Grain Milling
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Industry Overview
The grain milling industry includes about 400 companies with combined annual revenue of $11 billion. Major companies include Archer Daniels Midland (ADM); ConAgra; Cargill Foods; and General Mills. The industry is fragmented: the top 25 companies account for 25 percent of industry revenue.
Grain milling is the milling of flour and rice; the malting of grains (primarily barley); and the mixing of prepared flour mixes and dough. This industry doesn't include revenue from mills that prepare breakfast cereals, nor does it include meal ground from legumes or nuts.
Competitive Landscape
Demand is driven by consumer patterns in bread, whole grains, and rice consumption. The profitability of individual companies depends on managing grain prices and inventory effectively, and minimizing the risk of rodents, insects, and molds. Large companies have advantages in advanced milling technology and a diversified product line. Small operations can compete effectively by specializing in organic, non-genetically modified, or heirloom grains. The industry is capital-intensive: average annual revenue per employee is about $600,000.
Products, Operations & Technology
Major products include wheat flour (55 percent of the market); rice (20 percent); and cornmeal (10 percent). Other products include malted barley and prepared flour mixes.
Any grain can be ground into flour, but wheat is the most common milled grain. About three-quarters of all US grain products are made from wheat flour. Each year, mills grind around 900 million bushels of wheat, producing 20 million tons of flour.
Wheat is typically seeded in spring or fall and harvested in late summer. Trucks transfer harvested wheat from a farm or elevator to a mill. After weigh-in and inspection, trucks dump the grain into a dump pit. A conveyor takes the seed from the pit to a cleaning house, where machines pull large and small particles from the grain. After cleaning, the wheat must be tempered for about 24 hours, a process that adds water to the wheat, raising its kernel moisture.
Mills grind, sift, purify, and sometimes bleach grain until the flour reaches the preferred grade. Finished flour is moved to a hopper, where it's bagged and held in inventory until delivered by truck or rail, or used in-house to make prepared dough. Bags can range from industrial-sized 50- or 100-pound sacks to three-pound bags for retail sale.
Wheat is separated into five main classes: hard red winter (HRW); hard red spring (HRS); soft red winter (SRW); soft white; and durum. Hard flours are best for baking bread; soft are used to make cakes, pastries, and tortillas; durum wheat is hard and high-protein and is used to make pasta. Hard wheat represents around 70 percent of all flour milled; soft wheat, 20 percent; and durum, 8 percent.
Grain mills tend to specialize in a single class of wheat. However, by altering the milling process, a mill can produce multiple products. White flour is made using only the endosperm portion of the wheat kernel. The unused bran and middlings, byproducts called millfeed, are sold as livestock feed. Whole wheat flour retains the bran and germ of the kernel and doesn't produce millfeed.
A 60-pound bushel of wheat typically yields 42 pounds of white flour and 18 pounds of millfeed. A commercial loaf of bread uses 1 pound of flour; thus, a bushel of wheat yields 42 loaves of white bread. Americans consume an average of 130 pounds of wheat and 20 pounds of rice each year.
Common inputs in the grain milling industry include electricity; packaging materials such as plastic, cardboard, and textile bags; wood for pallets; and equipment repairs. Grain is the largest material cost.
Recent technological advances include complex milling machinery that can quickly process large quantities of flour. Other important advances include highly precise temperature and humidity controls in the storage facility, and fumigants with reduced ozone emissions.