World Grain - August 2013 - 52

Regional Review: China’s milling Challenges

mills and received a lot of preferential
policies by the local governments,” Mr.
Zhiguo Dan said.
Wang said that the state-owned
COFCO was second in daily milling capacity at 14,000 tonnes.
According to the European Flour
Milling Association, which visited
China to look at the sector in 2012,
COFCO is one of China’s state-owned
food processing holding companies and
China’s largest food processing, manufacturer and trader. “Founded in 1952,
it is one of the largest SOEs of the 49
directly administrated by China’s State
Council,” EFMA said in a report on the
visit on its website. “Between 1952 and
1987, it was the sole agricultural products importer and exporter operating
under direct control of the central government. In 2007, the corporation had
just over 60,000 employees in multiple
locations in China as well as overseas
operations in countries like the U.S.,
U.K., Japan, Australia and Canada.
“Besides the food business, COFCO
has developed itself into a diversified conglomerate, involving planting,
cultivation, food processing, finance,
warehouse, transportation, port facilities, hotels and real estate. It is one of
the top 500 enterprises chosen by U.S.’s
Fortune Magazine.”
Next, according to the industry
sources questioned by Wang, is Yihai
Kerry, part of Singapore-based Wilmar
Industries, with a daily capacity of
12,000 tonnes. It has been active in
China for over 20 years. A major oilseeds processor, it expanded into flour
milling with the establishment of flour
milling facilities in Shenzhen in 1992.
The top three milling companies have
a market share of between 14% and 16%.
The sources put the average level of capacity utilization at about 50%. The industry is overwhelmingly privately owned,
with just 12% of mills owned by the state.
“Most mills source locally grown
wheat from the wheat production area,”
he explained. “Very little wheat is imported from Canada, the U.S., Australia,
and France for production of higher qual52

ity specific flour. They purchase wheat in
three ways: local farmers, private grain
traders, and state grain reserves.”
The industry is changing fast, with the
daily milling capacity both of individual
lines and of milling plants getting larger
“The scale of milling companies is getting larger,” he said. “The leading companies are becoming greater with expansion and construction of new mills.
Advanced technology and equipment
have been utilized more in new mills.”
A high level of automation means
more environmentally friendly milling
and brings energy savings. It means better food safety and hygiene. More flour
is being delivered in bulk to food plants
and more flour varieties with good quality and high stability are being produced. “The small and backward mills
face elimination,” he predicted.
At the same time the industry faces a
challenge from intense competition made
worse by milling overcapacity. He also
highlighted a problem with overly high
impurity levels in wheat delivered to mills.
“Overall domestic wheat quality and
consistency are not so good as imported
hard and soft wheat,” he said.
The systems for maintaining product
quality and safety assurance systems are
not perfect, and processing technology
and innovation ability is weak.
There is also a problem with an overemphasis among consumers on whiteness and brightness of wheat with low
ash from consumers. Some whitening
additives have been banned. In March
2011, Chemistry World, the Royal
Society of Chemistry’s magazine, said
that China had banned whiteners including benzoyl peroxide and calcium
peroxide, which whiten flour through
oxidation. “When ingested in large
amounts, the chemicals are harmful to
the respiratory system and can cause
sensitization,” the magazine said.
“The debate on four whiteners has lasted for more than 10 years. Although at the
current maximum level there is no clear
evidence to prove their harm, the government takes a low-risk principle to ban its
uses,” the magazine quoted Dong Jinshi,

Director of the Beijing Kaifa Environment
Protection Technology Centre, as saying.
In addition, although there are a great
many people in China, the industry’s
fast expansion and the expansion of
the wider Chinese economy means that
millers complain of a labor shortage.
Reluctance to impoRt wheat
According to the USDA attaché’s
annual report on the grains sector, “industry contacts noted that some flour
mills (particularly those located in north
China) do not want to purchase U.S.
winter wheat since local CIQ officials
may require fumigation for Tilletia controversa (TCK), which would be an additional expense. Because of the possibility of added costs, last year some end
users purchased Australian wheat in lieu
of U.S. winter classes.”
The attaché estimated that China would
export an unchanged 800,000 tonnes of
flour in 2013-14. “COFCO, a state-owned
enterprise, is the only entity that can export wheat,” the report said. “China primarily exports flour or processed products to neighboring countries or Special
Administrative Regions such as North
Korea, South Korea and Hong Kong.
“State grain companies purchase and
store the majority of Chinese wheat, and
have the option to utilize preferential government loans for these activities,” the report explained. “Because the government
holds the majority of wheat reserves, flour
mills buy directly from central government auctions, which are held weekly by
the State Administration for Grains.”
In a more recent update on the grains
sector, highlighting the prospect of
higher than expected wheat imports, the
attaché said that, “given the price competitiveness with local production and
demand for better quality, imports are
blended with local production at flour
mills, particularly in the south coastal
province of Guangdong.”
Chris Lyddon is World Grain’s European editor. He
may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you — send comments and
inquiries to worldgrain@sosland.com. For reprints of
WG articles, e-mail reprints@sosland.com.

August 2013 / World Grain / www.World-Grain.com

http://www.World-Grain.com

World Grain - August 2013

Table of Contents for the Digital Edition of World Grain - August 2013