Author Archives: David McKee

Flour Millers Gather In Ethiopia

For the first time, Addis Ababa, Ethiopia, Africa’s unofficial capital, hosted the International Association of Operative Millers (IAOM) Mideast and Africa (MEA) Conference and Expo, Oct. 24-27, at the Millennium Hall. The 27th rendition of the event, perhaps the weightiest gathering of the global wheat and milling industry annually, drew more than 500 participants from 46 countries for exchanges of market and technical information both in educational forums and on the trade show floor, which featured 92 exhibitors from 22 countries.

Representatives of many of the Ethiopian Millers Association’s 350 member companies were able to enjoy unprecedented contacts with leading global technical experts, traders and equipment suppliers. The country’s milling sector has been steadily industrializing to cope with 20 million tonnes of annual cereals production. A record 2 million tonnes of wheat imports came into the country in 2016 to compensate for the drop in domestic cereals production due to the worst drought in decades.

Africa Panel

The milling industry’s challenge of feeding economically growing African countries was the theme of the opening panel discussion.

“Africa is number two in the rate of wheat consumption growth after Southeast Asia,” said Dan Basse of AgResource Company. “Sub-Saharan African demand is increasing the most. Average caloric intake of rest of the world is leveling off, but Africa is still increasing.”

He added, “The world on average needs 1.8% more food per year but is producing 2.8% more.”

Panel moderator Martin Schlauri, managing director of Bühler’s African Milling School in Nairobi, pointed out that 70% of the grain used by East Africa’s industrial millers is imported, and milling to feed the region’s 330 million people accounts for nearly one-third of electricity consumption.

Brad Allen of Ardent Mills speaks at the IAOM MEA Conference.

Abubakar Bakhresa, executive director of Said Salim Bakhresa & Co. Ltd., the region’s dominant milling group, commented on the need to upgrade skills. “We used to send millers to Mysore, India or Europe for training but now can we send them to Nairobi,” Bakhresa said. “We are sending millers from all our mills.”

The key to efficiency is standardization of operations, observed Nick Hutchinson, group managing director of Unga Holding.

“We must introduce ways to measure efficiency,” he said. “Another challenge is maintenance. We need competent people.”

Local grain supply also was discussed. Esubalew Kefale of Ethiopian biscuit producer Ahadukes Food Products observed that in Ethiopia wheat is not segregated well in the marketplace.

“It is difficult to maintain quality standards,” Kefale said. “Biscuits need two types of grain quality. The flour millers’ association is providing training but the problem is raw material.”

Government Intervention

For the first time IAOM MEA directly addressed the politically sensitive and complex topic of government intervention in grain markets in the Middle East and North Africa. The panel included industry leaders from four countries.

Mohamed Reza Mortazavi, director of the Iranian Federation of Food Industries, said that in 2012 there was a brief period of market liberalization allowing millers to buy 80% of the wheat crop, but that since 2013, an election year, Iran’s government has been buying 85% of the wheat crop at above market prices, including 11.5 million tonnes of wheat from this year’s bumper crop. Farmers received $375 per tonne while government allocates the wheat at just over half that price to millers in order to keep bread and pasta prices low. Including 5 million tonnes of carryover, government stocks are at 16.5 million tonnes. But the country only needs 8 million tonnes for subsidized bread and 2 million tonnes for pasta.

From left, Merzad Jamshidi, KFF Mills; Essa Al Ghurair, Al Ghurair Foods; and Dr. Mebrahtu Meles, Ethiopia’s state minister for industry.

Essa Al Ghurair, chairman of Al Ghurair Resources, cited Egypt’s introduction of debit cards for social welfare recipients to replace heavily subsidized bread. Beneficiaries are happy to be able to buy higher quality baked goods or cooking oil. The innovation may reduce wheat consumption and wastage in the wheat import-dependent country.

Gunhan Ulusoy, chairman of the Turkish Federation of Flour Industrialists, remarked that cereals purchases and sales by the Turkish Grain Board vary according to crops and markets but are limited in most years to 2 million to 3 million tonnes, depending on the need to support farmgate prices. Turkey’s position as the world’s number one wheat flour exporter has mostly to do with logistical convenience of importing low-cost Russian wheat and a highly-efficient milling sector. Half of Turkey’s 3 million tonnes of flour exports are going to strife-torn Iraq and Syria, he said.

In Lebanon, wheat imports and wheat flour sales are mostly on a free market basis, said Patricia Bakalian, CEO of Bakalian Flour Mills. However, the government has intervened in the past to subsidize flour prices when world wheat prices have spiked.

Overabundance Of Wheat

“The world is awash in wheat,” said Basse, who moderated the market outlook sessions. “Prices are at a 10-year low. The Black Sea continues dramatic rises in production.”

Dan Basse of AgResource Company speaks during a panel discussion at the IAOM MEA Conference in Addis Ababa, Ethiopia. Photo courtesy of IAOM MEA.

Russia, with a 70-millon-tonne wheat crop, has displaced Canada and the U.S. as the top wheat supplier to the world. Global wheat prices are now set in the Black Sea, not the U.S. Gulf.

The U.S. had “practically perfect planting and harvesting conditions” said Ian Flag, regional director of U.S. Wheat Associates. “U.S. supply is 17% above the 10-year average.” HRW carryover stocks of 29.5 million tonnes are nearly a record.

Low world prices mean that Australian wheat growers will store their crop longer than usual, commented Nick Poutney, regional manager for GrainCorp.

“They will not plant as much next season,” he said. “There is a large increase in take-out of pulses in rotation. Crop size is getting large enough so bulk vessels shipments instead of container loads will become feasible.”

In contrast to other leading export origins, both France and the Baltic region saw smaller crops.

“There is a big lack of wheat in France,” Jean-Pierre Langlois-Berthelot of France Export Cereales informed the gathering. “Production of 28.2 million tonnes of milling wheat is 24% below the average. Usually the country exports more than 50% of its crop. There is a lot less wheat to export this year than in other countries.

“In France, everything went wrong in May. The cycle of vegetation of wheat was totally disrupted by rain. Average yield was 7.5 tonnes. Low radiation meant unusually low test weights. The average is 45 grams per 1,000 kernels but this year’s crop is only 37 grams. High ash content is unusual as well.”

Langlois-Berthelot also predicted that due to the low French yields combined with depressed prices from the global glut, half of French wheat growers could go bankrupt without a French government or E.U. rescue.

Indrek Aigro of Copenhagen Merchants, Denmark, noted that a cold February resulted in winter kill in Baltics. “There is 5 million tonnes smaller production so we will have 5 million fewer tonnes of exports,” he said. “There is a loss of 7 million tonnes of quality milling wheat. There is only 9 million tonnes of milling quality wheat compared to 14.5 million tonnes last year, so 5.5 million tonnes less.”

Next Year’s Event In Dubai

In his welcome speech, IAOM regional director Ali Habaj explained a revamping of the IAOM MEA website to provide a platform for new and used machinery and employment opportunities in the sector. The postings will be in English, Arabic and Persian.

Closing the conference, Habaj announced a return to Dubai, United Arab Emirates as the site of the 28th IAOM MEA Conference and Expo in in the fall of 2017.

The Glencore booth was busy with visitors during the trade show.

Merzad Jamshidi, KFF Mills, asks a question as David McKee, grain industry consultant, looks on.

Danilo Carloni, OMAS, gives a presentation on the Leonardo Rollermill.

Dr. Lutz Popper, Mühlenchemie GmbH & Co. KG, gives a talk on Nutritional and Technical Improvement of Flour for Bread and Pasta.

David Balaguer, Fundiciones Balaguer, gives a presentation on the company’s new Optical Fluting Test.

From left: Martin Schlauri, African Milling School, xxxxx, Ethiopian Millers Association; Ali Habaj, Atyab Investments & Oman Flour Mills Co.; Dr. Mebrahtu Meles, Ethiopia’s state minister of industry; Andreas Flueckiger, Bühler AG; Essa Al Ghurair, Essa Al Ghurair Investment LLC; Anas Shaar, National Flour Mills; and Adama Ekberg, Nations Unies.

Ethiopia’s Italian connection

Italy’s close past and current economic ties with Ethiopia, particularly in the agricultural and food sector, were highlighted at “Wheat, Flour, And…”, a high profile sideline event held concurrently with the IAOM MEA Conference in Addis Ababa and at Ocrim’s world headquarters in Cremona, Italy.

Ocrim SpA, the Italian embassy, and Ethiopian Millers Association co-sponsored a gathering that drew more than 120 participants and included a live video conference with a panel of Italian food entrepreneurs in Cremona. Matteo Antolini, Ocrim vice-president, noted that his company has been in Ethiopia for 35 years, having supplied many of the first industrial wheat mills in the country.

Ocrim CEO Alberto Antolini addresses attendees at the Cremona, Italy portion of Ocrim’s “Wheat, Flour and...” video conference event.

Given the presence of 12 Italian equipment companies exhibiting at the IAOM, the transfer of milling and pasta production technology was one of the main themes.

Ocrim Vice-President Sergio Antolini speaks to attendees at the Addis Abbaba, Ethiopia portion. Photos courtesy of Ocrim.

Pasta has been popular among Ethiopia’s urban consumers since its introduction after the first contacts with Italy 120 years ago. In the last decade an increasing number of food enterprises, particularly milling companies, have installed new pasta production lines, but wheat quality and availability is a constraint.

In the past, semolina millers and pasta producers could import their own durum in containers, but foreign exchange controls and the government monopoly on commercial wheat imports prevent this option now.

Tiberio Chiaria of the Italian Agency for International Cooperation (AICS) observed, “Ethiopia is importing 40,000 tonnes of pasta per year, so there is a demand for quality.”

Ethiopia is now growing an additional 50,000 tonnes of durum wheat per year, thanks in part to support from AICS, which imported 40 tonnes of improved durum seed from Italy selected for planting in Ethiopia’s Bale region. It has dry growing conditions similar to Italy, Europe’s leading durum producer with a forecast of nearly 5 million tonnes forecast in 2016-17.

Ethiopia’s state minister for industry, Mebrathu Meles, outlined Ethiopia’s ambitious goal to attract foreign direct investment and become “the leading country for light manufacturing in Africa.”

He noted that Ethiopia offers a wide range of agro-ecological zones where almost anything can be grown, and so is seeking to attract agro-processing investment. Noting that Italy is a successful model of development of light industry and high value agricultural products, he asserted, “We have a long-term relationship with Italy. We should maximize it.”

AICS general manager Ginevra Letizia said Italy has committed to invest $180 million over five years in agro-industrial support, particularly the building of infrastructure.

Meles elaborated on the government’s own support for infrastructure, outlining plans to build four major agro-industrial parks around the country to house food processing companies. The first such park is under construction.

AICS senior economist in Ethiopia, Andrea Ghione, validated the concept.

“Industrial parks are clusters for processors and a pull for producers,” Ghione said. “They can provide a steady demand for certain products with certain quality. There are opportunities for agro-processors.”

Ghione further observed that the agro-industrial parks will provide some economies of scale in warehousing and require aggregators to deliver standardized quality raw materials like grains in 16.5-tonne trucks as the minimum marketing unit.

Ocrim presented Captain of the Year awards to food manufacturers Bira Food Complex and K.O.J.J. Manufacturing, as well as the Oromia Agricultural Research Institute for their contributions to development of the cereals value chain in Ethiopia.

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Maize Production soaring in eastern Africa

Maize is by far the most important cereal crop in the four largest countries of eastern Africa. Combined production of 17.2 million tonnes in 2016, despite ongoing drought, is nearly 50% more than a decade ago. Remove middle-income Kenya, which had a 14% decline, and the increase for Ethiopia, Tanzania and Uganda was nearly 70% versus population growth since 2006 of 27%.

Having increased output, one of the next major challenges is to reduce the high levels of cancer-causing aflatoxins in the region’s maize. A presentation at the 2015 International Association of Operative Millers Conference in Nairobi cited recent studies showing average ppms in the region far above international norms. Along with food safety, the dominance of smallholder farmers, government market intervention, regional trade and food security are all key aspects of the maize economy in eastern Africa as examined country by country in the survey that follows.

Foreign direct investment has brought large-scale mechanization to maize production in Uganda, helping to raise average yields. Photos by David McKee

Ethiopia

Population: 99.5 million
Production: 6.3 million tonnes

Ethiopians have cultivated cereals for thousands of years on the high plateau where their ancient civilization originated. Production of the New World grain overtook sorghum for good in 1982 to become the No. 1 cereal crop. Maize now makes up 30% of 2016 major grains production of 21 million tonnes. Due to severe drought, that figure was down 4.5 million tonnes from a record 25 million tonnes two years before. Nevertheless, 2016 maize production recovered to within 5% of 2014’s level.

Small hammermills process most maize even for urban consumption in Addis Ababa. Industrial roller milling of maize has yet to take hold.

The USDA estimates that nearly 10% of maize has been used for feed since 2011 as living standards rise.

Despite drought, the food security outlook is positive with ending stocks of maize at 450,000 tonnes. Domestic maize is one of the three main cereals held by the government in its strategic grain reserve, along with domestic sorghum and mostly imported wheat.

A state entity has operated a fertilizer importation and distribution network for many years that has helped boost average yields to around 3 tonnes per hectare even though smallholders account for 95% of production. Large investments in improved seed systems supported by the country’s donor-funded, semi-autonomous Agricultural Transformation Agency also have contributed to increased output.

Tanzania

Population: 51 million
Production: 5.5 million tonnes

Thanks to rising production with a current five-year average of 5.7 million tonnes, Tanzania has become a major exporter to deficit countries in the region. Since 2013, annual exports have been around 400,000 tonnes versus just 14,000 tonnes in the decade of the 2000s. Maize exports are a mixture of cross-border trade, deals by large trading houses, and sales from the government reserve in order to rotate stocks without disrupting domestic markets.

Maize is stored temporarily in long cribs at Amatheon Agri’s 3,000-hectare farm in northwestern Uganda.

Tanzania’s National Food Reserve Agency (NFRA) plays a large intervention role, buying up much of the commercial surplus from smallholders at a guaranteed floor price. The country’s maize ending stocks have been around 1.3 million tonnes since 2013 thanks to NFRA, which may be termed a success to the extent that for over a decade the country has not needed to appeal to international donors for food aid due to drought or other emergencies. To the contrary, organizations like the United Nations World Food Programme (WFP) sometimes rely on purchases from NFRA to supply its own food distribution programs in the region.

Small hammermills grind almost all maize consumed. Popular markets in Dar es Salaam house large numbers of locally fabricated hammermills that provide a fee-based service. Tanzanians have yet to acquire a taste for the highly refined, degermed maize meal produced by industrial roller mills elsewhere in the region.

Large maize surpluses have contributed to the leveling out of wheat imports in Tanzania to an average of 850,000 tonnes per year since 2012 following many years of increases.

Kenya

Population: 45.9 million
Production: 2.8 million tonnes

As a result of a sustained period of GDP growth, Kenya now has the highest average income of any country in the region. This is reflected in more diversified diets and a plateauing in total maize use since 2011 at around 3.7 million tonnes per year despite continued population growth. USDA estimates that 10% of the country’s maize is now going for feed use. By some measures Kenya is already considered to be a middle-income country. Rapid increases in egg and broiler production are evidence of that.

Flat consumption belies a major shift in the maize economy. Since 2012 area planted in maize has decreased by one-third while imports have quadrupled to 1 million tonnes per year. Almost all of the incoming maize originates in Tanzania and Uganda, fellow members of the East African Community (EAC) customs union. Better rainfall gives the two countries a comparative advantage in maize production vis-a-vis drought-prone Kenya.

The national grain reserve agency, Kenya National Produce and Cereals Board (NPCB), has artificially boosted production by buying a few hundred thousand tonnes per year from farmers at an average price of $30 per 90-kg bag ($333 per tonne). In June 2016 it lowered its purchase price 20% to $266 per tonne after continued lobbying from millers who sometimes depend on supply from tender sales of government stocks. Inferior quality of poorly stored government grain is an ongoing problem. When finally rotated, much of NPCB’s maize is only suitable for feed use.

Unlike in neighboring Tanzania, large industrial roller mills process most maize consumed in Kenya, at least by the urban population.

Uganda

Population: 37.1 million
Production: 2.6 million tonnes

Maize along with cassava, other root crops, plantains and beans is one of the main food staples in Uganda. Nevertheless, due to relatively high average yields of 2.5 tonnes per hectare, the country produces nearly as much as Kenya where yields are just 1.7 tonnes. Uganda exports around 300,000 tonnes to its neighbors both as maize meal and grain. South Sudan’s burgeoning urban population is particularly dependent on Ugandan maize surpluses. WFP operates a regional hub in Uganda that procures maize grains and meal within the country to supply the domestic refugee population as well as displaced populations and refugees across the borders. Feed use of maize is already 200,000 tonnes per USDA estimates, as poultry production expands.

A liberal business climate has enabled Uganda to attract significant foreign investment in agribusiness. With little government intervention to muddle cereals markets, the maize value chain also has received its share of incoming funds.

South African grain management company Afgri has established a foothold with storage facilities in a number of locations, including Gulu in the northwest. Several commercial maize farms have started up in recent years. Berlin-based agribusiness Amatheon Agri Holding NV operates one of the largest with about 2,000 hectares planted to maize on a total of 3,200 hectares of cultivated land in the northwest as well.

North and South Kivu, DRC

Population: 12 million
Production: 800,000 tonnes

DRC’s heavily populated, mineral-rich provinces of North and South Kivu are more economically integrated with other countries of the Great Lakes Region than with the rest of DRC. The large urban populations of Goma, Bukavu and Uvira benefit from imports, mostly smuggled and untaxed, of all kinds of foods, including maize and maize meal.

One bold investor has started up the region’s first modern maize roller mill in Ruzizi Plain, north of Lake Tanganyika. The electrical hook-up is from nearby Burundi. Urban consumers are pleased to buy a Congolese brand.

Government data just for South Kivu in 2013 shows 337,127 tonnes of production by 835,472 households with 135,858 tonnes commercialized, all increases from the previous year. North Kivu’s figures are 10% to 20% higher. By comparison, almost 1 million households produced over 6 million tonnes of cassava in South Kivu. Due to steady, year-round rainfall exceeding 1,500 ml, but much more at higher elevations, the potential to increase maize production in the western plateau regions of South Kivu would be enormous if only feeder roads could be built and security improved. A decades-long presence of roaming militias has displaced much of the rural population to cities along the lake-shores, leaving large tracts of arable land available for cultivation.

Rwanda

Population: 12.7 million
Production: 550,000 tonnes

Rwanda’s dirigiste government has systematically targeted production of maize, a non-traditional food, as a means of enhancing food security. The result has been a ten-fold increase in production from just 50,000 tonnes in 2000 on a hilly landscape. The Rwandan state’s strategic grain reserve maintains a relatively modest maximum level of 50,000 tonnes of stocks but has even reduced it in recent years and sold off silo and warehouse storages, judging that the country faces no major food security challenges warranting the cost of maintaining a large reserve. International companies like Afgri have invested in some of these storage facilities and put them to commercial use. There are a handful of small industrial maize roller mills around the country, some of which import maize and then reexport maize meal to neighboring countries like DRC and Burundi. A commercial poultry industry is developing, creating additional demand for maize in feed.

South Sudan

Population: 11.9 million
Production: 400,000 tonnes

The economy of conflict-torn South Sudan, the world’s youngest country, depends on petroleum exports, subsistence farming and international aid. A joint WFP/FAO assessment in 2015 estimated 1.27 million tonnes of gross cereals production in two annual crops on 1 million hectares. Precise data are lacking but the breakdown is roughly two-thirds white sorghum and one-third white maize. There are just a small number of semi-mechanized commercial farms in the north bordering Sudan. The UN report put the net cereals deficit in 2015 at 250,000 tonnes. Traders bring sorghum from Sudan and white maize from Uganda to fill this gap. However, since fighting between government factions erupted in December 2013, food aid has again become a major part of the food balance sheet. The WFP said the country has 1.7 million displaced persons in addition to 650,000 refugees mainly in Uganda receiving emergency handouts. Non-emergency programs like school lunches bring the total number of beneficiaries to 3 million, about a quarter of the population. Thanks to its commercial availability in the region, maize makes up the biggest part of the donated food basket.

Burundi

Population: 10.7 million
Production: 150,000 tonnes

Conflict-ridden Burundi, similar in area, population, geography and agricultural practices to its neighbor Rwanda, stands in stark contrast when it comes to maize production. In 1972, when it had a centrally planned socialist economy, the country attained a peak of 250,000 tonnes, two-thirds higher than current levels.

Imported maize is part of the food aid basket provided to people displaced by the recent fighting and political instability.

Somalia/Djibouti/Eritrea

Population: 10.6 million/826,000/6.5 million
Production: 116,000 tonnes/0/20,000 tonnes

The three arid countries along the Red Sea and Gulf of Aden coastlines extending to the Horn of Africa produce and consume little maize. Somalis are traditionally nomadic herders and traders. The same is true for the ethnically Somali people of Djibouti. Their modern carbohydrate preference is imported rice and pasta. Somalia’s maize planting on 200,000 hectares yields not much more than a half tonne per hectare. Some maize is grown on Eritrea’s high plateau region but teff and sorghum are the main cereal crops.

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Rice Is King In West and Central Africa

Outside of Asia, rice is as big a part of diets in west and central Africa as in any region of the world. Though cultivated for over 2,000 years in the Niger River floodplains, local rice production decades ago ceased to keep pace with the rapidly increasing consumption of burgeoning urban populations. Consequently, the 20 or so mostly coastal countries extending from arid and sparsely populated Mauritania to lushly forested Congo and anchored by regional giant Nigeria now account for more than a quarter of global rice trade.

Roughly 12 million tonnes gets imported, complementing local output approaching the same amount.

Collectively, and in most cases individually, the countries of the vast region have sufficient arable land and water resources to be self-sufficient and even generate large surpluses for export. Consequently, the majority of governments have adopted policies to speed the transition from subsistence rice farming to commercial production. However creation of a value chain that can competitively supply domestic rice to city dwellers accustomed to high quality, low cost, attractively packaged imported products is fraught with challenges.

flatbed-truck-parboiled-rice

A flatbed truck hauls 30 tonnes of parboiled rice in 50 kg bags out of the Port of Conakry in Guinea after being loaded directly from a break bulk vessel carrying 20,000 tonnes. Photos by David McKee.

One of the biggest is how to attract long-term investment in farming, in land storage and processing from food companies who are accustomed to less risky, short-term trading.

In a number of the larger countries, some success is already notable with domestic production expanding while imports level off or even decline.

The picture is highly variegated from country to country and even within them.

NIGERIA AND BENIN

Nigeria’s 180 million people are estimated to consume nearly 6 million tonnes of rice per year. Just over half, or about 3.1 million tonnes, is imported despite a tariff of 70%.

In practice, very little of the foreign rice is subject to such a high duty. According to International Grains Council data, over half of imports in 2015 entered from neighboring Benin where the duty on rice is only 12%. Most of Benin’s rice imports, up to 30,000 truckloads per year, are routed via transit shipments through Niger to the northwest of Nigeria.

Since Nigeria consumes parboiled rice exclusively, but Benin prefers white rice, it is easy to deduce that the 85% share of Benin imports that are parboiled are bound for Nigeria through the orchestrations of clever traders.

Nigeria’s overseas rice purchases are highly concentrated among just a few major trading houses. According to one top importer, about 60% comes in bulk vessels from the three largest rice re-processors in Thailand with bagging at the Nigerian ports. The remaining 40% is vessel loads of break bulk bagged rice originating in southeastern or northwestern India.

Starting a few years ago, the Nigerian government has allowed these companies to pay only 30% import duty if they invest in domestic milling capacity. As a result, the small group of companies that accounts for most imports also owns a major share of the modern milling capacity.

The challenge that they and other value chain investors now face is procuring or producing enough rice to keep these mills operating.

The Rice Processors Association of Nigeria has 22 member companies who lobby the government to maintain import duties and rein in illegal shipments from Benin.

Stallion Group, a pan-African trading house headquartered in Dubai, is Nigeria’s largest rice – and automobile– importer. Amit Rai, Stallion’s chief of domestic rice operations, reports the company has also made the largest investment in domestic rice milling with capacity of 430,000 tonnes per year in three locations. The company is buying from 300 rice cooperatives and another 8,000 to 9,000 farmers spread across 14 of Nigeria’s 36 states. Rice is grown in around 23 of them. Rai says the company is targeting 1.5 million tonnes of domestic rice milling capacity. Stallion Group is present in rice – and automobiles – in a number of West Africa countries, particularly Ghana.

MALI

Thanks to a sustained effort dating back the 1980s to develop land along the Niger River for irrigated cultivation, Mali has made the most progress of any country in West Africa toward self-sufficiency in rice.

Farmers now grow 1.4 million tonnes, mostly in the zone a few hundred kilometers west of Bamako, known as Office du Niger. Annual imports have declined to only 100,000 tonnes according to USDA estimates.

City dwellers now mainly consume local rice varieties that are preferred for their freshness and aroma.

Industry and government officials frequently state that the network of canals could be extended to increase irrigated rice area by several times to 1 million hectares. Double cropping and yield in-
creases thanks to new varieties and better fertilizer application could turn the country into a large surplus producer by the end of the decade with exports flowing from the landlocked country to its neighbors on three sides.

SENEGAL

Low-cost bulk shiploads of 100% and 50% broken rice from Brazil and Uruguay make up about three quarters of Senegal’s annual imports of 1.4 million tonnes. About 100,000 tonnes is re-exported. Large-scale irrigation schemes in the Senegal River valley shared with Mauritania on the northern bank have allowed national production to gain ground.

Average farm size is small at just one to two hectares but mechanized service providers help raise productivity through tractor tilling and combine harvesting for a fee.

Policy makers in Senegal have struggled to overcome the dichotomy of low cost, good quality foreign rice exclusively for urban consumers and poor quality, higher cost, domestic rice consigned to rural households.

Private sector investment in a number of modern mills in the northern rice production zone means that well-cleaned, sorted and graded domestic rice is now available, but production costs remain much higher than in major export origins.

In place of elevated import duties that only resulted in high volumes of smuggling via Gambia, the government is now requiring the 10 largest licensed rice importers to purchase the surplus domestic production based on their share of imports. If a company accounts for 10% of imports, it must buy 10% of the commercially available local rice at government-dictated prices for inclusion in their distribution channels.

There is a second rice production zone in the southwestern Casamence region of Senegal sandwiched between Gambia and Guinea Bissau. As in the neighboring countries, paddies are carved out of mangrove swamps and long-handled wooden hoes are used to laboriously turn the earth in a subsistence farm economy with little mechanization.

IVORY COAST

Cote d’Ivoire’s success as one of the world’s leading exporters of cashews and cocoa has retarded its development as a rice producer despite optimal growing conditions for the cereal. Subsistence farming of rice is widely practiced in all corners of the country but for cash crops, farmers prefer the more lucrative cultivation of export commodities.

A handful of major food companies import 1 million tonnes of mostly high quality rice from a wide range of origins for the sophisticated consumers of Abidjan. Long grain Thai and Vietnamese varieties are preferred with perfumed rice gaining share.

Since 2012, the Ivorian government has been engaging in a state planning exercise in order to bolster domestic production. The country has been divided into 10 zones that are being grant-
ed as concessions to private operators. These include the largest rice importers as well as some foreign investors. Each concessionaire will have a semi-exclusive right to install industrial rice mills in its zone and procure from local farmers. Currently there is only one large industrial mill operating.

The Ministry of Agriculture’s ONDR is also reportedly managing a scheme to import 30 rice mills from India with financing from India’s Ex-Im Bank. Private sector players complain that excessive intervention creates uncertainty in the sector that hinders them from going ahead with investment plans.

GHANA

In neighboring English-speaking Ghana, where the business environment is much more laisser-faire, one domestic business group, Avnash Industries Ghana Ltd., is now building one of the largest industrial rice mills on the continent. The Bühler-equipped mill located in the center of the country will have capacity of 500 tonnes paddy per day. The company is also launching a palm oil refinery in the Port of Tema.

The challenge, according to rice mill general manager Sheeva Avnash, will be to secure enough local rice to keep the mill turning.

Timing for the venture may be good, given the 40% devaluation of the Ghanaian currency that accompanied the crash in petroleum prices. Some importers took big FX-related losses and incoming volumes have dropped by 30% year on year. Locally grown product should make inroads in urban markets.

Ghana is another country where parboiled rice is important. It is the only place in West Africa where U.S. rice is eaten, but the major importers report that low global prices could mean no shipment from the Gulf of Mexico in the coming year.

Singapore-based Olam is one of the leading importers.

GUINEA, SIERRA LEONE AND LIBERIA

The three countries struck by the Ebola pandemic in late 2014 faced some risk of food shortages when ships carrying rice refused to discharge in their ports. Unaffected countries like Senegal were not allowing vessels that had called at countries affected by Ebola to pull into Dakar. Disruption in local transport of food compounded the problem even further.

In Liberia, where annual rice imports total 300,000 tonnes and local production is just 200,000 tonnes, the largest importer fortunately had 55,000 tonnes on hand at port warehouses when supply stopped. Stocks dipped to 11,000 tonnes, less than two weeks of import supply for the country of 4.5 million, before rice vessels began calling again. In all three of the water-abundant countries, rice is one of the main cereal crops grown by smallholders. Very little of their harvest reaches the major cities. It is either consumed by farm families or traded at the village level.

Large stocks of rice held in port warehouses by private importers are a key aspect of food security in Liberia and other countries of West Africa.

Large stocks of rice held in port warehouses by private importers are a key aspect of food security in Liberia and other countries of West Africa.

In Sierra Leone and Guinea, imports constitute less than 25% of total rice consumption. Guinea’s milled rice production of 1.2 million tonnes would only need to be expanded by one-third to eliminate the roughly 400,000 tonnes of imports and fully meet the needs of the 12 million citizens. Rural Guineans eat rice that they parboil and dry in the sun. There are almost no automated mills with parboiling and drying using husk-fueled boilers and furnaces as in India. A small coterie of private rice importers with import licenses benefit from low duties granted by government officials who fear the slightest rise in the price of a staple food could lead to mass demonstrations as happened in a number of West African countries in 2008.

GAMBIA AND GUINEA BISSAU

To give a boost to local output, Gambia’s autocratic government issued a decree in early 2015 stating that importation of rice would be banned starting in 2016. The country of less than 2 million imported 140,000 tonnes in 2014, while the domestic crop did not exceed 40,000 tonnes. Planting has been expanding at a steady but slow pace with much effort put into research and development of new varieties. The handful of companies controlling the trade say they will heed the ban but the result could be shortages, a big increase in smuggling, and a sharp spike in rice prices. The country’s only industrial rice mill, built in 2011, was never commissioned due to a fallout between the private business group and government partner in the joint venture.

In nearby Guinea Bissau, cashews are by far the largest cash crop. The principle exporters of the raw nuts are also the leading rice importers thanks to a long tradition in the former Portuguese colony of bartering rice for cashews in bush villages.

These days, the trade is more cash based, but the same companies have mostly retained control of both commodities. Like Senegal, the two small countries get the largest share of their rice from South America in 100% or 50% broken form arriving in bulk vessels and bagged at dockside during discharge. LD Commodities dominates the supply from South America to these countries and others in West Africa.

Original PDF article as appeared in the World Grain magazine.

Record Turnout In Dubai

More than 800 millers and exhibitors attend the annual IAOM Mideast & Africa Conference.

The IAOM Mideast and Africa annual conference and exposition, held Oct. 31-Nov. 3, returned to Dubai to begin its second quarter century as the region’s major platform for technical and business exchange in the milling industry. The commercially pulsating crossroads attracted a record number of over 800 registered millers and exhibitors from 60 countries for the three days of professional camaraderie and grain market and processing insights.

Organizers said 250 employees representing 130 milling companies were registered this year, marking notable progress in a key goal for the event and the 93 firms that occupied the sold out exposition space.

The forum’s content continued to reflect the rapid development of many countries into increasingly sophisticated consumer markets where there is growing demand for a greater range of packaged cereals-based foods as well as animal protein products.

Branding strategies, both personal and product oriented, were the topic of two of the management keynote speakers. They sought to provide answers to the question of how to differentiate and add value to wheat-flour based products that in much of the region are still perceived purely as a commodity.

Roy Loepp, IAOM president and Ali Habaj, regional director IAOM MEA, present an award of appreciation to Essa Al Ghurair for his quarter century of contribution to IAOM region. Emcee Rania Ali, a well-known Dubai television presenter, is seated.

Roy Loepp, IAOM president and Ali Habaj, regional director IAOM MEA, present an award of appreciation to Essa Al Ghurair for his quarter century of contribution to IAOM region. Emcee Rania Ali, a well-known Dubai television presenter, is seated.

Many Middle East and Africa wheat millers have been diversifying into animal feed production as growth in demand for eggs, broiler meat and other animal products accompanies dietary diversification resulting from increased incomes. After a successful side program on feed milling at the previous IAOM MEA in Cape Town, speakers addressing such questions as the most desirable particle sizes for maize in broiler feed were included in the main program.

Essa Al Ghurair, chairman of Al Ghurair Resources, the host of the event, opened the conference with a welcoming speech that laid out the program and innovations in the “mind sharing” and reminded the audience, “This industry touches rich and poor, young and old.” He suggested that millers continually ask themselves, “How can we be honest in what we do?” as suppliers of a key staple food.

MARKET OUTLOOKS

The highly anticipated presentations of crop and market conditions for the major wheat exporting regions were spread over two days. They painted a rosy picture of abundant wheat supply and low transportation costs for the short, medium and long term.

The results and projections for the Black Sea and the Baltic Sea were particularly significant for the grain-hungry countries of the Middle East. Hans Stoldt of Ameropa, a grain trader, boldly predicted wheat production and exports 10 years ahead to 2025-26 for the Black Sea region.

Based on a continuation of the steady yield and planting increases of recent years, he forecast that just five countries will ship 74.6 million tonnes of wheat primarily through the Bosphorus a decade from now, with Russia and Ukraine accounting for over 80%. That is a 65% increase over his estimate of 45.1 million tonnes in the 2015-16 marketing year. Since total exports of these countries, which also include Romania, Bulgaria and Serbia, have shot up from 1.4 million tonnes in 2000-01 to 39 million tonnes in 2014-15, this actually constitutes a significant slowing in the pace of growth.

The Baltic Sea region is also continuing its ascent as a major grain supply source, according to Indrek Aigro of Copenhagen Merchants, another grain trader.

Total wheat production in the eight countries has increased by over 60% since 1995 from 34 million tonnes to a repeat record of 55 million tonnes in 2015. Nearly all of this increase has become surplus available for export, given the slow rates of population growth in Germany, Poland, the three Scandinavian countries, and the three former Soviet Baltic states.

The latter will consume only 1.8 million tonnes of a record 6.8-milliontonne wheat harvest this year. The main challenge faced by shippers in the region is finding additional markets to absorb the 20 million tonnes on offer. Middle East and African countries, with annual wheat imports of nearly 70 million tonnes, are the main targets.

At the same time, as the former Soviet Bloc countries have developed into a major global supply source, a large part of U.S. wheat exports have shifted from the Middle East to other regions, according to Vincent Peterson, vice-president of overseas operations, U.S. Wheat Associates. From 1985-1990, the Middle East and North Africa took, on average, 30% of American wheat exports. Now the region accounts for just 3%. Latin America’s share has shot up from 10% to 40% of the average 25 million tonnes per year of U.S. export sales. This figure has changed little in the last 30 to 40 years.

Iranian millers, whose grinding capacity greatly exceeds domestic demand, are starting to target neighboring countries for flour exports. The chairman of GTC, Iran’s government wheat supply monopoly, stated in his presentation that exports of flour by Iranian millers to Afghanistan and Iraq could reach 1 million tonnes in the coming years, taking market share from millers in Pakistan, Kazakhstan and Turkey.

Iran’s strong contingent of milling companies is traditionally a bulwark of the IAOM MEA Conference. This year was no exception as over 30 mills were included in the 38 organizations providing 54 attendees from the country. The gradual lifting of economic sanctions means the millers have greater flexibility in equipment purchasing.

POSITIVE FEEDBACK

Exhibitors and attendees, both old and new, gave uniformly positive feedback on the conference. Copenhagen Grain Merchants’ Torben Christensen stated, “IAOM is a great conference and event where you meet existing as well as potential customers for the future.”

George Lasu, managing director of South Sudan’s only wheat mill, a 200-tonne-per-day plant being built in Juba by the Ramciel Multi-Purpose Cooperative Society, expressed his satisfaction, saying: “It was the first time for us to participate in the conference. It was very fruitful because we acquired a lot of knowledge and interacted with a lot of very experienced people in every field of milling. So we are very happy to be part of this association.”

Amer Ziyada, managing director of Millrite, Dubai, who has attended every year but one since the beginning, noted that the number of exhibitors this year was the largest he had seen.

But he added, “There should be more steps taken to increase the number of millers versus suppliers.” He suggested reducing the cost of the day pass to make the exhibition more accessible to mill staff. “When we started there were just 40 of us: 30 millers and 10 suppliers,” he said.

Another longtime participant, Nicolas Tsikhlakis, managing director of The Modern Flour Mills and Macaroni Co., Jordan, and member of the IAOM MEA Region Leadership Council, pointed out, “We had good representation of millers this year. It was a pretty balanced show with traders as well. Networking was very good.”

Seaboard Corporation senior trader Evert Ackorn called the IAOM conference “a fantastic forum for the industry to meet to discuss synergies, opportunities, and the challenges we face in an ever-changing operating environment.” He noted that his company “remains a strong advocate of these associations that provide a positive influence to millers.”

Anna Zenchuk, technical marketing manager of BioAnalyt, Germany, observed: “As a small, new company with an innovative product that simplifies measurement of Vitamin A and iron in flour, we valued the chance to speak for the first time at such a major gathering of millers.”

Another first-time participant, Steven Braco of RJ O’Brien, an independent Chicago, Illinois, U.S.-based futures commission merchant, said: “This event allowed me to interact informally with long-time clients and to better understand the risk management needs of major millers and the traders supplying them.”

REGIONAL FORUMS

To better meet the technical needs of milling professionals across the vast, culturally and economically diverse region, the IAOM MEA district this year began a series of regional milling forums. The first was staged in Nairobi in August, where 75 millers from 43 companies, including a large contingent from Ethiopia, were present for a workshop focused in part on aflatoxins in maize milling.

Ali Habaj, Oman Flour Mills CEO and IAOM MEA regional director, announced that, based on Nairobi’s resounding success, a second regional forum is planned for Algeria in 2016 where a few hundred small and medium millers comprise the bulk of the sector. It is to be IAOM’s first activity in the major wheat importing country.

IAOM MEA 2016 TO BE IN ETHIOPIA

The Dubai event concluded with the announcement of the selection for the first time of Addis Ababa, Ethiopia, sub-Saharan Africa’s de-facto political capital, as the site of the IAOM MEA Conference scheduled for October 2016. Ali Habaj observed that in a recent visit he was, “very impressed by the infrastructure and it is a fantastic market.”

Madame Abeba Tesfaye, vice-president of the Ethiopia Millers’ Association, accepted the nomination. Ethiopia’s population of 90 million is second in size after Nigeria in Africa. The country grows and consumes more cereals than all others below the Sahara. It ranks first in wheat production among them with around 3 million tonnes annually in addition to close to another million tonnes of yearly imports. There are between 200 and 300 milling companies in Ethiopia.

Many of the larger millers have been diversifying into pasta production. The annual crop of over 20 million tonnes of cereals, legumes and oilseeds still requires much in the way of improved storage and processing. Agricultural exports have boomed in recent years, underlying a high rate of annual GDP growth.

Original PDF article as appeared in the World Grain magazine.