competition in export markets is another factor. More grain and
oilseed production in Brazil and the
Black Sea region is challenging the U.S.
export status and lowering commodity
export prices in the world market.

Bühler completes construction of
food application center in Plymouth
PLYMOUTH, MINN. - Bühler has
completed construction on its Food
Application Center (FAC) in Plymouth.
The next phase of the project will include installation of equipment and commissioning. The pilot plant facility is expected to be fully operational by July and
ready for the first trials with customers.
The center will include innovative
technologies for processing corn, pulses, ancient grains and many other food
ingredients. It includes an advanced
grain and raw ingredient cleaning
section, de-hulling lines, the Prime
Masa process (for Nixtamal flour), a
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complete grinding and milling system,
as well as flaking and extrusion lines.
"The Bühler FAC will be a playground for customers," said Daniel Garcia, process engineer at Bühler. "You can
come with a concept of a new product,
and we will have the capabilities to test
and combine different processes at an
industrial scale, developing normal or
special flours, flakes or extruded goods
ready to cook or ready to eat."
Processing of pulses is a new technology area, and the FAC will boost its
development, said Aidin Milani, sales
manager for Pulses Processing.

Solutions for the grain merchandising business likely will be found outside of the sector, Mr. Nicholson said.
He said the future will include producers controlling more of the supply
chain and a closer contractual relationship between the producer and
end user.
To stay relevant, grain originators/
handlers/merchandisers will have
to simplify their business models,
re-establish trust with the producer
customers, increase traceability, have
closer relationships with customers,
be more customer-service-oriented
and be flexible.
Mr. Nicholson had a similar list for
how grain companies will have to
respond to a new marketing environment. They will have to look beyond
their core grain business and expand
along the supply chain such as into
processing or becoming a fully integrated food company.
They will have to adjust to digitalization on farm and in the chain to deliver extra value, Mr. Nicholson said.
Companies should also prepare for
higher traceability from farm to fork
and optimize grain origination asset
networks and handling capacity.
Lastly, they should evaluate on-farm
grain storage financing options, especially as more U.S. soybeans need to be
carried longer through the season.
"The marketplace is changing how
and where grain moves to market and
therefore changing the grain companies' business models," Mr. Nicholson said. "As their business models
change, assets deployed will change,
ownership of assets will change, and
ultimately the prices paid and received will change. The changes are
just only beginning." MBN
"North America is a major producer
of pulses, and food producers in the
region are becoming more and more
interested in developing and using
highly functional and nutritional pulsebased ingredients," Mr. Milani said.
The center also will help develop innovative milling processes, said Tino
Boehm, sales manager for Specialty
Milling.
"For example, we will be equipped
to produce Nixtamal flour, a special
corn flour applied on the traditional
Mexican tortillas, and Nixtamal-based
products," Mr. Boehm said.
"We are looking forward to have the
FAC ready for trials and demos," Mr.
Milani said. "It will also be important for
trainings and to test new equipment." MBN
Milling & Baking News

January 1, 2019 / 11

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Milling & Baking News - January 1, 2019

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