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Bioceres making its push with GM wheat

By Arvin Donley

November 2022

Bioceres making its
push with GM wheat

Argentina-based company has made major inroads with HB4 wheat in Argentina, has sights set on Australia and the US

World Grain

©Brian Jackson – stock.adobe.com

Hindered by climate change, supply chain dysfunction and geopolitical tensions, global wheat production and trade have leveled off the last several years, with global ending stocks now at a 10-year low. Consequently, the need for increased yields and wheat varieties that can grow in suboptimal conditions has never been greater as global food insecurity has reached unprecedented heights.

One solution would be the adoption of weather-tolerant genetically modified wheat varieties. But embracing biotechnology, particularly when it comes to a food grain like wheat, has never been simple. Despite the preponderance of scientific evidence showing that GM wheat, as well as other grains, are safe to consume, a significant and vocal minority of consumers are adamant in their disdain for all things genetically modified.

Thus, flour millers and other downstream wheat-based food processors, many of whom are privately intrigued by the possibility of GM wheat commercialization, take a cautious public stance to not upset customers or potential customers. For example, World Grain reached out to a number of people in the global flour milling community for comment on this issue but most declined.

In the eye of this stormy situation is Argentinean biotech company Bioceres Crop Solutions, the maker of HB4 wheat, a genetically modified, drought-resistant variety that during the past two years has gained acceptance and regulatory approval in several South American countries and also has cleared preliminary regulatory hurdles in Australia and the United States.

Frederico Trucco, chief executive officer of Bioceres, is optimistic that HB4 is on a trajectory for commercialization in several key wheat-producing countries in the coming years. But the payoff is rarely quick for biotechnology companies, which is something he is always reminding investors. After all, it’s taken nearly 20 years since the introduction of HB4 technology in 2003 to develop wheat varieties and start to gain regulatory approvals that may pave the way for commercialization.

“It’s been a long journey,” he said. “These technologies are developed over decades, not just a few months or a year. When investors think of technology, they probably think of the computer software sector where things get replaced very quickly. (Monsanto’s) Roundup Ready soybeans were first commercialized in Argentina in 1994 and the patent didn’t expire until 2014. It takes a long time to develop but they last for many, many years.”

Of the many stakeholders in the wheat value chain, nobody is more excited about the prospect of HB4 commercialization than the wheat growers who for many years saw corn and soybean yields skyrocket due to biotechnology while wheat yields remained stagnant with only conventional varieties available.

Bioceres said HB4 drought-tolerance technology has been shown to increase wheat yields by an average of 20% in water-limited conditions, a key adaptation that favors double-cropping systems, where water management is increasingly critical. It also has shown environmental benefits. Under no-till practices, HB4 soy-wheat rotations result in an estimated 1,650 kilograms of carbon fixed into the soil per hectare per year, compared to positive emissions from conventional soy monoculture, Bioceres said.

“GM technology is something US wheat producers have supported since they adopted that principal document,” said Dalton Henry, policy director of US Wheat Associates, referring to the USW/NAWG Principles for Commercialization document that supports customer choice and identifies important US wheat export markets that must approve new traits. “They realize the benefits of technology, especially when you think about traits like drought tolerance. It’s impossible not to have it at the front of your mind considering the year we had last year in two pretty significant growing regions in the US.”

Trucco said an aspect of HB4 that often is overlooked is it also performs well in non-drought scenarios.

“In the past, there were drought-tolerant varieties, but the plants yielded less when water was not an issue,” he said. “In practical terms this is very important because we want technology that makes improvement in all scenarios. If it only works when you have drought, you are limiting yourself to very small environments. When we say it benefits situations where there is adequate water, we are talking about yield increases that can be as high as 40% to 50%.”

Trucco

Argentina, Brazil and HB4

Not surprisingly, the first country to widely cultivate HB4 wheat, which is based on a drought-tolerant gene taken from a sunflower, came in Bioceres’ home country of Argentina. Bioceres developed the HB4 wheat strain in partnership with the National Council for Scientific and Technical Research and the National University of Litoral. While not technically commercialized in Argentina, it is being grown by many farmers under Bioceres’ supervision.

In October 2020, Argentina, the largest wheat producing country and exporter in South America, granted first approval of HB4 wheat for growth and consumption. The commercialization of HB4 wheat in Argentina was subject to Brazilian approval, as Brazil is the main export market for Argentinean wheat production.

In November 2021, after a rigorous review process, the Brazilian National Biosafety Commission unanimously endorsed biosafety conditions for flour processed from HB4 wheat. But Brazilian millers, concerned that some of their customers were not receptive to products made from HB4 wheat, threatened to stop buying Argentine wheat, vowing to turn to other countries for supplies.

But ABTRIGO, the Brazilian milling association, softened its stance after a survey of Brazilian consumers, commissioned by ABIMAPI, an association that represents biscuit, pasta, bread and cake makers, yielded a surprising result.

“A post-approval survey in Brazil showed that close to 70% of consumers had no concerns on GMO wheat, an observation that helped change the position of key groups that historically rejected transgenics in the crop,” Trucco said. “With this we are not saying that the job is done; it is far from being done. But we are obviously thrilled to see this progress and very proud of our global leadership in this front.”
Colombia is the other South American country that has approved HB4 wheat for consumption.

International strategy

Trucco acknowledged that for HB4 wheat to become a truly global product, it must expand beyond South America. So Bioceres has set its sights on Australia and the United States, two major producers that export wheat all over the world and are prone to drought.

“Australia is our most immediate international interest outside of Latin America,” Trucco said. “We are actively pursuing Australia, as it has a market twice the size of Latin America. And it is a country that traditionally is more severely affected by drought, so HB4 technology can be even more valuable to Australian growers.”

Bioceres scored a major victory in May when Food Standards Australia New Zealand approved the company’s drought tolerant strain HB4 for use in food. In June, it announced it was moving forward in its push to obtain approval to plant and produce its genetically modified drought-resistant wheat in Australia. The Office of the Gene Technology Regulator must provide approval for the planting of HB4.

Trucco said Bioceres plans to carry out field tests of its GM wheat in Australia and will seek planting approvals in 2023.

But will Australian growers embrace the technology? Brett Hosking, chairman of Grain Growers and a Victorian farmer, said growers are interested in the technology but will want to see how it performs in the field and how the variety compares to other similar ones already in the market.

“The fact that this has this drought tolerance may get lots of growers interested,” he said. “But whether they will buy a bag and try on the farm, it needs to prove itself against other varieties out there. They’ll look for paddock-based replicated trials that fit within their soil type, crop rotation, and the system they use in their farm business and climate.”

If Bioceres can secure planting approvals in Australia, it could open the door for acceptance in other major wheat producing and exporting countries such as the United States.

Just days after Bioceres received regulatory approval in Australia came word that the US Food and Drug Administration (FDA) concluded its evaluation of HB4 wheat and had “no further questions regarding the genetically modified wheat’s safety.”

Bioceres said the conclusion of the voluntary consultation program with the FDA is a key step toward commercial enablement in the United States, which is awaiting approval from the US Department of Agriculture (USDA). The United States is the fifth largest wheat producer, with an average of 15 million hectares planted every year, and the third largest exporter, holding a key position in the global wheat trade.
Trucco called the United States “probably the most attractive market.”

“So many markets depend on US wheat,” he said. “We have a strategy and idea of where the technology can be more relevant, and we’re starting to seek collaborators (in the US) that can make this happen sooner rather than later.”

Trucco said Bioceres is actively seeking US universities or companies that it can work with to do breeding work and testing.

While Henry said it was impossible to say if HB4 would ultimately be approved for commercialization in the United States, he was confident that it wouldn’t occur anytime soon.

“(Trucco) has been aggressive every time he’s asked about a timeline, and those timelines have had a tendency to slip,” he said.

While most individual millers from around the world declined comment on HB4 for this article, the North American Millers’ Association (NAMA) issued a statement following the FDA’s decision.

“The availability of high-quality, affordable wheat is essential for millers, and ultimately, consumers,” NAMA said. “There is growing demand for sustainably produced wheat that uses less water, fertilizer, fuel, and other inputs and at the same time drought has reduced wheat yields in the US and around the world. Drought-tolerant wheats like HB4 could help with global supply challenges.”

However, NAMA also noted that it “supports consumers being able to make food purchases based on their personal preferences and supported legislation requiring labeling of products that contain bioengineered food ingredients.”

Jane DeMarchi, president of NAMA, told World Grain one of the big questions that millers have about the new variety is its milling quality.

“We urge Bioceres and any company developing new varieties of wheat to do quality testing for those new varieties for milling and baking characteristics and to go through the Wheat Quality Council’s review process,” she said.

She also echoed Henry’s opinion that the introduction of HB4 into the United States “is a long way away.”

A reason for pessimism regarding the prospect of widespread commercialization of HB4 wheat is that several of the United States’ and Australia’s most loyal customers, such as Japan, have strict policies against importing unapproved varieties. A GM wheat variety inadvertently getting mixed in with a US shipment of conventional wheat to Japan in 2013 temporarily strained trade relations between the two countries.

Bioceres has stated that it will maintain its preserved identity plan and delay the commercialization of the seed until there is greater acceptance of the GM wheat and its derivatives worldwide. Trucco said he is confident that with the grain testing and sorting technology that is available, tolerance levels of 0.001% can be maintained.
“I’m not saying that contamination cannot occur; it will in the future,” Trucco said. “But it is manageable.”

DeMarchi

Arrows pointing up for Bioceres

Bioceres’ fourth-quarter and full-year earnings report, released on Sept. 8, contained plenty of good news for the Argentina-based company.

Comparable gross profit for the quarter increased 32% compared with the year-ago quarter, reaching $41.4 million. Comparable gross profit for the full fiscal year reached a record of $136.9 million, up 45% compared with fiscal year 2021. Fourth-quarter revenues were up 44% to $104 million and full-year revenue was up 62% compared with 2021 to a record $319 million.

Notably, HB4 wheat revenues were $12.4 million, a 94% increase compared with the year-ago contributed goods number.

Frederico Trucco, chief executive officer of Bioceres, said key feed and food clearances obtained during 2022 were a factor in the improved results, including China’s Ministry of Agriculture approval for HB4 Soy and the US Food and Drug Administration (FDA) favorable conclusion on HB4 wheat safety assessment. Other feed and food approvals for HB4 wheat include Brazil, Colombia, Australia, New Zealand and Nigeria for HB4 wheat.

“This is an amazing closing to an amazing year, not only reflected in our record-setting financials but also in terms of achieving gatekeeping regulatory clearances, namely feed and food approvals for HB4 wheat in Brazil and for HB4 soy in China,” Trucco said. “We are, for the first time, reporting revenues associated to the HB4 technology, resulting from the one crop where we faced the most skepticism: HB4 wheat. This technology is now not only green-lighted by a growing number of regulators, including the US FDA, but also increasingly accepted growers, industry participants and consumers at the end.

“Today we have more than 20 processors incorporating HB4 wheat in their products with a similar number being onboarded in the next few months. We have consumer brands actively addressing HB4 wheat merits, and we have successfully executed the first export operation for HB4 wheat flour to Brazil.”

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Nigeria and other developing countries

Bioceres scored another victory in mid-July when Nigeria, which is home to several of the largest flour mills in Africa, became the latest country to approve the import of HB4 wheat for food and feed use. The import permit granted by the National Biosafety Management Agency of Nigeria is valid until July 2025.

Attempts by World Grain to get a response from Nigeria’s larger flour milling company, Flour Mills of Nigeria, to the government’s decision to allow HB4 wheat imports were unsuccessful.

Trucco sees countries such as Nigeria, which is a major wheat importer and has a high per-capita wheat consumption rate, as potential beneficiaries of the new technology.

“Any technology that will fortify wheat security will be viewed very favorably in these countries,” Trucco said. “And we’re not predicating our business based on premiums so I think that should be music to the ears of countries that rely on importation such as Egypt.”

Khalid Al-Hazaa, general manager of Al-Hazaa Investment Group, which operates flour mills throughout the Middle East, was one of the few flour millers willing to discuss the topic on the record with World Grain.

While he has questions about the health consequences of consuming GM wheat and whether consumers in his region would shun GM wheat products, Al-Hazaa said it may be time to consider the merits of the technology.

“The time has come to start considering this step, especially with the current increase in the world’s population and the increased demand for grains and wheat, in particular,” Al-Hazaa said. “Also, after what we’ve witnessed during the COVID-19 pandemic and the Russia-Ukraine war that caused a global grain supply chain disruption, all these factors should raise our concerns and enhance our efforts to look for solutions that could increase global production, help in good use of current agricultural lands, and overcome the problems of drought and climate change.”

Like many millers, Al-Hazaa is eager to see if Bioceres succeeds in marketing its product beyond South America.

“If the GM wheat got approved internationally, especially in large wheat-producing countries such as Australia, the United States, the Black Sea countries and Europe, then definitely countries in the Middle East would follow, especially Egypt, as it is a large producer and consumer of wheat,” he said.

Al-Hazaa noted that Egypt is “focused heavily on increasing local wheat production,” and that adopting HB4 wheat for production could be one of the means to help the country increase its yields.

While HB4’s ability to increase yields in drought conditions are the major attraction for many developing countries, Steve Mercer, vice president of communications for USW, said the other side of the coin regarding HB4 wheat is the potential environmental and sustainability advantages that it provides regarding less water usage.

“One is the practical benefit for producers to produce more wheat and the other side is the sustainability arguments, which could be attractive in developed countries,” Mercer said.

Herbicide concerns

Although HB4 wheat has received safety approvals in several countries, environmental groups warn that commercialization would lead to higher exposure to glufosinate-ammonium because it is tolerant to the herbicide.

GRAIN, a Barcelona, Spain-based non-profit organization that supports small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems, said that glufosinate-ammonium is “widely questioned and prohibited in many countries due to its high acute toxicity and its teratogenic, neurotoxic, genotoxic and cholinesterase altering effects.”

GRAIN warns that the addition of GM wheat, which is grown in different parts of the year than most other GM crops, will lead to year-round exposure to glufosinate-ammonium-based herbicides.

Trucco said HB4 is resistant to the herbicide glufosinate-ammonium because in the biotechnological process Bioceres used a glufosinate-resistant gene as the selectable marker to be able to distinguish the positive transformant from the negative transformants.

“So it’s an effect of the biotechnological tool used to achieve drought resistance,” Trucco said. “Unlike with the first wave of transgenics several years ago whose main yield differential was directly associated with the use of the herbicide, HB4 was developed to have drought resistance as its main characteristic and value.

“While this means that HB4 wheat is tolerant to glufosinate-ammonium, it does not need to use this herbicide. Just as with conventional wheat, any other agricultural herbicide can be applied in the production of HB4 wheat with no impact on the quality of the wheat. In fact, at Bioceres, we are working hard to develop biological herbicides that could in the future be applied as alternatives to chemical herbicides in seed treatments. We are actually one of the only companies globally that develops all categories of biological products for agriculture: from bio-nutrition and seed genetics, to biostimulants and bioprotection technology.”

Timing is everything

Other companies, including US-based Monsanto, before it merged with Bayer, developed GM wheat only to reverse course due to strong backlash from consumer groups and tentative regulators. But that was a different time, when there was plenty of wheat in reserve and less certainty about the impact of climate change on crop production.

Today, not only is there more widespread drought impacting yields and production, but a once-in-a-century pandemic has caused global supply chain dysfunction and two of the world’s largest wheat producers and exporters — Russia and Ukraine — are at war, limiting the amount of grain being produced and shipped from the Black Sea region.

It’s hard to imagine a better environment to be introducing a high-yielding drought-resistant genetically modified wheat variety.

“I don’t know if it’s the best possible timing to be talking about that kind of trait, but it has to be close,” Henry said.

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Future is now for milling technology

By Matt Noltemeyer

September 2022

Future is now for
milling technology

Incremental advances improve highly efficient, labor-light flour mills

World Grain

©xreflex – stock.adobe.com

Agrain professional’s device pings early on a Wednesday: A VP has a VIP in need of 30,000 cwts of bread flour, ASAP.  

Since the mill had cake flour grind scheduled today, the worker mentally tallies the steps to make the switch.

He pours a coffee, commutes to the cozy cockpit of his home office, fires up the machinery and completes an authenticator eye scan.

A few taps at the tablet and he’s put the cake flour grind on hold. A few more taps and the line, in the plant a few miles away, begins to make the necessary adjustments for milling hard red winter wheat into bread flour without ever turning the lights on. 

Another couple keystrokes and the soft WIP — work in progress — wheat is set for a few more hours in the temper bin. Next, the automated mill dutifully collects a precise volume of winter wheat, dampens it with the additive solution that will have the bran toughened just right and the endosperm appropriately mellow by the mid-morning coffee break. 

During the grind, the mill will continually monitor quality parameters and issue data on each wheat berry. Should a problem arise with the specs or a mechanical part, the mill will divert product to a holding bin while troubleshooting takes place, avoiding a mess on the floor. A self-regulating pneumatic system will convey just enough product to avoid wasting energy and adjust automatically if the flow rate deviates.  

A scene from a wheat miller’s dream? 

Yes and no.

More precisely, that tableau mixes technologies already used in many flour mills that are expected to become more refined, more efficient and more commonplace in the coming years, with what some see as “the Holy Grail of wheat milling.” 

On the occasion of its 100th year chronicling the evolution of milling in the United States and reporting on the commodity markets that feed the world, Milling & Baking News, a sister publication of World Grain, spoke with milling experts about the technological leaps, bounds and baby steps that led to the modern flour mill; where flour production technology most likely is headed next; and what improvements will transform the industry when value-added solutions to age-old problems emerge. Some milling equipment manufacturers were reluctant to be interviewed because they didn’t want to give away ideas they were working on or developing.

Millstones and pneumatics

In the beginning there were millstones. By the 15th century, millers began to work out the grind-sift-grind process to reduce the kernel, endosperm and bran into flour. Innovations such as the roller milling system in the 1870s revolutionized the industry to a degree that perhaps hasn’t yet been eclipsed. After all, rollers endure as the foundational technology in the world’s newest, largest, most efficient flour mills. 

Incremental advances consistently reduced the mill labor force, eventually eliminating such roles as smutters controlling the clearing house, bolters steering the sifting house, truckers tugging the hand carts. By the 1950s, longer-lasting parts meant equipment broke down less often. When pneumatic conveying superseded bucket elevators, mills became cleaner, safer places with fewer sweepers. 

“The genius of the gradual reduction system of milling is that a mill can produce multiple grades of flour contemporaneously, fine cake flour, pretzel flour, cookie flour,” said Richard Siemer, president of Siemer Milling, Teutopolis, Illinois, US. “We can blend it back and forth and sift it apart. Milling technology, at the heart of it, is innovations that took place in the 1700s and the middle-1800s. For the most part, in the 20th and 21st centuries, what we’ve been seeing is just refinement. If we could resurrect a good miller from a good mill who died in 1900, bring him into a modern mill today, he’d understand the process almost immediately. You would, of course, have to train him on computers, and the scarcity of mill workers would be part of his cognitive dissonance.”

For the near term, more such incremental improvements to existing technologies are expected. For example, while pneumatic cleaning systems are more sanitary, they tend to use more energy than mechanical sorting. The US power grid amply provides for that. But in other countries and with customer expectations trending green, there is an opportunity to raise the efficiency of the cleaner technology.

The new mills that have come online in the past five years are some of the largest in the world, a trend that’s likely to continue.

“If you check into Sosland’s Grain & Milling Annual archives, as I do from time to time, and you look back into the 1980s, 10,000 sacks a day, or 600 tons, was a pretty big mill, but I don’t think that would make the list of the 25 biggest mills in the states today,” said Scott Martin, senior director of technical milling with Ardent Mills, Denver, Colorado, US. “Back then, I worked at a 10,000-sack mill that had two sifter floors, 17 individual sifters, holding about 94 sifter sections. A modern 10,000-sack-a-day mill has maybe four sifters and maybe half as many sections. Fewer machines, bigger machines make for more simplicity, fewer labor resources, which are good improvements, and it’s good to see progress.”

Satake optical sorter with removable vibratory feeder system for production flexibility and sanitation.

NIR and working from afar

A flour mill today is an efficient, computerized version of the roller mill and gradual reduction systems in place for many decades. Millers who in the 1960s looked to floor spills to spot problems now have a real-time understanding of how each element in the plant is performing, all viewed from screens in a control room or even from another location. That area continues to expand with each generation of technology introduced. The miller who in the 1970s regularly replaced worn belts to avoid potential fire hazards now runs lines mostly controlled by direct drives and, increasingly, variable frequency drives to run fans, airlocks and other components intelligent enough to sense a potential stoppage and divert product before the elements likely to cause combustion align.

The arrival of NIR, or near-infrared reflectance, meant millers no longer had to manipulate samples with their fingers or take them off site to a lab where a technician with a scale and an oven took four hours to test the product. NIR shortened the wait to minutes. Moving the data analysis computer to the mill streamlined things, as did training millers to calculate their own results. The latest updates automated the process and moved it online. 

“Knowing the quality of flour is important, and if it can be done automatically, it frees the shift miller to do something that can’t be done automatically, plus the mill and its customers get a better measure of quality because we’re measuring it all the time,” Martin said. “If a quality parameter isn’t where it needs to be, we can divert that product to a different storage bin, do some troubleshooting and know we have that product isolated for corrective action. A mill has to have the resources behind it to keep the instruments calibrated, and with most now on a network, it’s all about whether the network is strong enough. It’s a pretty exciting part of where the industry is going.”

These technologies and other examples of mills essentially running themselves are the future of flour milling, experts said. Already there are autonomous mill tracks in place that can run without a human in the building. It’s commonly called lights-out milling because when the miller leaves the area and the sensor times out, darkness ensues, but the mill continues to clean, sort, sift and grind.

Multinational equipment manufacturers such as Bühler are striving to stay at the forefront of automation innovation.

“Their ambition is to create an autonomous mill that really could operate by itself if a company wanted to or needed to,” Siemer said. “You can’t eliminate the human factor, but it’s another step toward automation.” 

As the 21st century rolls on, experts foresee manufacturers such as Bühler incorporating more electronics, more sensors, and enhancing multi-point sensor-based data collection. Essentially, sensors present real-time data on the temperature of the equipment, vibration, throughput and many more that comprise a massive trove of measurements being taken every second. Mills have to figure out what data are important for their grind and how to apply it toward improving the process. That typically means using data to improve mill yield, to keep flour products within specifications and to run in the most energy efficient way possible.

“The challenge is doing something with the data to tell us more about flour quality and productivity and energy usage — that’s when the data adds value,” Martin said. “You have to have the means to analyze data and then put value into what the data tells you. We’re just on the cusp of that. We’re starting to have roller mills that can tell us about roll temperature and roll force and kilowatts consumed — all toward reaching maximum efficiency and productivity.” 

Another key benefit? Integrated control systems that join on-site and remote management enabling remote troubleshooting. 

“In our case, working with Bühler, a miller can literally dial up Switzerland or Minneapolis and ask that person to get online and view the operating parameters and consult on what to do about it,” Siemer said. “Software suppliers can open the hatch, get inside and try to diagnose your system. Millers in different locations of the same organization can also share information with each other. It’s something we’ve just been able to do within the past few years, to call on experts, reliable people from different places and have them actually participate in the troubleshooting process in real time.” 

As US flour mills continue to migrate to new technology and processes that are more autonomous, there will be a need for skilled mill workers schooled in the new and the old, said Kent Juliot, vice president of research, quality and technical services with Ardent Mills. 

“Even in 10 years, the industry will still have older mills, so you’ll need people that know both sides, those who can manually adjust mill rolls but also understand the logic of an automated controls system,” Juliot said. “With labor shortages, newer systems can reduce the number of people needed, but the pressure from the technical side will be even greater, because the education and knowledge will have to span all the way down to just above the waterwheel. The future of milling is going to be exciting and new, but we can’t forget the old.”

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Sorted and binned

The methods for removing corn, soybeans, husks, straw and other dockage from incoming wheat were once limited to a basic separator and a scourer to clean out the dust from the crease. Mechanical cleaning gave way to aspiration, which paved the way for precision grain cleaning systems such as the color, or optical, sorter. It’s the closest thing to a revolutionary technology the industry had seen in about 60 years. 

These cleaning systems combine sophisticated cameras with precision equipment using sharp blasts of air to knock out impurities that may have commingled with wheat at an elevator or aboard a rail car. It eliminates non-grain contaminants and sorts supplies by characteristic. Color sorters have improved consistently since their debut. Today, most all new plants employ them, and many older mills have retrofitted them. The technology has moved from black-and-white to color cameras and now to infrared scanning. Sorting technology today allows mills to better handle damaged wheat. For example, it can salvage more good wheat from a shipment with elevated dockage, disease such as scab and other mycotoxins, such as vomitoxin. It’s clear to experts that the future holds further refinement of optical sorting technology. 

“Mill technology keeps improving, and if we think to the future, the technology in sorters will probably blow our minds in ways we can’t even dream of right now,” Juliot said. “For example, they currently use spectral analysis that can give you an actual analysis of each individual wheat berry and, in my opinion, they’ll become amazingly high-tech in the foreseeable future.”

Cleaning out impurities relies on the color sorter, which compares kernels with references it’s already learned, and reacts quicker than any human ever could. But what of the nearly invisible threats to food safety, the mycotoxins? Cutting-edge technology on the horizon aims to eliminate them with a method more efficient and economical than ever at a time when the US Food and Drug Administration has indicated pathogens are on their radar and near the top of their list.

“Pathogens are right up there with leafy greens and everything else on FDA’s list, so having a mitigation step in place, they expect you to have it,” said Brad Allen, chief technical officer at PHM Brands, Denver. 

Several methods of handling this problem are on the horizon. One of those already operates at PHM’s Dawn, Texas, US, plant, having been adapted for the food industry by PHM Brands’ Energis Solutions in a joint venture with the technology’s inventors. Energis is manufacturing equipment that produces a treatment solution on site. It yields a similar reduction to other systems developed since the turn of the century 22 years ago, “but we’re doing the head end of the process, so you’re not making a ready-to-eat claim like other methods do, but you’re getting the brand protection and you’re not going to get a recall,” Allen said.

The advance of that and future pathogen elimination technologies could spur adoption of an industry-wide standard, a development that would please Siemer. 
“It’s not something I’d like to make any money on as a proprietary advantage,” he said. “I’d just like to have everybody agree that we’re going to use it for certain products. And I’d like to see it applied to flour rather than wheat, because that gives you a lot more flexibility. Unfortunately, none of the systems that I’m aware of right now are used on flour, they’re used on wheat before milling. It gets kind of complicated. I know it’s significant right now, and I think it’s going to become more so.”

Genomes and unknowns

Some of the innovations likely to shape and shift flour production in the future are beyond the horizon for now. Breeders manipulate wheat to create varieties more likely to thrive in certain growing environments or to increase resistance to disease pressure. At some point, experts said, biotechnology and research in the wheat genome will generate some major advances to the milling process of flour production. That may have to do with the ease of processing the kernel, adjusting qualities such as protein, reducing gluten’s impact on those afflicted with celiac disease, or increasing gluten strength for use in pizza doughs, variety bread, and perhaps even pancakes. 

“As long as wheat quality is, as they used to say, 70% nature and 30% nurture, or 30% genetics, 70% environment, you’re not going to be able to be really precise, but I believe that biotechnology will soon have the biggest impact on the wheat foods industry in a positive way,” Siemer said. “If as many resources had been put into breeding wheat as have been put into breeding corn over the past 90 years, we’d be a lot further along, but that’s our particular cross to bear.”

Near the top of Siemer’s wish list is a boost to soft wheat resistance to alpha-amylase activity. That’s an enzyme in the wheat that starts to break down the endosperm shortly after the kernel is fully ripe, especially if moisture is introduced via rain on a mature, ripe crop. It leads to sprouting, which reduces the viscosity of the flour and locks it out of some applications, such as pie crusts.

“If wheat could just sit out there in the field for a week without degrading, as distinct from sitting out there for an hour if it starts raining, that would be enormous for the milling quality of wheat and would be one factor in the attractiveness of wheat as a crop here in the eastern Corn Belt,” Siemer said. “It would be more reliable. Farmers would know when they harvested it that it would be of good quality.”

After quality is established, wheat headed for the mill typically stops off for a lengthy stay in the temper bin to ready the kernels for efficient sorting. Of all the advances in milling over the years, the temper time has proven a tough nut that’s yet to be cracked. 

“One thing that hasn’t changed over the years is the miller’s desire for 24 hours of temper time for milling hard wheat,” Martin said. “If we could find a means to achieve the physical changes to the wheat kernel in a shorter time, it would be greatly beneficial. Bigger mills require more space for work-in-progress, or tempered, wheat. Bigger bins mean greater capital investment. 

“Also, if the mill is grinding spring wheat and the flour silos get full, I still have all that spring wheat WIP in my temper bins. I can’t change to another grist, so the mill has to stop and wait for space to come available in the flour silos. Mills with a 24-hour temper time have to know what they’re going to do tomorrow today. They can’t turn the mill on a dime so to speak.”

There have only been marginal improvements in tempering over the past few years. A step-change in technology to shorten the planning cycle or the development of an additive to reduce temper time to just a few hours but retain the effects for optimal grind is seen by the industry as a Holy Grail because of the flexibility it would enable. 

“If there were a way to do that,” Juliot said, “it would be transformative.” 
Until such an innovation comes along, improvements in flour milling efficiency, efficacy and food safety will continue to be incremental, millers and grain industry leaders say. And that’s not a bad thing, Siemer noted.

“I heard a miller say 45 years ago in one of my first months in the business, ‘I’d hate to be the person known for building the last grind-and-sift flour mill,’” he said. “But honestly, we’ve gone for all these decades, and nobody has come up with a better way of making flour, so we’ll see what happens.” 

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China hungry for more

By Susan Reidy

June 2022

China hungry
for more

World’s most populous nation reaches for self-sufficiency as it holds fast to food security

World Grain

©ChonnieArtwork – stock.adobe.com

It has the world’s most people and the second largest economy. It has successfully produced one-fourth of the world’s grain and fed one-fifth of the world’s population with less than 10% of the world’s arable land.


But China wants — and needs — more.


In 2019, China surpassed the United States and the European Union as the world’s top importer of agricultural products. While population growth essentially has stagnated, falling in 2021 to the lowest rate of growth since 1960, disposable household income increased 9.1% in nominal terms over last year. The nation is experiencing rapid urbanization and consumers’ preferences are changing to a more sophisticated diet.


This all leads to the need for more — more crops, more food, more imports. What China doesn’t necessarily have is more resources to meet these needs internally. Still, it will push for self-sufficiency, a goal it has had for decades that has come more into focus recently in official government pronouncements.


“It’s always been a concern, but two shocks sparked a renewed interest: the US-China trade war and African swine fever,” said Wendong Zhang, associate professor of economics, Iowa State University. “I think that another thing that also changed is that when China used to talk about self-sufficiency in agriculture, it was mainly talking about food crops. Now they’re probably thinking more broadly, this is food products.”


Chinese economic agencies, the National Development and Reform Commission and the agriculture ministry have all stressed security as a priority for 2022, pledging to secure the supplies of grain, energy and raw materials. It has even released detailed plans to set aside more land for soybeans, a crop that it had mostly given over to imports after entering the World Trade Organization (WTO) in 2001.


At the same time, the nation also seems to be relaxing its stance on genetically modified organisms, likely as a means to meet its goals through increased yield.


Still, analysts say it’s too much more, especially for soybeans, and China won’t be able to achieve those goals. At the same time, its actions seem to contradict policy, as China increases its purchase of soybeans and corn.


“This tension between what the government says and how it acts is really interesting,” Joe Janzen, assistant professor, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, told World Grain. “They are clearly managing some very serious trade-offs between a desire for security and to have enough food, and to be in control and be self-sufficient. That’s in part why they have to behave opportunistically. They make decisions that are right at that time, so when they really need commodities from other parts of the world, they go get them. When they feel like the cost of that is too great, they pull back. They are constantly managing this trade off.”


While the COVID-19 pandemic and now the Ukraine-Russia conflict has increased China’s push for self-sufficiency, it will still need to be a part of the world market to provide food security to its people.


“Although the Chinese government would want to be self-sufficient in all products, they lack the resources, especially for land intensive feed grains and meat products like beef, soybeans and sorghum,” Zhang said. “All they can become is more self-sufficient. They will continue to be a significant driver in the global market.”

©Nah Ting Feng - stock.adobe.com

History of reform

In its quest to feed more than 1 billion people, China has undergone multiple agricultural reforms. Grain output in 1949 amounted to 113.18 million tonnes, and the agricultural foundation was fragile. The government responded with land reform in the 1950s in which peasants were given their own land. During the First Five-Year Plan from 1953-57, gross agriculture output increased by 4.5% on average, according to a report by Guoqiang Cheng, Institute of Market Economy, Development Research Center of the State Council of China.


Over the next two decades, excitement for agriculture production waned under China’s commune systems, with output increasing by only 2.3% on average per year. Shortly before the next round of reforms, 250 million of China’s 780 million rural residents were living in poverty and food and other basic consumer goods were rationed. Grain output was 283 million tonnes and the average yield was only 2,600 kilograms per hectare.


In 1978, China launched a market-oriented rural reform, reigniting enthusiasm for agriculture production and boosting the nation’s overall gross domestic product. After those reforms, grain production increased from 283 million to 407 million tonnes in 1984.


Agricultural development entered a new phase in 1998 that included significant changes in the supply and demand, and strategic restructuring of agriculture and the rural economy. Production shifted from long-term shortages to equilibrium or even excess supply in bumper harvest years.


Cheng attributed the changes to technological progress, increased investment in agriculture, improved infrastructure for farmland, water conservancy and irrigation facilities, market-oriented reform of product pricing and greater openness of the agricultural sector to the outside world. Growth of the national economy, urbanization and growth in disposable income increased demand for meat products, seafood, fruits and vegetables.


As the agriculture sector developed and restructured, it also opened up to the outside world and integrated into the world trade system, Cheng said. This accelerated further with China’s accession into the World Trade Organization in 2001. Exports increased from less than $11.3 billion in 1992 to $31.03 billion in 2006, with an average growth rate of 7.5%. During the same period, imports increased from $5.3 billion to $31.99 billion with an average growth rate of 13.7%.


Through the years, agricultural imports grew at a much faster pace than exports, and today China is a net importer of agriculture products. In 2021, it imported 28.35 million tonnes of corn, an increase of 152% from 11.3 million in 2020, according to data from the General Administration of Customs. Wheat imports also hit a record 9.77 million tonnes, an increase of 16.6% from 8.38 million in 2020.

Planning for self-sufficiency

Chinese demand continues to outstrip domestic supply, particularly as the middle class grows and is willing to spend a large portion of its disposable income on higher quality food. China finds itself importing more and more, even as policy stresses the need for self-sufficiency.


The 14th Five-Year Plan (2021-2025), issued this February, called for annual grain production of no less than 650 million tonnes and meat production of 89 million tonnes. It also said retaining poverty eradication in rural areas, food security and seed development are top priorities.


“Pronouncements have come out in the last three or four months from the Chinese government suggesting they need to focus more on food self-sufficiency,” Janzen said. “At the same time, we have relatively high levels of soybean and corn exports from the US to China. It’s not because China loves the idea of importing US soybeans and corn, but because they need those products to meet short-term food security objectives.”


According to China’s published statistics, annual grain production has exceeded 650 million tonnes for seven consecutive years, including a historic high of 682 million tonnes in 2021. Meat production reached 88.8 million tonnes in 2021.


The plan also said scientific and technological innovations shall account for 64% of the growth of agricultural output by 2025. Use of fertilizers and pesticides must continue to decrease, and the use of animal manure must reach 80% or more by 2025.


To stabilize the grain planted area, the government said it will provide protective price policies with rice and wheat procurement, producer subsidies for corn and soybean growers and expanded scope of full cost insurance. It will keep 120 million hectares of arable land, with 103 million hectares dedicated to grain production. Total construction of high-standard farmland must reach an area of 71.7 million hectares by 2025. High-standard farmland is restricted to grain production.


The Chinese government is improving the safety net for farmers and experimenting with land reform, Zhang said. Before 2007, there was no agriculture insurance market and now China is the second-largest crop insurance market in the world.


“They’re offering a different variety of products, including revenue production products and incentivizing more machinery purchases,” Zhang said. “They’re also allowing farmers to pretend to own the land, so they are able to rent it out to another farmer. Now, about a third of the land is rented out, so that could potentially increase some of the production scales and efficiencies and allow the use of more machinery.”


China’s ability to achieve self-sufficiency depends heavily on the commodity, Janzen said. In staple grains such as corn, rice and wheat, it’s not far from self-sufficiency in part because the nation has made a conscious decision to focus on staple grains.


“It’s a zero-sum game,” said Stephen Nicholson, global grain and oilseed strategist for Rabobank. “If you focus on one crop, you’re going to have to import something from someplace else. It’s a steep curve for them to get to, along with trying to adopt all the Western practices to get to the yields, increasing hectares and adopting GM seeds. I’m a bit of a skeptic as to whether they’re ever going to be self-sufficient in anything. They are lofty goals, commendable goals. But I think the reality is it would be really difficult for them to be self-sufficient.”


Agriculture practices, seed varieties, lack of modern machinery are just some of the factors limiting yield growth, Nicholson said. Corn and soybean yields in China are about 60% of the US levels, Zhang said.


“When you look at our yield growth, we’ve seen nearly two bushels every year in corn and smaller in wheat and soy,” Nicholson said. “But they’re not seeing that at all. In some cases, they’ve had some issues over the last several years that production is relatively flat. Well, that’s not going to work.”


Corn production in 2022-23 is forecast at 265 million tonnes, a drop of 2.8% from the previous year. Corn imports are estimated at 20 million tonnes, down 4 million tonnes from 2021-22, but still the third highest year on record. China is building reserves in response to the pandemic and is preparing for any other external shocks, the USDA said.


“In addition, lower planted area for corn due to a shift to soy acres, as well as persistent, high domestic prices will further the desire for imports as market opportunities present themselves,” the USDA said.


The most recent Five-Year Plan calls for improving soybean production capacity in northeast China and expanding the planted area for rapeseed in the Yangtze River Basin. The 2022 No. 1 Document on agriculture and rural development specifically focused on soybean and other oilseed production, a change from previous years.


It includes subsidies to plant grains and oilseeds, intercropping corn and soybeans, increasing production of non-soybean oilseeds and adjusting oilseed utilization in animal feed. China has said it plans to boost domestic soybean production by 10% per year, for an overall increase of 40%, Janzen said.


“It’s not totally clear where those beans would come from,” he said. “Would it be additional acres or some kind of improvements in yield? Any sort of increase in soybean acreage will come at some expense of some other crop. That conflicts with the goals of self-sufficiency stated for other crops.”


One possible solution is intercropping, the practice of growing two or more crops in proximity, which reached 466,666 hectares in 2021, according to the USDA. China is calling for an increase of 1 million hectares this year. This could reduce corn area and yields, but the overall impact is small, the USDA said. Subsidies for intercropping could be as high as $824 per hectare, much more than for soy alone.


China’s soybean production in the 2022-23 market year is estimated at 17.4 million tonnes, an increase of just 1 million tonnes from last season, based on expected acreage of 8.9 million hectares and minimal yield growth. Total oilseed production is estimated at 62.4 million tonnes, up from 61 million tonnes in 2021-22, according to the USDA.


Oilseed consumption is forecast at 166.7 million tonnes with imports at 104.1 million tonnes, up from 98.4 million tonnes a year ago. Demand continues to outstrip domestic supply, so imports are expected to account for 62% of total domestic oilseed consumption.


Finding more acreage is no easy task. With urbanization, cities are taking up more land and expanding fruit and vegetable production also is swallowing up acres, Zhang said.


“Also, China pledges to be more sustainable and carbon neutral, so there are also programs to convert some of the previous cultivated fields back to forest or pasture,” he said. “There’s not a whole lot of new land that they can cultivate. They’re more thinking that with the better technology and more efficient management, they’re hoping for better productivity gain.”

GMO on the horizon?

Those productivity gains could come not only from more modern farming practices, but also the adoption of GMO technology. At some point, the pressure to approve GMO technology is going to be too great, Janzen said. The Five-Year Plan included increasing support for “modern agricultural science and technology research” with efforts on, among other things, biotech breeding. High-level Chinese officials have made strong public statements emphasizing the importance of biotechnology, the USDA said, and the Biosecurity Law of China came into effect in April 2021.


While China has not approved any genetically engineered (GE) food or feed product for domestic cultivation, it has issued biosafety certificates for cultivation of some domestic products. The USDA said there are 10 domestically developed traits that have biosafety certification that are waiting for variety registration for commercialization.


This January, China issued a revision of the major crop variety registration rules that define a clear pathway for domestically developed GE crops to be commercially cultivated, the USDA said. Domestically produced seed could be commercialized as soon as next year.


China has been hesitant in the use of GM in part because the general public has a distrust of the products, Zhang said, but also the government doesn’t want the technology to be dominated by foreign companies. Over the past 10 years, China has invested heavily in the technology, especially CRISPR and genome editing, he said.
“China is not that far behind and in some areas, it is probably even more advanced than its foreign counterparts,” Zhang said. “So there is more of a conscious push that way, but this still is going to be a long road.”


It took the United States about 20 to 25 years to improve yields 20% to 25% through the adoption of GM technology, he said, and even if China went full speed ahead, it would probably take the same amount of time.


Chinese officials have shown no willingness to accept safety testing data from outside of China without first conducting verification trials, the USDA said. This is a concern for foreign developers because they lose control over the timeline to conduct the trials and the trial results, the agency said.


Janzen said it’s more likely China will approve GMO for use in some kind of animal feed product versus products that go into the food supply chain.


“I think it’s probable, given the levels of GM adoption around the world,” he said. “But that decision has to be acceptable to the Chinese population.”


Nicholson questioned if GM is such a big issue for the Chinese, why do they import soybeans from the United States and Brazil?


“It’s more about what is convenient and what’s not to meet their political goals rather than some big upsurge in policy or some big public upsurge against GMOs,” he said. “If they decide this is what they’re going to do, and they’re going to be self-sufficient, they will say this is what we need to do. If nothing else, the Chinese are pragmatic.”

World market impact

Global disruptions, including the COVID-19 pandemic and the Ukraine-Russia conflict, has propelled China to further stress the importance of food security. And while those disruptions make the call for self-sufficiency louder, ultimately China will need to still be a major player in the global market to ensure it is prepared for all eventualities and can feed its 1.4 billion people.


“Sometimes that means having to source commodities from places where it wouldn’t otherwise source,” Janzen said, adding that US corn is a good example. Up until 2020, China didn’t buy too much US corn, but when Ukraine had a poor crop, it turned to the United States. Because that’s a way it can meet its objectives at the lowest cost. I think it will continue to be opportunistic in that sense. China has the economic wherewithal to import grain when it needs it from other parts of the world.”


Strategically, China wants to have a more diversified portfolio, to the extent it’s possible, Zhang said. For certain products, like corn and soybeans, the United States is indispensable.


“Overall, unless China dramatically increases yields, which is unlikely in the short run, it will continue to be very consequential in the global market,” he said. “Especially with the increasing income it could potentially play a bigger role in consumer-oriented agriculture products.”


There are a lot of moving parts related to energy policy in China and the United States that could influence agriculture markets, Zhang said. Low carbon fuel standards will impact the soybean market and change the relative price ratios for whole soybeans versus soybean meal.


“What will the Chinese want to do with the ethanol mandate, which is currently in suspension?” Zhang said. “That could change the calculation for China’s import needs for ethanol versus corn. Those are some of the things that are also very interesting to watch and see how this will play out.”


Another consideration is how much China will allow market price incentives to exist to help match supply and demand inside of China, Janzen said.


“Chinese farmers face prices well above the world price for most of these commodities, so they’re insulated from global markets,” he said. “That would be another lever the Chinese government could use to help meet its food security goals at lowest cost. But whether it will move even toward using market incentives domestically, and give up control, is an open question.”


It’s hard to say how the Ukraine-Russian conflict will impact China, analysts agree. Ukraine has been a significant import country of origin for China, and even occupied the top spot for a few years, Zhang said.


“There’s some uncertainty there so that’s why we’re seeing a little uptick in corn purchases from the US,” he said. “It will also depend on the duration and severity of the conflict.”


Nicholson said the Ukraine-Russian conflict could be a monkey wrench in China’s plans, but it will find a solution.


“The Chinese will find, whether it’s direct or intermediate, other sources of grain and make sure this doesn’t impact them,” he said. “Certainly, the political challenges with China are always going to be there. But I’m optimistic they’re going to continue to import, whether from the US or someone else.”

More than 5,000 flour mills operate in China, including those owned by the world’s largest milling company, Wudeli Flour Group. The company’s total daily milling capacity is 61 million tonnes (wheat equivalent).
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Global Vision: The World Grain Story

By Laurie Gorton

March 2022

Global vision:
The World Grain Story

Magazine celebrates 40 years of covering the grain, flour milling and feed milling industries from an international perspective.

World Grain

Publishing for global audiences is no easy task. Many try, but few do well. World Grain’s 40 years covering the international grain, milling and feed industries shows what it takes to succeed.


“World Grain was Morton Sosland’s brainchild,” said Arvin Donley, editor, World Grain. “Morton had the foresight to see that global trade of agricultural commodities was going to expand in the coming decades, and developments in the grain industry in one country can have a profound impact on another.


“World Grain is a publication that highlights the interconnectivity of nations when it comes to the production and processing of grains and oilseeds.”


The magazine’s longtime publisher and now chairman of the company, Charles Sosland, said, “Our editorial quality today leads the market. World Grain has better staff writers and better qualified correspondents than any other publication in this field, bar none.”

The opportune time

The year 1982 provided a seminal moment to launch onto the world stage a publication that focused on the global grain trade. It had been a decade since the Great Russian Grain Deal roiled markets. Soon, however, the powerful agricultural hegemonies in the USSR were crumbling, China had started its shift to market economics, and the two big grain trading government monopolies in Canada and Australia were headed toward their twilight.


It was also the year of the China Encounter, a grain, milling and baking symposium jointly sponsored by Sosland Publishing Co. and the Bureau of Foreign Affairs in the Chinese Ministry of Agriculture. Ten years after US President Richard Nixon’s breakthrough visit to China, it took place to great success Sept. 9-12 in Beijing and attracted delegates from China and 12 different nations, including the United States.


Introducing the new magazine in its first issue the next month, Morton Sosland wrote to its readers, “World Grain will be a pivot for the flow of information needed to allow the world’s most vital industry to improve its productivity, efficiency and profit-making capability.”


Nearly 40 years later, Charles Sosland recalled his father’s vision: “World Grain came about because of what Morton started at Milling & Baking News in the 1970s, specifically his interest in and interactions with grain business owners and executives around the world. This also led to him breaking the news about the Russian Grain Deal, news that secured the place of Sosland Publishing among the world’s leading media.”


Neil Sosland, executive editor, markets, and Morton’s brother, added, “We had been thinking about this concept for a long time. The company and The Southwestern Miller were founded in 1922 to serve regional flour millers. Although that magazine was directed at the US, we always had some readers around the world.”


World Grain’s first issue appeared in October 1982. It assembled an 82-page folio, and its front cover featured the planet Earth as seen from space. Its first country focus — still among the magazine’s most popular series — examined the USSR. Headed by Morton Sosland as editor/publisher, the magazine recruited Tony Bush, a noted British business journalist, to be managing editor.


As a new magazine, it could call on authoritative reporters and writers, including Morton Sosland, Josh Sosland, Melvin Sjerven, Jay Sjerven and Roger Johnson. On the business side, it applied the talents of Mark Sabo, director of publishing; Rob McKnight, director, North America advertising sales; and Charles Sosland, director, international.


“In those early years, Tony Bush and Neil Sosland worked with the magazine’s editors, later including Susan Robinson, Stormy Wylie and Melissa Alexander,” Charles Sosland said. “Our current editor, Arvin Donley, came to us as an already well-respected journalist, knowledgeable about the grain and milling fields. My own career started on the milling and grain side, and later I became group publisher for our grain titles.”

Getting onboard

The idea was right, the market was there, and the timing was promising. But what about advertising support?


“After all, publishers also need to be able to monetize their concepts,” said Meyer Sosland, chief operating officer and executive editor, Sosland Publishing Co. He was previously an assistant editor of Milling & Baking News, soon moving to managing editor of World Grain. He is Charles’ son.


“We had talked to the world’s major grain suppliers and millers and learned that becoming the window on the world would be unique,” Charles Sosland said.
Getting the advertisers onboard was somewhat more difficult.


Neil Sosland observed, “With announcement of World Grain, we encountered a certain resistance from European advertisers to an American publication going to an international audience.”


Charles Sosland explained, “The three most powerful equipment suppliers in Europe were concerned that we would become a marketing tool for their American competitors. Only after I relocated to London with my family and had success with two Italian manufacturers did the other three big Europeans come around.”


Those “early in” advertisers were rewarded with prestigious positions opposite “Letter from the Editor” and on the front and back covers. These placements continued for many years.


To further enhance the international positioning of World Grain, publishers and editors attended and reported various national industry meetings as well as the big international shows. This also helped buttress the magazine’s relationships with international readers and advertisers.


“At the time we launched World Grain, there were Italian and UK publications, each attempting to go international,” Charles Sosland remembered. “The UK title was as old as our Southwestern Miller (now Milling & Baking News).”


Printing and mailing presented other hurdles to overcome. Almost as soon as it launched, World Grain circulation boasted subscribers in nearly 130 countries.
“We went through any number of printers,” Charles Sosland said. “We encountered problems not only with timely delivery of the magazine but also paper stock — lightweight stock is less costly to mail but not so durable.


“And mailing was a significant challenge. We finally worked out an arrangement with our printer in Singapore, Hong Kong and Kuala Lumpur in Malaysia. They found a company that would ship World Grain to local post offices around the world within a week of publication. Then, it was up to the local post office to get the magazine out to the readers. It can still take two weeks to two months to reach readers, but delivery has much improved.”

A world view, strongly voiced

World Grain’s media kit today describes the magazine as being “the international business magazine for grain, flour and feed.”


“Our magazine circulates monthly to an estimated 38,000 readers in nearly 160 countries,” Donley said. “The overall mission is basically the same as it was in 1982, which is to highlight industry trends, important events and anything else that is relevant to our global audience. What has changed is how we deliver this information to our readers with all the digital options we now have to disseminate our news product.”


World Grain readers are managers, owners and operators of major grain storage and handling concerns and processing facilities responsible for manufacturing flour and feed. The magazine’s issues are delivered to six continents: Africa, 10%; Asia, 15%; Oceania, 10%; Europe, 22%; North America, 25%; and South America, 18%.


“Morton recognized that the way grain is stored, handled and processed is done much the same way around the world,” Charles Sosland said. “Milling is milling. Flour is flour. Feed is feed. Grain merchandising is the same way. And most of the managers in this field speak and read English.”


Now it was up to the editors and correspondents to bring compelling content to readers around the globe.


“We had to get out and address our talents to reporting on grain on a worldwide basis,” Neil Sosland said. “World Grain was a definite extension of Milling & Baking News but also definitely a world publication.”


Fortunately, World Grain had more than one ace in the hole. Because grain and milling are lynchpin topics for Milling & Baking News, World Grain has always been able to count on strong participation within its editorial and feature pages by key Milling & Baking News editors.


Company president and editor of Milling & Baking News, L. Joshua Sosland, recalled writing many articles for World Grain in the days that he served as Milling & Baking News’ markets editor. The August 2021 earthquake in Haiti brought to mind a trip he took 10 years ago a few months after an even more devastating earthquake. He visited the country’s largest flour mill.


“It was a uniquely tragic story,” Josh Sosland said. “The managers described how work to clear the rubble was frequently interrupted to listen for possible survivors. The seaside dock that served the mill was the only operating port facility in the country for quite a long time.”


Over the years, several editors and publishers influenced the magazine’s performance. Morton Sosland was World Grain’s editor/publisher from 1982-93 and editor-in-chief from then until his death in 2019. Neil Sosland was editorial director for much of the magazine’s first decade (1984-93). Tony Bush was managing editor from 1982-84 and then moved full-time to Agribusiness Worldwide.


Melissa Cordonier Alexander, recruited from vice president of public affairs at the Kansas City Board of Trade, headed the magazine and later managed its annual directories (13 years, 1983-2011), exerting significant influence. Others who held the role of editor or managing editor included Susan Robinson (10 years, 1988-98), Stormy Wylie (eight years, 1994-2002), Suzi Fraser Dominy (four years, 2002-06) and Meyer Sosland (12 years, 2004-16). Eric Schroeder, Milling & Baking News’ managing editor since 2004, added similar duties for World Grain in 2016. The longest serving, however, is World Grain’s current editor, Arvin Donley (17 years, starting 2005), nearly matched by Susan Reidy (15 years, starting 2007) as senior editor and, previously, editor of Biofuels Business.


The individuals who served World Grain in sales and publishing roles have similar long tenure. Mark Cornwell (20 years, 1994-2014), a World Grain sales rep, succeeded Charles Sosland as publisher in 1999. When he left, another veteran Sosland sales rep, Dan Flavin (23 years, starting 1999), took over as publisher.


World Grain was launched as a bimonthly, but three years later in 1985, it went to nine regular issues a year and an international buyer’s guide as its 10th. In 1985, it was the first in its field of coverage to compile and publish an international milling directory — 4,000 mills in 80 countries.


Regular issues rose to a full 12 monthly editions annually in 1994. Addition of Grain & Milling Annual and Spanish, Chinese and, most recently, Russian language editions plus regional and international buyer’s guides brings the magazine to 18 separate issues in 2021.


It also has added coverage of feed.


“There was always a little bit of feed industry coverage mixed in, but it wasn’t until about eight years ago that we made a concerted effort to significantly increase our coverage of the global feed industry,” Donley explained.


Flavin explained further, “Consolidation within the industry has given us the opportunity to expand our coverage to include feed-related articles and readers.”
Circulation also was expanded to add producers of grain-based biofuels.


“Basically, we’re interested in any type of grain processing,” Donley said. “I anticipate that specialty milling is going to become a bigger part of our coverage as we move forward because more companies are making it a bigger part of their operation.”

Content that fits the market

“Above all, World Grain strives for diversity in its content,” Donley said. “By that I mean we try to have important news from every continent in each issue, as well as meaningful content on each of the three industries we cover. We also strive to include a nice mix of market news, profiles on companies and individuals, new construction projects, operations features, editorial commentary and news from industry suppliers.


“It’s quite a balancing act, but one we take very seriously.”


As intended from the first, World Grain is distinctly international in editorial scope.


“World Grain was meant to be the international version of Milling & Baking News, but more operational in focus,” Charles Sosland said.


World Grain’s editorial menu reflects today’s broad trends and places them in context of its readers in the grain, milling and feed sectors.


From the first, each issue carried one or more features about significant milling and grain operations, often profiling the newest and largest such facilities.


“The industries we cover are dominated by companies that have been around for decades and, in some cases, more than a century,” Donley said. “But those companies are always erecting new facilities, and we are always eager to feature a new grain terminal, flour mill or feed mill. These new plants are of great interest to our readers because they often feature the newest equipment the industry has to offer.”


Interviews provide commentary from industry leaders. These individuals range from the EU’s Minister of Agriculture, to the US Secretary of Agriculture, to the heads of the former USSR’s Exportkhleb, Ceroil Foods in China and the Canadian Wheat Board. The chief executives of major millers and grain-based associations around the world also have had their say in the pages of the magazine.


The country focus articles, included in each issue from the beginning, profile government policies concerning agriculture and detail the agribusiness conditions in countries on every continent except Antarctica. All told, the series has taken readers around the world several times.


“There are several dozen countries that qualify as major players in the industries we cover, and we try to feature them every few years on a rotating basis,” Donley said. “Others, such as China, Brazil, the US and Canada, are updated more frequently because their ag industries are so large and dynamic.


“We do get occasional input from our advertisers who inform us about countries seeing the most growth in terms of added grain storage and processing capacity. It has always been one of our most popular features, and we are careful during our selection process to make sure all parts of the globe are represented in a given year.”


The magazine regularly covers new technologies, a focus established during Neil Sosland’s editorial management. Its coverage of pneumatic conveying, color sorters and double-roll roller mills gave many international readers their first glimpse of these state-of-the-art systems. The potential for “lights out” milling was reported in 1992.


Ethanol received front cover attention from World Grain. In 1988, the magazine reported a Swedish pilot project for making fuel ethanol from cereal grains. During ethanol’s boom years, 2003-08, World Grain took readers to visit many ethanol production facilities, described its manufacturing technology and cautioned about diversion of grains from food and feed into fuel. Although ethanol has waned considerably, it’s still an active subject for the magazine.

Today’s hot topics

The interests of World Grain’s audience in the grain storage, handling and trade arenas, as well as those active in flour milling and feed manufacturing, share common themes.


“Product safety has become hugely important,” Donley observed. “Personal safety, whether it’s preventing grain dust explosions or grain entrapment or keeping employees out of harm’s way in processing plants, is also an issue that drives our coverage, as is sustainability.


“These industries are also dealing with increasing amounts of government regulation, which can significantly impact these tight-margin businesses.”
One emerging trend is blockchain technology and the impact that will have on everything from grain trading to how flour and feed mills operate.


“New technology is always at the forefront of World Grain’s coverage because it can revolutionize how grain is stored, processed and transported,” Donley said.


Climate change has been a significant editorial subject for World Grain since the 1990s. Articles detail its implications for agriculture generally and cereal grains specifically. The topic is frequently the featured subject of the magazine’s front covers.


“As the weather gets hotter and more extreme, it is having a dramatic impact on crop production,” Donley said. “In recent years, many countries, most notably Australia, have seen crop output significantly reduced due to drought. The changing climate is moving more grain production north in places such as Canada and Siberia. They are now growing soybeans, which would have been an unthinkable development just a few years ago.


“While production of those crops expand into those areas, the concern is that places like Australia and the Southern Plains in the US, which already had a warm, dry climate prior to the recent extreme climatic developments, will have difficulty growing crops in the near future. With the global population projected to increase to nearly 10 billion by 2050, the world simply cannot afford to have grain production curtailed because of climate issues.”

Speaking in Tongues

When Morton Sosland introduced World Grain’s inaugural issue, he called attention to plans to offer some editorial content in Spanish. That year, the magazine provided several technical articles and news items in Spanish translation. This practice continued for several years, culminating in an all-Spanish language edition appearing in 1999 and every year since. A Chinese-language edition was added in 1985 and, most recently, a Russian edition.


“The foreign language editions of World Grain have continued because our advertisers believe, as we do, that this is a strong enough market to support its own language publication,” Charles Sosland explained. “It gives us a springboard to other foreign language publications in those countries and others.”


The magazine’s relationships with correspondents in these regions continues to be essential. For example, a grain science professor in China who possessed an entrepreneurial character was the key to the Chinese edition, Charles Sosland said. And there were also several well-established equipment manufacturers active in China who offered advertising support.


Although English is the common technical language for most of the world, World Grain recognized that some regions did not share the same fluency.


“The size of those markets justified advertisers’ requests for ads to be provided in those languages,” Charles Sosland said. “I’ve been asked about publishing similar editions for the Middle East, but we don’t yet have opportunities in that region, nor is there a common language we could use.”

Posted on

The fall and rise of Russian wheat

By Arvin Donley

December 2021

The fall and rise of
Russian wheat

Once highly dependent on imports, Russia has become the world’s top wheat exporter.

World Grain

©scherbikovav – stock.adobe.com

Wheat is not only sown into Russia’s rich, black soil, but also woven into the cultural fabric of the agricultural powerhouse that straddles Eastern Europe and Western Asia. The image of wheat stocks can be found on Russian and Soviet Union-era flags, monuments, and artwork, reflecting the food grain’s importance as a national symbol of abundance and prosperity.

Recognized throughout history as a leading wheat producer, it wasn’t until recently that Russia began flooding the international market with significant volumes of the grain. In fact, throughout the latter part of the 20th century, Russia depended heavily on wheat imports to feed its people and its burgeoning livestock industry.

How did Russia go from being largely self-sufficient in wheat during the first 70 years of the 20th century to being among the world leaders in imports the century’s last three decades, only to dramatically reverse course and become the world’s leading wheat exporter during the last five years?

The fall and rise of the Russian wheat industry is a complicated story, influenced by international politics, domestic political and economic ideology, the country’s notorious volatile weather, and the ups and downs of the domestic livestock industry.

William Liefert, formerly of the US Department of Agriculture’s Economic Research Service where he specialized in Russian and Former Soviet Union agriculture, describes the “black soil region” in southern Russia as being among the best agricultural land in the world.

“That land during the times in modern history when there has been sufficient peace has naturally been a surplus grain-producing region and exporter, as it is now,” said Liefert, noting that the 19th century Russian empire was a major grain exporter.

In the following century, the czarist regime’s collapse in 1917 led to the Bolsheviks’ rise to power in Russia and the formation of the Soviet Union. After consolidating authority in the late 1920s, Josef Stalin pushed for mass industrialization, which included agricultural collectivism, as part of the new Soviet Communist vision.

“There was suddenly complete state control of the economy,” Liefert told World Grain. “This led to mayhem in agriculture. About half of all livestock in the country was destroyed because the peasants decided they weren’t just going to hand it over to the government. It led to a horrible famine that centered on Ukraine, which was largely a man-made policy event. It did not have to happen. It’s a subject of historical debate that anywhere from 4 million to 10 million people died in that famine.”

Eventually, the Soviet Union became largely self-sufficient in grain, particularly after World War II through the 1960s. Although yields were below average compared to other leading wheat-producing nations, the Soviet Union was able to remain self-sufficient due to the enormous amount of land that was dedicated to grain production.

But in a Soviet agricultural system described as having “no strength, only weaknesses” by current Russian Grain Union President Arkadiy Zlochevskiy, farmers were “demotivated to improve production assets and make technological improvements” during that era.

“With the lack of motivation and in the context of the (planned) economy, even the program of virgin land development, which was called to the save the country’s food safety, didn’t help,” Zlochevskiy told World Grain.

Dimitry Rylko, general director of the Moscow, Russia-based Institute for Agricultural Market Studies (IKAR), said the strategic shift toward increasing imports became necessary.

“The Soviet system could not afford any longer the food shortages in normal, peaceful times,” Rylko told World Grain. “On the other hand, they could not keep up with growing consumer demand against the background of fixed wholesale and consumer prices and, basically, state-owned agriculture. The only way of solving this fundamental contradiction was to enter the import market.

The Great Grain Robbery

With domestic grain production trending downward and severe drought conditions in the early 1970s hindering output even further,the Soviet Union quietly changed course from its self-sufficiency strategy by brokering a secret deal to import grain from its arch-political enemy, the United States.

In July 1973, the Soviet Union purchased 10 million tonnes of mainly wheat and corn from the United States at subsidized prices, which caused global grain prices to soar. Soviet negotiators worked out a deal to buy the grain on credit but quickly exceeded their credit limit. American negotiators did not realize that both the Soviets and the world grain market had suffered shortfalls, and thus subsidized the purchase, leading it to be dubbed the “Great Grain Robbery.” The strategy backfired and intensified the crisis as global food prices rose at least 30% and global grain stockpiles were decimated.

“The farmers were happy, but the rest of the world was wondering what the heck was going on,” Liefert said. “What people may not know is the Great Grain Robbery coincided with a change in Russian policy regarding the expansion of the livestock sector.”

Liefert said the motivation for the sudden influx of imported grain wasn’t only to ensure low food prices and food security for the Russian people.

“Beginning in 1970, the Soviet regime decided to expand the livestock sector,” Liefert said. “They saw increasing meat and dairy production as the most direct way to increase the standard of living. It was actually kind of a benevolent policy. They began offering huge subsidies to the agricultural economy, mostly to the livestock sector. They succeeded in increasing the amount of meat and dairy products, but it came at a huge cost. Huge resources were thrown at that sector.”

From 1970 to 1990, the Soviet Union was a large importer of not only grain but soybeans and soybean meal as it attempted to bolster its livestock industry. However, when the Soviet Union dissolved in 1991, and Russia returned to being a singular country transitioning from a planned to more of a market-oriented economy, the government could no longer afford the subsidies, so they were eliminated.

“Without those subsidies, input prices rose significantly relative to output prices,” Liefert recalled. “Farmers could no longer afford all those inputs, and with the decline in inputs, outputs also fell considerably.”

He noted that Russia’s annual grain production fell from 95 million tonnes to 63 million tonnes during that 10-year period. But it wasn’t just the unfavorable grain prices versus high input costs that led to the slump in grain output. The Russian livestock sector contracted by about half in the 1990s, with annual meat production falling from 7.2 million tonnes in 1991 to 3.6 million tonnes per year in the final four years of the 20th century, Liefert said.

“The contraction of the livestock sector meant they didn’t have to import all that feed grain or produce so much domestically,” he said.

Russia’s two biggest advantages in wheat production

When it comes to wheat production, Russia has several advantages over many of its competitors.

“One of the real advantages is an abundance of nutrients in the soil, which is enormous,” said Russian Grain Union President Arkadiy Zlochevskiy. “We have the largest reserves of black earth – the most fertile type of soil. We have territories like the Kulunda steppe in Altai Territory, with potassium reserves large enough for 1,000 years. This is not taking into account that this reserve is being replenished each year. This means that for us, nutrients appear to be cheaper than for our competitors.”

A second advantage is cheap agricultural labor, which drives down production costs, Zlochevskiy said.

But the labor cost advantage is a bit of a double-edged sword, he concedes.

“The government targets to raise the incomes in rural settlements from the current 53% to 57% of the city dwellers’ incomes,” Zlochevskiy said. “This is not much, especially if we compare these figures with other countries. This (low incomes in Russian rural areas) is not good, but it is one of the factors of our competitiveness.”

He said there is a perception that Russian agriculture has a third advantage — access to large amounts of freshwater — but there are logistical problems.

“Indeed, we have large reserves of freshwater, but it is mainly concentrated in Baikal,” he said. “In order to bring it to a field, you’d waste time, and transportation costs would be tremendous.”

A golden era of Russian agriculture

After a difficult decade of transitioning to a more market-oriented economy, Russian agriculture began to reap the benefits of the new system and the shift from grain importer to exporter began.

“The main factor, which had a number of spinoffs, was privatization of the Russian economy and the shift to free market prices,” said Rylko, who also noted that land privatization, significant investment in port infrastructure, and the emergence of agro-holdings, or large-scale farming operations, helped Russia become a major grain exporter.

And once again, Russia’s decision in the early 2000s to strive for self-sufficiency in meat production benefited the grain industry as demand for feed grains increased sharply.

“The main goal of the Russian agricultural policy ever since the 1990s has been to revive the livestock sector and make the country as self-sufficient as possible in agriculture,” Liefert said. “A lot of that has been achieved. At one point Russia was importing over 3 million tonnes of meat per year. It is now importing about one-tenth of that.”

To supply the growing livestock sector, feed its 144 million people and earn the designation as the world’s top wheat exporter, Russia had to dramatically increase wheat output, which at the turn of the century was around 30 million tonnes per year. Mainly through increased yields, Russia saw its wheat production double to 60 million tonnes in 2010 and to a record 85 million tonnes in 2020.

“When you look at the last two decades, Russia has shown such impressive growth,” Stefan Vogel, global sector strategist for grain and oilseeds at Rabobank, told World Grain. “You look at the acreage changes; they’ve gone up 30% to 50% for many of the grain crops such as wheat and sunflower seed. Production has grown three times more than it was. Wheat production nowadays is 150% above where it was 20 years ago. It’s been impressive to see how much this country was able to scale up production.”

But bolstering production was just part of the equation to becoming a leading wheat exporter. Equally important was investing heavily in infrastructure improvements at the Port of Novorossyisk and other Russian port terminals.

“As soon as they started exporting wheat in large volumes, they realized they had great potential in this area but there were bottlenecks at the ports,” Liefert said. “Before they were importing grain, now they’re exporting it, and to export you need a lot more storage capacity at the ports.”

Mostly private investors have poured millions of dollars into port infrastructure improvements, including installing newer, larger grain storage bins, and dredging the sea floor to enable bigger ships to enter the port for loading.

The port expansions, which began in the early 2000s, have accelerated in recent years. In June, United Grain Co., Demetra-Holding and Federal State Unitary Enterprise Rosmorport reached agreement to develop a new pier at the Port of Novorossyisk to enhance the transshipment of grain cargo. It will double the total transshipment capacity at the site to about 25 million tonnes from 13.6 million tonnes, while increasing capacity of one-time storage to 870,000 tonnes from 370,000 tonnes.

The first year of the 21st century, Russia exported a modest 696,000 tonnes of wheat. Ten years later, having made tremendous inroads into Asian, Middle East and African markets, Russia increased that total to 18.5 million tonnes. By 2018, Russia more than doubled that total when it exported a jaw-dropping 41.4 million tonnes of wheat, which still stands as a record. Since then, the country has exported around 35 million tonnes per year.

To a certain degree, Russia’s push to become the world’s leading wheat exporter may have been precipitated by a lengthy price decline of oil and natural gas, which for many years have been Russia’s most lucrative export commodities. Despite the current spike in oil prices, many countries are vowing to switch to green alternatives, putting the long-term future of fossil fuels in doubt.

Perhaps that is part of what inspired Russia’s push for more revenue from agricultural exports. In 2012, Russian President Vladimir Putin boldly stated that Russia would double its grain exports by 2020.

With that goal met, the question is where will Russia’s grain industry go from here? Will it remain a powerhouse wheat exporter? Will it become a bigger producer and exporter of other grains? Will some unforeseen issue such as climate change or geopolitical tensions negatively impact its role as wheat supplier to the world market?

At the turn of the 21st century, Russia produced around 30 million tonnes of wheat per year. The country doubled that total by 2010 and in 2020 set a production record of 85 million tonnes.

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Opportunities and challenges ahead

When looking to the future, one must always consider that while Russia has become a more market-oriented economy, it still operates under more government control than its wheat-exporting competitors such as the United States, Canada and Australia.

Since June 2021, Russia has placed a floating tax on wheat exports, reportedly to tame food inflation, which has gripped the country, as well as most of the world, in recent months. Historically, Russia has been quick to impose export quotas or even bans during times of drought or domestic food inflation. In 2010, after drought devastated the country’s wheat crop, it imposed an outright export ban, a move that caused global wheat futures to spike and may have indirectly contributed to the Arab Spring uprisings in the Middle East.

“I believe it is best to let the free market decide and then the producers and supply chain can work it out,” Vogel said. “But given how tied wheat prices are to bread prices, I think what Russia is doing right now is a better way than banning exports completely.”

Zlochevskiy said the Russian government’s interference with grain trade does a disservice to its farmers.

“The government doesn’t understand that we struggle for the sales market, and they constantly hamper farmers’ motivation,” he said. “We saw this back in 2014 when we had begun supplying durum wheat to the European Union. And at that moment, the government introduced a floating export duty, which primarily hurt the most expensive product items. All products with a price above ($180) were subjected to a 50% duty. This decision killed our exports of durum wheat. There is no incentive for farmers to grow it as long as no sales markets are available, so farmers stopped investing in this segment.”

If not durum wheat, is there potential for Russian farmers to become larger producers of other high-value grains and oilseeds? Opinions are divided on the subject.

“By all means this is going to happen,” Zlochevskiy said. “Motivation to grow wheat is going down, while to grow soybeans, to the contrary, is rising. The demand for corn is stable, primarily because livestock producers are yet to realize its potential as a feedstuff. However, the time will come when the demand for corn on the domestic market will rise.”

While Vogel doesn’t foresee a significant increase in Russian soybean production, he does see potential for greater production of another oilseed.

“I think the crop to watch besides wheat is rapeseed,” he said. “There is potential to see that rising, particularly in times when you have Canada facing a drought, prices for canola being high, and Europeans still scrambling for imports. I assume the Russian farmer will look at that opportunity and invest more on the rapeseed side.”

While Russia has succeeded in modernizing its grain infrastructure at port terminals, the country still lags well behind its biggest grain export competitors with mostly outdated inland grain infrastructure.

Vogel said Russian rail and waterway grain transportation systems are in need of a significant upgrade.

“Given that rail is still largely state-owned, there may be issues with getting enough rail cars and getting a competitive freight rate,” Vogel said. “When you compare the big grain companies in other parts of the world – ADM, Bunge, and Cargill in the US, for instance, have developed a nice supply chain from the inland elevator all the way though rail transport and river transport. It’s the same more or less in Brazil. I don’t see that happening in Russia where the international companies haven’t developed as much strength as in other exporting regions.”

In terms of increasing wheat production, there are two paths to consider: Expand the amount of planted area or improve the yields on the land that is already in production.

The problem with expanding wheat acreage is that most of the land that could be brought into production is marginal at best, Rylko said.

“We have truly vast land reserves, but it wouldn’t make much economic sense in involving this land in grain production,” Rylko said. “We need first to improve effeciency of already existing operations, in particular, to boost already ongoing digitalization of our farming. We should not stand on the path of virgin land development. This is expensive and promises poor returns.”

He is more optimistic regarding the potential for crop yield improvement.

“We still have big reserves regarding fertilizer and pesticide application,” Rylko said. “Moreover, one can see quite big intra-regional differences as the best farmsteads in Russia are using more inputs and achieving higher (yields) than average farms.”

The country’s farmers also have been slow to adopt no-tillage farming techniques that reduce soil erosion, increase soil biological activity and increase soil organic matter, all of which can lead to economic gains for farmers over time.

“Such a big shift requires a combination of big investments, big patience and big knowledge,” Rylko said. “So, despite the tremendous success, there is still a lot to do on the already utilized lands.”

Wheat quality is another area with room for improvement, although Rylko noted that progress was being made.

“I remember just a few years ago, in the middle 2010s, that Russian exporters dreamed of shifting from the 11.5% to 12.5% protein category,” he said.

“For at least the last four seasons in a row this dream is the reality: 12.5% has become a predominant export quality. Amazingly, this season we haven’t seen any vessel shipped by the Black Sea terminals with protein below 12.5%.”

The image of wheat stocks can be found on Russian and Soviet Union-era flags, monuments, and artwork, reflecting the food grain’s importance as a national symbol of abundance and prosperity.

Russia no stranger to geopolitical issues impacting trade

In a world that is divided politically by democratic and autocratic governments, it’s not unusual to see agricultural trade disputes between countries with differing philosophies. This has especially been the case with Russia over the years.

In 1980, the United States, which at the time was a major supplier of wheat to the Soviet Union, halted shipments to Russia in protest of Russia’s invasion of Afghanistan. In 2014, Russia, in a much better position from a grain reserves standpoint, banned high-value agricultural imports from the United States and Western European countries. The ban was Russia’s response to geopolitical tension with the West stemming from the country’s conflict with Ukraine.

Currently, political tensions between the United States and China have resulted in some restriction of trade between the two countries. Stefan Vogel, global sector strategist for grain and oilseeds at Rabobank, said it’s possible that Russia, which is more politically aligned with China, could see its trade flows altered due to the China-US conflict.

“There was a study earlier this year about what would happen if the trade wars between the US and China worsen significantly to the point where the countries barely traded with each other,” Vogel said. “It could be a situation where you start to see blocs of trade with the US, Australia and Europe in one bloc and Russia and China forming a natural bloc on the other side. In that case you could see a future where China would import more wheat from Russia for feed and replace some corn.

“It is a situation where if there is further deterioration of the situation, it could also involve countries sympathizing with either the US or China, and the agricultural sector could be heavily impacted by such moves. China relies heavily on soy imports but that’s not something Russia can easily supply.”

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Digitization transforms commodity markets

By Susan Reidy

September 2021

Digitization transforms
commodity markets

Electronic trading technology ended 150-plus years of open outcry buying and selling and has potential to transform the grain elevator’s role.

World Grain

Photo courtesy of CBOT records: Series V – Public Relations Department.

From the sidelines of the Chicago Board of Trade trading floor in the early 2000s, Tanner Ehmke, then a reporter for Dow, witnessed the beginning of the end of open outcry trading.

 

“I was there to watch the day when the electronic platform went online and started trading side-by-side with open outcry,” said Ehmke, who is now a CoBank lead economist for dairy and specialty crops. “You could see open outcry disappear right before your eyes.”

 

The appeal of anonymity with electronic trading along with the speed, cost savings and boundless opportunities meant the technology quickly gained ground.

 

Exchanges around the world that used the open outcry system for more than 150 years closed their trading pits and pushed toward digitization. Buying and selling that used to be done in pits by traders in brightly colored jackets, holding tickets, and shouting orders back and forth, is now done around the world with a click of a computer or the touch of a phone screen.

 

“The change from open outcry pit trading to electronic trading in the last 15 years is the biggest technical change in modern futures trading in the last 150 years,” said Scott Irwin, Laurence J. Norton Chair of Agricultural Marketing, University of Illinois, Urbana-Champaign.


The exchanges themselves developed in the mid-19th century as a central market for delivery, sale and purchase of commodities. Traders could meet face-to-face and make verbal contracts for the future delivery of crops such as corn, soybeans and wheat. It helped insulate the producers and consumers from drastic seasonal and supply fluctuations that were common during that time.


Exchanges emerged in cities along navigable waterways — Chicago, Kansas City, Minneapolis and New York City. In the following century, new technology such as the telegraph and telephone, improved trading, especially from off-site locations. But it wasn’t until electronic trading in the 1990s and beyond, that exchanges started eliminating trading floors and consolidating operations. With the CME closing its trading pits this year, open outcry for agriculture commodities came to an end.


Looking to the future and possible disruptors, the use of blockchain for trading hasn’t taken off as some industry experts thought it would. Still, digitization is having ripple effects throughout the supply chain and leading to a changing role for grain elevators as farmers become savvier at marketing their own bushels. There’s also been the birth of new technology companies such as Covantis and Agriota that seek to modernize and streamline trade and post-trade activities.

 
“A lot has changed just in the last 20 years,” Ehmke said. “I wouldn’t say the pace of change is slowing; there will continue to be new innovations that will expedite these trends of consolidation and faster and lighter trading platforms. You can bet on that any day of the week.”

Market history

While some form of futures trading can be traced back to ancient Greek and Phoenician merchants who sold their goods throughout the world, the modern globally traded futures markets have their origins in the 19th century United States, according to CME Group.


Commodity markets arose as increasing agricultural production and consumption required a central market for delivery, sale and purchase.


Agricultural producers and consumers experienced drastic seasonal and supply fluctuation, gluts and shortages and tumultuous price fluctuations, CME said. At a time when storage facilities were primitive and the markets were disorganized, hubs of agricultural commerce started to emerge in cities located around navigable US waterways.


By 1848, canal and railroad infrastructure linked the Great Lakes with the Mississippi River, making Chicago, Illinois, an ideal location for agricultural commerce. Agricultural production was shifting west of the Mississippi and Ohio rivers, but the major population growth was happening on the East Coast.


“There had to be a system developed to get grain from the heartland back to the East Coast,” Irwin said. “Chicago became a major transshipment point for connecting grain from individual farmers to a central place where it could be shipped by barge or rail. That was a natural place where futures trading would start to occur. A lot of people were dealing in a lot of forward contracts because of the physical movement through Chicago.”


The Chicago Board of Trade (CBOT) formed as a cash market for grain in 1848. Creation of a central grain exchange allowed farmers and grain producers to sell crops at set prices in the months between harvests and allowed consumers to buy grains at transparent prices throughout the year, CME said.


Standardized futures contracts were introduced by CBOT in 1865, introducing a level of reliability and security to buyers and sellers that stabilized markets against possible default, CME said.


“There’s always people wanting to adjust their price exposure in this forward contract market, so why not create a market that allows people to trade in and out of the long and short side of forward contracts,” Irwin said. “That’s the idea of a future market.


“The whole system developed to make it as easy and low cost and guaranteed way of trading and adjusting price exposure on either side of the transaction.”


More exchanges were formed in the decades to come, including the Kansas City Board of Trade in 1856, the forerunner to the Minneapolis Grain Exchange in 1881 and the New York Mercantile Exchange in 1882.


“Once we started creating future contracts, other ideas developed,” Irwin said. “The whole system took some time to develop. But by the 1870s and 1880s, we had pretty recognizable futures trading comparable to today.”


Within these exchanges, the primary method of trade was open outcry, where buyers and sellers were able to see and hear each other in order to make bids and offer prices. An individual could take a place in the “pit” or “floor” and engage with traders, or they could commission a floor broker who would trade on their behalf.
“Traders in the pit conducted business among themselves, while buyers and sellers of the security in question relayed bid and offer prices to their representative floor brokers,” FXCM said.


Technology impacted the exchanges and trading early on, through the adoption of the telegraph, ticker tape and telephone. The telegraph, invented in 1832, allowed for distribution of financial newsletters in areas far away from the marketplace, according to FXCM, a provider of online foreign exchange trading and related services. By 1856, broker-assisted buying and selling of exchange-based securities was possible through telegraph.


The stock ticker, first put into action in 1867 in New York City, allowed for up-to-the-minute stock quotes origination at the New York Stock Exchange nationwide.
Invention of the telephone in 1876 introduced a new method of communication and by 1920, 88,000 telephones were in service on Wall Steet. As long-distance connectivity grew, the telephone became the industry standard for remote interaction with the marketplace, FXCM said.


“The inventions of the telegraph, ticker tape and telephone all contributed to the growth of marketplaces and exchanges in the US and Europe,” FXCM said. “When coupled with the computational power developed by the breakthroughs in information systems technology, the stage was set for the rapid evolution of computerized trading systems and electronic trading.”

The Kansas City Board of Trade was formed on the banks of the Missouri River in 1856, at the heart of one of the world’s most prolific wheat-growing areas. The market first started trading futures contracts in 1876.

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Bye-bye to outcry

The roots of electronic trading and digitization of the markets dates back to the 1960s and the use of streaming real-time digital stock quotes. Brokers could get specific market data on demand without having to wait for the ticker tape, FXCM said.

 
With the formation of the National Association of Securities Dealers Automated Quotations (NASDAQ) was the “opening of Pandora’s Box for the trading industry,” FXCM said. It used cutting-edge information systems to create a strictly digital trading platform, one that other exchanges wanted to follow.


By the 1990s, personal computers were becoming more powerful and internet connectivity was improving and the push toward automated markets overtook the open outcry system. In 1992, futures contracts began trading electronically on the CME Globex platform. In 2002, MGEX launched cash-settled corn and soybean contracts on its electronic trading platform with wheat futures and options following in 2003.

 
Adoption of electronic trading moved swiftly. In 2004, electronic trading accounted for 61% of all CME volume; by 2015, 99% of futures contracts were traded electronically.
As electronic trading took off, open outcry died. MGEX closed its trading pits in 2008, KCBT ceased to exist in 2015 and NYMEX went completely electronic in 2016.

 
With no need for traders on the floor, the exchanges themselves started consolidating at a rapid pace. The CBOT and Chicago Mercantile Exchange merged to form CME in 2007, and a year later, CME acquired NYMEX. CME acquired the KCBT in 2012 and consolidated its trading floor with the Chicago operations in June 2013, just two years before KCBT closed for good.

 
CME, the lone holdout in open outcry trading, announced just this year that it will permanently close most of its physical trading pits, including those for grain trading. They closed March 2020 due to the outbreak of the COVID-19 pandemic.

 
With the closure, ag products like corn and soybeans will not have any human-to-human interaction in the pit.
“With the trading floor gone, you lose that atmosphere, that place where people gathered, where they not only made trades but traded information,” Ehmke said. “You kind of miss that. You also miss a lot of nuances in the pit. For instance, a trader could tell you if they see a bull market coming because they could hear it in the way people talked, if they were louder. You’re not seeing the human face anymore; you’re not hearing the rally in the market.

 
“You lose those other soft senses that a lot of people had made a career of. They could feel the market.”


But in open outcry, the volume of trading was constrained by human beings’ shouting at each other, Irwin said.
“So the total capacity to trade and the speed at which you could trade was constrained to a set of human beings in a physical place,” he said. “With electronic trading you’re now trading literally at the speed of light and the only capacity constraints are the size and speed of the servers that the futures exchanges use. That’s the big reason why trading was so quickly adopted and why pit traders have gone the way of buggy whips.


“Electronic trading isn’t perfect but it’s faster, with very few capacity constraints. It’s a much cheaper way of trading and overall it’s probably a fairer way of trading.”


Ehmke said electronic trading also has brought anonymity to the market, which is both an advantage and a disadvantage.

 
“There’s less to read in the marketplace because you don’t know who’s behind it,” he said. “In the pits, you could clearly see if it’s a commercial grain trading company.”


If a broker had a big deck of orders in his hands before the market opened, it was obvious he was going to be doing a lot of business that day. In response, people would start bidding up grain, he said.

 
“That was one of the limitations in open outcry, the anonymity was hard to come by,” Ehmke said. “It wasn’t hard to figure out who was behind a trade. That’s all gone away. That’s what people want; they want the anonymity and the ease of clicking and doing their own trade. Going through a broker was more cumbersome, more costly and more time consuming.”


Early on, electronic trading was like the Wild West, with smart traders figuring out ways to create an edge, said Angie Setzer, co-founder and partner in Consus, LLC, which provides individualized marketing and agronomic solutions to farmers and grain buyers. She started her career as a cash grain broker before becoming vice president of grain for Citizens Elevator.


“For a lot of the big companies, the lack of transparency was beneficial to them,” she said. “That’s what pushed electronic trading at such a fever pace. Early on I thought there’s no way this would replace us; the human element was too important. I didn’t imagine within eight years we’d go from 90% pit traded to 100% electronic. I never dreamed it would go that fast.”

To the future

After electronic trading, there was much talk about the possibility of blockchain, a decentralized digital ledger with records called blocks that is used to record transactions, could replace existing trading platforms. But that hasn’t happened yet, Ehmke said.


“Blockchain is a different type of technology that records information along the blockchain where you can see all the transactions of a commodity that’s being traded, like crypto currency,” he said. “If you can trade crypto currency, you can trade a bushel of corn. Not so much. The problem is how do you trace a bushel of corn, because it is getting commingled in the system. What bushel are you precisely tracking? There’s a limitation with using that technology with commodity trading.”


The purpose of blockchain is to make things more efficient; that simply isn’t needed in commodity trading, Ehmke and Setzer said.

 
“We already have something that is pretty easy,” Ehmke said. “It’s hard to make it simpler than what we’ve got now. I don’t see how blockchain has any chance of disrupting those services. We still need to have some sort of instrument to lock in future prices and I don’t know that blockchain is the tool to do that.”


But, Setzer said, blockchain might have a role in food safety and production.

 
“I’m not sure it will have a big influence when it comes to trading and turning bushels into cash,” she said. “As far as making sure we know what chemical has been applied or what seed has been planted, I definitely see a role for that, and I see it stepping up in the next 10 years, especially for growers looking for a premium.”


A bigger disruptor to the way commodities are bought and sold will be the changing role of the grain elevator, Setzer said. With so much information available, and the ability to trade without a broker, farmers may choose to bypass the elevator and do their own marketing and selling.

 
Many farmers are already maximizing what they get from the land, so the next opportunity to enhance value is to run their farms like a business, Setzer said.

 
“Nowadays farmers can be connected to a network of people they’d not be able to work with otherwise and it’s opened the door for farmers to trade like an elevator,” Setzer said. “I’ve seen more of this education and more of this discovery that there’s value in being able to control the bushel beyond the harvest. Some farmers know more about market structure fundamentals than even some experienced merchandisers. That’s going to continue to happen, especially as the next generation takes over the farm.


“That’s changed a huge part of the elevator industry and will continue to change the elevator industry going forward. Country elevators will always have a role but the ones that remain will provide flexibility and alternative resources.”


The number of cooperatives is declining, the amount of on-farm grain storage continues to increase, and the size of farms continues to increase, Ehmke said.

 
“We’re going to see more and more companies contracting directly with growers because they have the acreage and the storage, and they can segregate,” he said. “There’s going to be pressure on the grain cooperatives and merchandisers to innovate around that.”


The continued push toward consolidation is a definite market disruptor, Ehmke said, that will have some impact on grain trading companies and agribusinesses in general.
“If there’s going to be any disruptors, I think perhaps there might be some type of technology that could expedite the process of bringing the farmer and consumer closer together,” he said. “What does that look like? I don’t know. We’re going to innovate those technologies to make it easier to capture that value up the value chain.


“When you’re talking about the realm of trading platforms, you never know what it will look like. You saw blockchain come but it didn’t end up being the disruptor yet that people thought it would be. So you always have to have an open mind in terms of trading commodities.”


Recently, multiple new companies have formed to provide electronic direct connections between farmers and end users, making it easier for farmers to market their own products and incorporating blockchain for transparency.
Dubai Multi Commodities Centre (DMCC) and CropData Technology launched in 2020 the Agriota E-Marketplace, a blockchain-based e-marketplace that acts as an agricultural commodity trading and sourcing platform. Through the platform, bulk buyers from the United Arab Emirates (UAE) are connected directly to farmers in India.

 
The marketplace has a range of services for contract, bid and money management, entity management, accounting, billing, reconciliation, analytics, fraud, risk and regulatory compliance management. Initially, it is handling cereals, pulses, oilseeds, fruits, vegetables, spices and condiments.
Farmers can connect directly to customers like food processing companies, traders and wholesalers. This cuts back on the number of intermediaries in a transaction, making the supply chain and traceability more efficient. The contract trading system will be powered by blockchain.
“This type of aggregation has the potential to empower local communities, deliver better quality farm-to-shelf products and expand the UAE’s long-term food security,” the DMCC said.

 
In October 2018, the world’s top agribusinesses announced plans to work together on an industry-wide initiative to modernize global trade operations. Archer Daniels Midland Co., Bunge, Cargill, COFCO, Louis Dreyfus and Viterra formed Covantis, a global agri post-trade platform for the execution of bulk shipments.

 
“In the history of the industry there has never been an initiative like this,” said Sorin Albeanu, head of commercial, Covantis. “This being achieved shows the industry agrees on the change that needs to happen and the challenges that need to be tackled.”


Existing post-trade execution processes are highly inefficient and there is hidden risk in how manual the processes are when it comes to exchanging contractual notices, passing through critical vessel information and identifying all the parties involved in buying and selling cargo.

 
Document workflow includes double data entry, slow communication and many last-minute changes, Albeanu said. In addition, documents are traded in a paper format and are transferred between many buyers and sellers, leading to delays, penalties and costs for having to issue letters of indemnity.

 
The Covantis platform, launched this February, covering soybeans and corn shipped and chartered out of Brazil, solves many of these issues. Soybean meal was added in August and there are plans for Covantis to expand into the United States and Canada in the first quarter of 2022. Argentina and the Black Sea region are also not far back on the list. Additional commodities such as wheat, sorghum, barley, oils and more will be added.


So far, 20 agriculture groups have signed up and more than 80 different legal entities active across the world were set up on the platform.

 
“Initially we focused on onboarding companies that act as shippers, FOB traders and charterers, allowing them to speed up the exchange of contractual notices, messages and documents,” Albeanu said. “With new functionalities being delivered, we have started to onboard CFR buyers, therefore covering the supply chain from port to port.”


The use of blockchain enables secure, real-time exchange of data, while increasing efficiency, reducing risk and costs.
“The platform is geared around creating visibility of long FOB and CFR strings of buyers and sellers that trade with each other the same cargo, the exchange of standardized contractual notices, messages and other vessel-related information, and improving the documents exchange workflow,” he said.

 
Through these capabilities Covantis is looking to improve efficiency and reduce errors, speed up communication and documents presentation, payments and therefore decreasing working capital and the risk for penalties. 


Additionally, by digitizing the post-trade execution processes Covantis creates an audit trail for the actions and data exchanged between parties, a single source of truth in case of disputes and enhanced security for how data is exchanged, therefore reducing the risk of forgery.  

 

Many times new technology meets with resistance, which slows its acceptance. Albeanu said Covantis has the backing of its shareholders not only in terms of investment but also in terms of data exchange and platform usage.


“Considering this support and the global agri firms that have already joined the platform, we are confident that we will achieve our objectives in terms of adoption. Even if we are live for only 6 months we have already seen over 60% of the Brazil flows, executed by charterers, being captured in the Covantis platform”” he said. “The time for change to happen is now.”

© 2005 VisionsofAmerica.com/Joe Sohm - stock.adobe.com

Timeline of commodity exchanges

April 3, 1848 —The Chicago Board of Trade (CBOT) is founded as a cash market for grain. Forward or “to-arrive” contracts begin trading at the CBOT almost immediately.


1856 —The Kansas City Board of Trade is established by local Kansas City merchants as a means of trading grain.


1856 — Broker-assisted buying and selling of exchange-based securities was possible with the telegraph, invented in 1832. 


1867 — The first “stock ticker” was put into action in New York City at the NYSE, transmitting up-to-the-minute stock quotes originating at the NYSE nationwide. 


1876 — Futures trading begins at the Kansas City Board of Trade.


1877 — The CBOT begins publishing futures prices on a regular basis. Future CBOT documents considered this to be the beginning of “true” futures trading.


1881 — The Minneapolis Chamber of Commerce establishes an exchange, which in 1947 became the Minneapolis Grain Exchange.


1882 — The New York Butter, Cheese and Egg Exchange name is changed to NYMEX. 


Sept. 15, 1920 — The Federal Trade Commission releases the first of seven volumes of its Report on the Grain Trade. 


1920 — Nearly 88,000 telephones were in service in the Wall Street district. 


Sept. 21, 1922 — The Grain Futures Act, predecessor to the Commodity Exchange Act, is enacted. 


June 15, 1936 — The Commodity Exchange Act is enacted, replacing the Grain Futures Act.


1947 — The Minneapolis Chamber of Commerce is renamed the Minneapolis Grain Exchange.


1960s — Computer-based market data services began to take the place of traditional ticker-tape quotation services.


1969 — Building on digital exchange-based streaming quote technology, a company named Instinet introduced the first fully automated system for the trade of US securities.


1971 — Fully automated over-the-counter (OTC) trading became a reality with the formation of the National Association of Securities Dealers Automated Quotations (NASDAQ).


1973 — Grain and soybean futures prices reach record highs. This is blamed in part on excessive speculation and there are allegations of manipulation.


Oct. 23-24, 1974 — Congress passes the Commodity Futures Trading Commission Act of 1974, and it is signed by President Gerald Ford. The bill creates the Commodity Futures Trading Commission (CFTC or Commission).


1992 — Futures contracts began trading electronically on the CME Globex platform, beginning the transition from pit-based floor.


Dec. 21, 2000 — President Bill Clinton signs into law the Commodity Futures Modernization Act of 2000, which, among other things, reauthorizes the Commission for five years, overhauls the Commodity Exchange Act to create a flexible structure for the regulation of futures and options trading, clarifies Commission jurisdiction over certain retail foreign currency transactions, and repeals the 18-year-old ban on the trading of single stock futures.  


Feb. 15, 2002 — MGEX launched cash-settled corn and soybean contracts on the MGEX’s electronic trading platform. 


May 9, 2003 — MGEX launched financially settled hard winter wheat futures and options on the electronic trading platform.


2006 — NYMEX and CME begin transitioning toward electronic trading.


July 12, 2007 — The Chicago Mercantile Exchange and the Chicago Board of Trade announce the completion of their merger forming the world’s largest futures exchange, the CME Group.


2008 — CME Group acquires NYMEX’s holdings when NYMEX went public and was listed on the NYSE. 


Dec. 19, 2008 — MGEX closes its trading pits. 

2012— CME completes acquisition of KCBT.


July 2, 2015 — After the trading floor was consolidated with the Chicago operations in June 2013, the KCBT ceased operation in Chicago.


2016 — Under the CME Group umbrella, NYMEX goes completely electronic.


2021— CME Group announced that it will permanently close most of its physical trading pits, including those for grain trading. 

Posted on

The Past, Present, and Future of Milling

By Arvin Donley

June 2021

The Past, Present, and Future
of Milling

Innovation continues to drive one of the world’s oldest industries

World Grain

©photocrew – stock.adobe.com

It’s been said the first flour miller was the first person who chewed on a wheat kernel. While the details of that milestone will never be known, we do know the transition to using millstones instead of molars to extract flour occurred around 6000 BC, and it remained the primary flour-making method for many centuries. Then, in 1779, at the beginning of the industrial era, the first steam mill was erected in London, England. A century later, the first mechanical roller mill was developed in Europe using stone disks. Since then, steel rolls have replaced stone rolls, pneumatic conveyors have replaced mechanical conveyors, automatic bagging machines have replaced human baggers and a whole host of state-of-the-art technology has been developed for the milling industry.


The milling process itself hasn’t changed much over the last century. Occasionally an innovation is introduced, such as color sorting technology to remove foreign particles and damaged kernels from the mill flow, but for the most part the advances have been upgrades of equipment already used in the process.


“Nothing overtakes the milling industry in great shockwaves,” said Jeff Gwirtz, a milling consultant and president of JAG Services, Inc., who for many years taught milling science at Kansas State University. “The group as a whole doesn’t just one day flip a switch and all of a sudden everyone is doing something new.

It’s a slower evolution. For someone who doesn’t understand the milling industry or someone who is fairly new, I tell them you have to understand that in the milling industry the jury’s still out on leather belting or the electric motor. I’m being facetious, of course, but usually the milling industry isn’t the first to jump at new technology.”


When new technology is introduced, it will most likely get a test run in a European mill. For one thing, the industry’s largest equipment suppliers are based in Europe, but also the millers in that region are more apt to embrace new technology than in other parts of the world.


Troy Anderson, vice president of operations for Denver, Colorado, US-based Ardent Mills Inc., the largest milling company in the United States, described the North American milling industry as being “fast followers” when it came to adopting the latest technology.


“I think the industry in North America is somewhat reluctant to be that initial test lab,” Anderson said. “It’s really hard to drive innovation through an industry that’s thousands of years old. The industry is often reluctant to make those major step changes.”


However, it would be inaccurate to say there haven’t been significant technological advances in the global milling industry over the last 100 years. The sheer amount of automation introduced to the industry in the last 30 years has improved mill performance in every way imaginable.


“Thanks to its development, the milling world has changed completely as it has allowed manpower to be rationalized through a whole series of ‘aids’ that it is able to offer, resulting in less human error, for example,” said Marco Galli, technological manager at Cremona, Italy-based Ocrim, a milling equipment manufacturer. “This has led to greater productivity thanks to a more rational management of the production cycles, all increasingly based on the correct management of data and information. I personally believe in that aspect the best is yet to come.”


When reflecting on the last 100 years of flour milling, one could point to dozens of innovations that led to a safer, more efficient milling process. Among those was the adoption of pneumatic conveying in the mid-20th century to move product through the mill. The advantages included fewer product leakages, product recovery and re-entry into the production cycle, no product or environment contamination, and far less maintenance than is required with mechanical conveyors. Another important innovation from the 20th century was the double high roller mill, which provides two grinding passages without any intermediate sifting. Many flour mills introduced double high roller mills to reduce capital costs. With this milling concept there is less installation, energy and maintenance cost, with fewer sifters, pneumatic lifts, filters, number of roll stands, spouting and auxiliary components and less space requirements. More recently, color sorters have become a game-changing piece of equipment in the wheat cleaning section of flour mills. Color sorters are used to remove ergot wheat, black tip, fusarium, burnt, other discolored grains and other inner contaminants.

 
“If I had to put my finger on one of the more recent innovative solutions, it would be the color sorting technology that’s grown in the industry, especially over the last 5 or 10 years,” Anderson said. “It’s become widely adopted and helped from an energy conservation and effectiveness standpoint of doing what we need to do in the plant.”


Perhaps the most significant development has been the utilization of computer-based automation that in recent decades has aided millers in countless ways. One of the early examples of this was the first lights-out flour mill going online in the 1980s, and although it hasn’t become the industry standard to operate unmanned mills remotely, the option is available in many plants.


Much of the industry’s technical innovation, particularly in the past 30 years, has focused on improving mill performance in three areas: Product and employee safety, energy savings and increased milling efficiency.

A Henry Simon Purifier (HSPU) with an intelligent screen to monitor operating status and environmental conditions, in combination with Advanced Sensor Technology.
Ocrim’s RMX/Q roller mill is a machine with an innovative design, built with special attention to hygiene. Stainless steel is the material dominating the entire structure. The surface finishing is obtained by the “microsphere polishing” technique assuring easy cleaning and maintenance as well as absence of molds and bacteria.

Product and employee safety

bar regarding food safety standards, milling equipment manufacturers have responded by designing equipment that addresses this issue.


“Food safety has had a major impact on the design of modern cleaning houses,” said Stefan Birrer, head of milling solutions at Uzwil, Switzerland-based Buhler AG. “With efficient color sorting, the precision of sorting has increased a lot. This has not only increased food safety but has contributed greatly to saving energy and raw material in our plants.”
Anderson said ensuring a safe food product, whether it is flour or a byproduct derived from the milling process, has become the top priority for millers.


“When I started in the industry 30 years ago, we didn’t want rocks, metals or anything harmful in the flour and we did everything we could at that time with the technology we had to make safe flour,” he said. “There were audits but there wasn’t a day-to-day conversation about it, whereas today it is the first point of every conversation. We have to make sure our product is safe at every one of our mills for every customer.”


Virtually every piece of milling equipment has been redesigned in recent decades with safety in mind. Sieves, for example, no longer use wood frames that can splinter or backwire or staples that can fall into the mill stream. Wooden spouting has been replaced with more sanitary stainless-steel spouting. Equipment such as roller mills, sifters, and purifiers have been designed to eliminate harborages for dust, dirt and insects.


“Years ago, when we taught the IAOM milling short courses at Shellenberger Hall (at Kansas State), I used to take people over by an old purifier and bang on it and watch the dead insects fall out of it,” Gwirtz said. “That had to do with design issues. They still have to have a place for the air to flow but they no longer have big cavities where the dust and dirt can accumulate along with insects.”


Not only are the flour products safer for consumers, but the mills themselves are less dangerous places to work as milling equipment manufacturers have made great strides in developing operator-friendly machinery that requires less maintenance and is enclosed so moving parts aren’t exposed.


“Today, the fact that the operator has less direct contact with the machines is a benefit in itself in terms of safety,” Galli said. “But this is not enough if the machines are not designed with this aspect in mind. In fact, the logic is not that of the operator going to the machine to check its condition, but it is the machine that ‘calls’ the operator when necessary. This is possible through the ongoing exchange of information between the machine and management system.”

Energy savings

Flour milling is a business with a notoriously tight profit margin, so milling companies are always looking to reduce costs. One of the biggest expenses for a milling operation is energy consumption since the process involves so many pieces of equipment. In recent years, great strides have been made by equipment manufacturers in developing energy-efficient machinery.

 

“The application of energy-saving technology, whether it’s variable frequency drive compressors or pneumatic systems that run just to meet demand, or the use of energy-efficient equipment and automation systems, they have all made a difference in reducing the energy requirements within the flour milling operation,” said David Jansen, vice president of production for Siemer Milling Co., Teutopolis, Illinois, US.


Gwirtz said the soft-start motors, which gradually are brought up to full speed, operate in stark contrast to the motors that were in mills when his career began in the late 1970s.

 

“If you’ve ever watched an amp gauge on a hammermill when it starts up, at least on the older ones, the needle on the amp just flies forward,” he said. “The amp load on the motor was probably 200 horsepower but the initial rush was probably 7 to 9 times greater than the full load. It wasn’t just a slight overload, it was a major, major overload.”

 

Milling companies also have found savings by replacing fluorescent light bulbs with LED lighting and adding motion-detection sensors that automatically turns off lights in areas where employees aren’t working.

Left: Variable frequency drive motors and soft-start motors have helped millers enjoy huge energy savings. Right: Color sorters have become a game-changing piece of equipment in the wheat cleaning section of flour mills.

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Improvements in efficiency

Today’s mills run more efficiently than ever, and the driving force behind that is automation. It has boosted productivity by allowing mills to operate around the clock, seven days a week with minimal or no personnel inside the plant.

 
“A good automation system has become the most important companion of the miller,” Birrer said.


The use of sensor technology has revolutionized milling and enabled problems to be detected more quickly than they were years ago.
A part of the mill’s control system, sensors acquire information that produce data that can be used to analyze the overall mill performance and optimize the performance of a specific piece of equipment. They let millers know when bins are full or when bearings are overheating as well as measure product quality, enabling automatic adjustments to be made without shutting down the mill.


“The sheer amount of data and information we have available at our fingertips today is amazing,” Jansen said. “When I first entered the industry, I would hear people say that milling is an art, and I would say that today it’s evolved and is still evolving into a precise science. When you look at what we can monitor, compared to 30 years ago, it’s pretty remarkable.”


The benefits of automation to the milling industry have evolved and grown over time, Anderson said.


“In 1992, automation was about labor savings and energy savings,” he said. “Today, we talk about automation to drive food safety, such as being able to trace product through the entire process.”

The future of milling

Given some of the dramatic technological advances that have taken place in the last 100 years, many of which couldn’t have been forecast a century ago, it’s difficult to imagine what lies in store for the milling industry over the next 100 years. One thing that’s certain is there will continue to be an increase in data collection related to every aspect of the milling operation.


“Our vision leads us to imagine a milling industry where the collection and management of data will be increasingly more relevant, making it so that all decisions are based on data collection and subsequent processing,” Galli said. “The data will guide us through milling management and compliance with parameters. Today, we already have plants where it is possible to change the settings of the roller mills, or reposition the products inside the technological flow, fully automatically, based on information received from the field, and their relation to the filed data.


“The data will give us information on what raw materials to buy based on what finished products needs to be produced in the short and the long term, all with the possibility of integrating this information with strictly updated market prices. Basically, the data will guide us to make the best choice based on the situation that has developed, all in real time, because that will be another crucial aspect. These aspects are then linked to the use of new design tools, of both machines and plants, to optimize costs as well as production times, always guaranteeing the maximum quality over time.”


Birrer predicts that traceability and sustainability — issues that have recently become high priorities in the global milling industry — will remain “hot-button” issues in the future and solutions will continue to be developed to address mill performance in these areas.


“Blockchain technology may be used to track the product from farm to fork,” Birrer said. “Also, the CO2 footprint will become a key sustainability indicator of milling companies, putting pressure on the whole grain value chain including grain handlers, millers, bakers and the respective solution providers to make their processes as efficient as possible. Digitalization will play a major role in this transformation.”


Gwirtz believes an increasing number of customers will demand transparency when it comes to knowing details about every step in the flour production process, from where the wheat was grown and harvested to all the steps thereafter that are involved in creating the final product.
He believes milling companies are “going to get pressure to pay more attention than ever to what goes through their milling units” and that more milling wheat will be purchased directly from the farmer.


While Anderson agrees that in the short term the trend toward farmer-direct wheat purchases will continue to grow, he foresees technology revolutionizing how the wheat kernel’s journey from farm to fork is documented.


“With the right technology, we will be able to provide the same traceability and the same ability of knowing exactly where that kernel of wheat was grown, whether it comes to us directly from the farmer, from a terminal or a country elevator,” Anderson said. “That’s where the technology has to go. I still believe there will be a fundamental place for the grain elevator in the supply chain to be a part of our industry.”


Likewise, Jansen foresees great strides being made in reducing the microbial load in flour as demands from consumers and regulatory agencies increase.


“I think the expectation will be that all flour is food safe — ready to eat,” Jansen said. “The industry will continue to look for solutions to meet these demands, whether it’s treating wheat during the tempering process or treating flour after it’s milled. I think eventually all flour will be treated in some fashion to make it food safe. A lot of work is currently being done to come up with a solution.”


He noted that Siemer Milling has installed two heat treatment lines for flour, bran, and germ to produce both food safe and functional flour products.

 
In terms of grain storage improvements, Peter Marriott, sales manager for Satake Europe, a milling equipment manufacturer, foresees going beyond today’s ability to monitor ambient conditions during storage.


“In the next step, imagine if storage silos will be able to fully adapt themselves to the changing ambient conditions, with receiving real-time weather information from the internet,” he said. “This example can be extended to other processes in order to explain how we achieve optimization and food safety with technology implementation.”

Control systems provide data that can be used to analyze the overall mill performance and optimize the performance of a specific piece of equipment.

Specialty milling

Bühler’s Mill E3 stands for advantages on three efficiency levels: space, time and energy. In the optimal case, a Mill E3 building can be 30% smaller in volume than a traditional mill of the same size.

The current trend toward increased specialty milling will continue to gain momentum, Anderson predicted, as he sees a shift away from almost exclusively milling traditional “white fluffy flour.”


“I see the industry shifting toward organics, which has become a larger segment for us, as well as a shift to milling ancient grains, legumes and other alternative proteins,” Anderson said. “As flour millers we can be too wrapped around a kernel of wheat. Wheat will always be a core and fundamental aspect of our industry. However, we have to continue to look at other products that are nutritious and provide a good alternative protein. At the end of the day, it’s about what consumers want and we need to explore how we can partner with customers to supply those.”


Anderson said Ardent Mills was positioned to be a provider of plant-based protein solutions through dry milling of various pulses and legumes.
“We’ve learned during the last several years that there are a lot of similar technologies in play, and it requires a lot of the same expertise that we already have with wheat milling,” he said. “We feel very good about our capabilities and our ability to serve those demands.”


Milling equipment manufacturers agreed that the mill of the future would likely be smaller.


“We definitely expect to see more compact milling systems in the future,” Marriott said. “With an efficient plant design, combined functions of machines, and simplified processes, we will develop smaller plants with optimal usage of the area, and a lower energy consumption advantage as well.”


Galli said he envisioned mills being shorter in height than many of today’s 6- or 7-story buildings thanks to alternative plant engineering concepts, the type that Ocrim began working on more than 50 years ago. He noted that some of these concepts are “already applied today, that make it possible to eliminate at least two floors in comparison to a traditional mill.”
While the square footage is likely to decline, production capacities at individual plants will continue to increase as it becomes harder for smaller flour mills to compete.


“There’s certain fixed costs, whether it’s a 5,000- or 10,000-cwt mill, that are always going to be there,” Jansen said. “So, the economics of it are going to continue to drive larger milling units and/or larger mills with multiple milling units within them just to capture those efficiencies of scale.”


Anderson also sees a future with fewer but larger-capacity flour mills.
“It’s hard to spend the millions of dollars needed to continually upgrade a 5,000-cwt mill versus the economy of scale you get with the bigger mills,” he said. “That’s the fundamental shift we keep seeing. Whether it’s within a given company or with mergers, I do think that’s probably a trend that’s going to continue.”

The future of milling: art versus science

Over the years but especially in recent decades as technological advances in the milling industry have accelerated, a common topic of debate among millers has centered on the question: To what degree is milling an art as opposed to being a science?


And as milling plants become more automated with huge volumes of real-time data available to analyze every conceivable aspect of the operation, is flour milling becoming less of an art?


“Absolutely, it has become less of an art,” said Merzad Jamshidi, chief executive officer and managing director of KFF Mills, Tehran, Iran.

 
“The only part where it still remains a bit of an art is how millers mix and match their raw material to produce the ideal product,” he said. “Milling is like any other business. You look at the aviation industry where the emphasis is more dependent on automation and less on pilots’ input and performance — I believe the mills are also heading the same direction.”


Still, many millers are adamant that despite mills being equipped with state-of-the-art automation technology, the human senses of millers still have a major impact on how successfully a mill operates.


“It is absolutely still an art,” said Troy Anderson, vice president of operations at Ardent Mills. “The technology provides quicker validation that the art is on target. We still need our millers, and they still need their sense of touch, sight, smell and sound to set up our mills and to know when we have an issue. At the same time, we have a lot of great technology that is getting better at beating those senses to solve the problem.”


Milling industry consultant Jeff Gwirtz, president of JAG Services Inc., and a former milling science professor at Kansas State University, said he feels strongly that even though computer-controlled systems have enabled millers to start a mill with the push of one control-room button rather than a series of buttons located on different floors of the plant, it is still important for the milling operative to understand the logic behind the series of events that unfold when a mill ramps up.


“Even though you push a button to start the systems, you should be able to sit in the control room and say, ‘I know this system is starting because I pushed the button and not only do all the lights turn green along the way, but I can hear it start up,” Gwirtz said.

 
“Sometimes you need to tie the pushing of the button to a series of events that should have to occur that have a practical and physically observable evidence of happening other than just the green light going on.”
The same goes for when a problem is occurring in the mill.


“If you have to wait until an alarm goes off and a red light flashes to understand you’re having a problem, then you weren’t running the system, the system was running you,” Gwirtz said.


David Jansen, vice president of production for Siemer Milling, said the advances in automation, particularly regarding data collection, have helped millers spend more time on the parts of the job they enjoy most.


“I don’t think the art is gone and I absolutely believe the need for the miller is still there,” he said. “I’d like to think that the advanced technology is helping millers today do more milling and less of the mundane tasks.”


Perhaps someday Artificial Intelligence (AI) will progress to the point where the human touch of a miller is no longer of value. But most agree it will probably take many years for such a scenario to play out, if ever.


“Every wheat kernel is different, just like every person is unique, and we have to have people who are good at responding to that,” said Anderson, a 30-year milling industry veteran. “To a degree, AI someday may be able to do that but we’re nowhere close to that today, so being good at marrying the art with the science around technology — we feel that’s the sweet spot of being really effective at what we do.”


Even the manufacturers of the increasingly automated equipment used in today’s mills foresee trained millers remaining as a valuable part of the milling operation in the years to come.


“The concept of the art of milling will certainly change and therefore also the way today’s millers are used to working,” said Marco Galli, technological manager at Ocrim. “There will be an increasing comparison of numbers because the data will be what guides and supports millers in their choices every day.

 
“Imagine the potential that could be achieved by combining the experience of a miller with data collection and the relative analysis of this data, for example, in managing the energy consumption of milling based on the wheat mixing. What I see in the future of the miller is the capacity to optimize the processes using supporting information made available through the collection and processing data from the field.”

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A Century of Grain Trade

By Susan Reidy

March 2021

A century of
grain trade

Volume changes have been seismic, while origins and destinations have fluctuated and will continue to do so as new disruptors emerge

grain

World Grain

©Olha Afanasieva – stock.adobe.com

S ince man began producing grain many centuries ago, there has been a need to trade it — with a neighbor, a neighboring village or a nearby region. As technology improved, infrastructure built, communication refined and crops burgeoned beyond demand, nations started looking beyond their borders for trade partners.

 
While there was global trade here and there a century ago, significant amounts of trade started in the 1960s and have continued to ramp up into the billions of dollars and millions of tonnes that move about the globe in today’s marketplace.

 
“Trade, in general, has moved from a regional relationship to a much more global intercontinental relationship that’s been facilitated by technology and transportation,” said Gary McGuigan, president of Archer Daniels Midland’s Global Trade group. “It’s just the globalization of what we do; it really is interconnected fully. While the formal tariff-free agreements have increased as well in those 100 years, we’ve also seen governments wanting to get involved either to limit exports or to buy imports into government reserves.”


The global trade of grain has increased exponentially from 1921 to an estimated 576 million tonnes in 2021, according to data from the Foreign Agricultural Trade of the United States (FATUS).

 
“We’ve had strong growth in trade, particularly for the last 20 years,” said Stefan Vogel, head of commodities for Rabobank, UK. “That trend will continue because production of all crops is increasing in regions that have land but not the most population. Other regions in the world where the population is growing, land and water resources are scarce.”


Along with the amount of global trade, the flow of commodities in and out of countries has fluctuated. Technological advances, along with protectionist policies and domestic subsidies starting before World War II and accelerating in the early 1970s after food price spikes, changed the geographic distribution of trade flows. Population growth in developing countries and the availability of cheap food encouraged reliance on imports, according to a Food and Agriculture Organization report on global trends and challenges.

Brazil emerged as a major exporter in the 1970s and continues to play a significant role in today’s global marketplace, one that likely will continue in decades to come. While the United States remains a key exporter, its No. 1 position has been supplanted by Russia in wheat exports and by Brazil with soybeans, most of which are destined for China.


China has become a major grain importer as it tries to feed 22% of the world’s population with only 7% of its arable land. Imports first surged in the 1970s, following economic reforms, and continued in the 1980s and 1990s as the nation emerged from isolation. In the first decade following its 2001 accession into the World Trade Organization, China’s imports were led by soybeans and sorghum.

 
Now, as it looks to rebuild its hog sector following an African swine fever outbreak and supplement tight domestic corn supplies, the nation is expected to import 24 million tonnes of corn, 10 million tonnes of wheat and 100 million tonnes of soybeans in 2020-21.

 
Looking ahead, while some factors that influenced changing global trade patterns over the last 100 years will remain, such as trade policies and population growth, several new disruptors are on the horizon that could permanently alter the flow of agricultural commodities. These include climate change, an increasing focus on sustainable production, the rising popularity of plant-based protein and a push for electric over fossil fuel use in vehicles.

China, Brazil soybean trends

(in 1,000 tonnes)

Globalization

Following the first wave of globalization, led by steam and the telegraph, world market prices started to drop in the 1920s. At that time, nearly 90% of the world’s wheat trade came from four countries — the United States, Canada, Argentina and Australia. But only 18% of global wheat production entered international trade. Nations started pushing for increased tariff protection and world trade plunged, according to the 20th Century Transformation of US Agriculture and Farm Policy report by the USDA’s Economic Research Service.

 
In the United States, agricultural exports fell by more than 20% from the previous decade. Agricultural exports remained flat until the 1960s and began to rise dramatically in the 1970s, fueled by adjustments in exchange rates and demand from the Soviet Union for imported grains and oilseeds, the ERS said.

 
Following World War II and into the 1990s, the United States was the world’s grain superpower, the ERS said, by leading in corn and wheat production as well as exports. Before the start of the 21st century, the United States annually exported one-third of the globally traded wheat and 70% of corn.

 
Two major disruptions in the 1970s led to lasting changes in global trade patterns: the Russian grain “robbery” and the US embargo on soybeans, said Dan Basse, president of AgResource Company.


“We’ve become a global agriculture market and it started with Russia (Soviet Union),” he said. “They were massive buyers because of the failure of the collective farming system. It really changed the landscape in the 1970s and it lasted until the Berlin Wall came down (in 1989).”


Prior to that, the Soviet Union had purchased some wheat from the United States in 1963 and in the 1970s implemented a policy of importing grain every year to feed its increasing livestock herds. In 1971, the Soviet Union bought some feed grains and the following year, faced with shortages, it quietly bought one-fourth of the US wheat crop in what has become known as the Great Grain Robbery. The United States subsidized the purchases, causing domestic prices to rise, and lost revenue while spending $300 million in public funds.

Top possible future trade disruptors:

    • Plant-based protein
    • Climate change
    • Sustainability concerns
    • Drop in biofuels usage in favor
      of electric

The shortage in the Soviet Union turned out to be part of an overall grain production shortage. As a result, wheat prices sky-rocketed and stocks were decimated. Global food prices in 1973 increased as much as 30%. But a new trade flow was created, and the Soviets would continue for decades to be a major importer of grain.

 
Over the next 20 years, the Soviet Union continued to import large amounts of grain, growing from 27 million tonnes in 1975 to a record-high of 47 million tonnes in 1985.

 
As food prices continued to rise in the United States, then-President Richard Nixon announced in June 1973 an export embargo on grains, including soybeans. This led to a huge surplus in the United States and dropped the price of soybeans by almost half. Farmers were not pleased and by October, the restrictions were gone. But the market already had responded.


Japan, which relied heavily on the United States for its soybeans for feed as well as use in tofu, was shocked by the embargo and realized it needed to diversify its supply to insulate against any future events. It turned to Brazil, which at the time had a small soybean industry.

 
Introduced to Brazil in 1882, soy was mainly used as feed for pigs. By the end of the 1940s, it started to be used as a feedstock and for cooking oil, according to the Land journal article, “Soy Expansion and Socioeconomic Development in Municipalities of Brazil.” In the 1960s, soy was cultivated in two states and the harvested area was 300,000 hectares.

 
As buyers sought out Brazil for their soybean needs, production expanded so that by the end of the 1970s, it had reached 8.5 million hectares.
In 1980, Japan and Brazil initiated the Japanese-Brazilian Cooperation Program for the Development of the Cerrados. During the 21-year program, Japan financed the expansion of farming into the cerrados, the tropical savanna region, while Brazil covered the cost of infrastructure improvements. Japan also helped finance the development of soybean varieties and pest management. Brazil, now the world’s leading soybean exporter, is expected to harvest 38.6 million hectares of soybeans in 2020-21.

 
Starting in the 1990s, a second wave of globalization was in full swing and the agriculture market was seeing significant increases in imports and exports. New competitors were emerging as nations reformed policies and adopted new technologies that lowered the cost of production and increased yields.

 
International attention turned to China’s demand for agricultural imports as the country emerged from isolation and allowed economic forces to allocate resources, said the ERS in its report, “China’s Growing Demand for Agricultural Imports.”


China’s accession to the WTO also generated additional projections, based on the principle of comparative advantage, that China would import more land-intensive crops and export labor-intensive products, the ERS said. Rising income and living standards, increasing urbanization and food safety concerns fueled China’s imports. It has been a major source of growth in world demand for soybeans since the 1990s, the ERS said, but the nation also brings significant volatility to the market.

 
“Sudden and dramatic policy shifts, and their subsequent effect on China’s international trade profile, make the country a relatively volatile player,” the ERS said. For example, in 1994 and 1995, China abruptly increased its grain imports and cut off corn exports as concerns about grain shortages and inflation became widespread. Then, from 1997 to 2003, China stopped importing wheat and boosted grain exports.

Overall, the value of agricultural goods traded tripled from 1995 to 2014 and the estimated inflation-adjusted value roughly doubled, said the ERS in its report, “The Global Landscape of Agricultural Trade, 1995-2014.” Trade grew to accommodate an increase of more than 25% in global population and a 75% increase in real gross domestic product.

 
In that 20-year timeframe, developing countries started participating more in global agricultural trade, particularly imports. The share of import value by developing countries increased from 28% in 1995-99 to 42% in 2010-14, the ERS said. Vietnam, India and the United Arab Emirates became more substantial importers during that time, as did Saudi Arabia and Iran.
The sources and destinations of agricultural trade also became more diverse in that 20 years, with the top five countries accounting for 63% of total imports in 1995 but only 48% in 2012-14.

 
The top five exporting countries — the EU, the United States, China, Russia and Japan — shifted positions slightly in the 20-year span but they remained at the top of the list. The share of the top five exporters fell from 85% in 1995 to 75% in 2012-14, the ERS said.

 
With new low-cost producers and exporters, the global grain trade was set again for transformation. Traditional importers now had excess product to move and nations started looking for new trading partners, resulting in the global grain trade flows of today.

Russian wheat imports/exports

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Today’s trade flows

Perhaps one of the biggest transformations in the recent past and into today is Russia’s, and to a lesser extent Ukraine’s, move from major grain importer to exporter. Russian grain output started increasing in 2000, creating substantial surpluses for export. The nation moved from a net grain importer of 3 million tonnes per year on average from 1996-2000 to a net exporter of an estimated 49 million tonnes of wheat and coarse grains in 2020-21.


In the last 30 years, grain production in Russia and Ukraine has increased 66%. While new land was brought into production, it was higher yields that fueled the increase. Average yield in the two nations increased by 76% over 30 years.


After the Soviet Union broke up, new technologies were available and production incentives changed. When meat production subsidies stopped, output dropped significantly and therefore so did the amount of grain fed to livestock.


Russia is now the world’s largest wheat exporter and is expected to produce 85.3 million tonnes in 2020-21. While its recently announced wheat export tax and grain export quota is expected to temper exports later in the marketing year, the USDA is still expecting Russia to export 39 million tonnes of wheat.


“The Black Sea will continue to be significant exporters for the foreseeable future,” Basse said. “They’re having problems with domestic food inflation, but they will continue to produce crops of 90 million tonnes or more. We’re still looking at a substantial ramp up in production. They’ll accomplish this through the weak ruble. Plus, there’s still another 27 million acres of the collective farming system that can be brought into production.”


All eyes are on Russia given its massive crop, Vogel said. But an export duty on wheat means farmers and grain handlers will not be able to participate much in global wheat price advantages.

 

“It opens up ways for other regions to take some more market share in the future away from Russia, if prices would remain really high,” he said. “Russia’s on a level playing field if prices are low. With prices above $200, Russia is at a disadvantage in the future.”


Ukraine is replacing barley with corn and is not only increasing the area of grains, but also the yield per hectare, Vogel said. It made the change after the government liberalized the export market for corn. In the last 10 years, exports have increased from about 5 million tonnes to 25 million tonnes today.

 
Throughout the last century, and particularly in modern times, government policies have had a siginificant impact on the the flow of grain around the world.

 
“Trade policies, protectionism, tariffs or barriers to trade, whatever you want to call it, ultimately they have caused disruptions in the trade flows,” McGuigan said.

 
Government policies in China, and the continued volatility of how and when they are applied, has swayed the market for decades. The United States continues to feel the strain from its trade war with China that dropped soybean exports by 70% in 2018 and now Australia is reeling from an 80.5% tariff on its barley exports to the nation. In the 2018-19 marketing year, more than half of Australia’s barley went to China.

 
“Disruptions like these are opportunities for bigger players,” McGuigan said. “Ultimately the grain will flow, the traditional route may change, but the grain will flow. So, China will buy more from the US, Ukraine, Argentina and less from Australia. Australia is still producing the same grain so it will have to ship it somewhere else, to Africa, other places in Asia.

 
“It just comes back to the global connectivity of all these trade flows. I don’t think anybody can really manage those trade flows 100% anymore. They may have been able to do it 100 years ago, but not anymore.”


While China did increase its imports of US soybeans as part of the phase one trade agreement, it did not reach the first target, which called for the purchase of $36.5 million in farm goods. Estimates showed China would have had to import 40 million tonnes of soybeans to reach that target, but only imported 25.89 million tonnes. That was still higher than 2019, when it imported 16.94 million tonnes of soybeans from the United States. Brazil stepped in as China’s top supplier, exporting 64.28 million tonnes of soybeans to China in 2020, up from 2019 and will export an estimated 57.67 million tonnes in the current market year.

 
In addition to soybeans, China likely will remain an importer of corn for a few years and has the potential to be the No. 1 corn importer in the world very soon, Vogel said. In fact, the February World Agricultural Supply and Demand Estimates showed import demand from the EU at 19 million tonnes, Mexico at 16.5 million tonnes, Japan at 16 million tonnes, and China at 24 million tonnes.

 
“That’s not driven by politicians,” Vogel said. “They’re having to supply those corn needs for the livestock sector. At the same time, it has reduced corn stocks over the last five years, so there’s not much they can easily bring on to calm down the market. China needs a high number of corn imports, and the US is a good supplier. South America will always play a role in that also.


“It will take a few more years for it to recover from African swine fever. It’s a positive sign for the future that the country will have very strong import numbers going forward.”

 
Along with losing a major share of soybean exports to Brazil, the United States has felt pressure from other regions in corn and wheat exports. Competition from Russia, Ukraine and Australia has weighed down wheat exports, while Brazil, Argentina and Ukraine are driving down its corn export share. The trade war with China boosted Brazil into the No. 1 export spot for soybeans.

 
The emergence of new low-cost producers and exporters in global, wheat and soybean markets are transforming global grain trade, the ERS said.

For example, Indian wheat exports are returning to the global market in a significant way for the first time in several years, the FAS said in its February “Grain: World Markets and Trade” report.

 
“India’s ample supplies are poised to reach additional markets as stocks tighten among many of the top exporters,” the FAS said. “India’s domestic support programs have a history of periodically expanding wheat production and burgeoning government-held stocks.”


Even with record consumption, stocks are at record levels. Several years ago, when stocks reached a high level, relatively high Russian export prices opened opportunities for India to supply Asia and Middle East markets, the FAS said. In recent months, Indian export prices have eased while prices for major suppliers have risen,
“This will afford India the opportunity to seize greater market share in Bangladesh and expand to additional markets,” the FAS said. “However, the scale of exports from India is not likely to match that of several years ago, since a larger Australian crop will provide formidable competition in Southeast Asian markets.”


McGuigan agrees India will be more present in global trade flows, which likely will include pulses of which India accounts for 25% of global production. As people’s diets change toward more vegan or plant-based protein, he said pulses will be more present in global trade flows.
“I do think India will be very important in those trade flows,” he said. “There is a big potential for much increased trade in pulses globally. The industry is set up for it. They use the same transportation, both across the sea and going in and out of ports.”

 
Africa could also become a bright beacon for trade in the years ahead, Basse said. Some believe Africa is moving toward self-sufficiency while others say because of a failed political system, the region will be importing more.

 
“Africa agriculture could improve; they have potential,” he said. “Somewhere there is an opportunity on the demand side, looking at 2025 and beyond.”


North Africa is a big importer of grain and oilseeds and will continue to be, McGuigan said, while sub-Saharan Africa has the potential to be a huge producer of grains.

 
“For whatever reason, they’ve not been able to harness that potential,” he said. “Fifty years ago, Zimbabwe was the breadbasket of the continent and now it’s not. The land is still there, the soil is still some of the best in the world but unfortunately it hasn’t been harnessed and I don’t see that happening anytime soon.”

Future disruptors

History has shown that grain flows can shift, sometimes rather quickly, and impact global trade for years and even decades to come. While it’s not possible to precisely identify what the next disruptors may be and how flows may shift, analysts see a few potential issues on the horizon.

 
One factor that Vogel said grain and oilseed producers should be worried about is the uptick of alternative proteins. Much innovation is happening in that field, whether it’s plant-based or through a fermentation process or cell cultured meat, and there is significant investment.

 
“If it got to the point where those proteins are accepted by the population, are considered safe and are price competitive, it could be a big disruption,” Vogel said. “We would still have protein isolating concentrates and capacity expansion of pulses and so on, but that is a scary picture if we can produce meat without using a lot of grains. It’s going to get very challenging for those producers of soy and corn. But who knows if and when, and to what extent that occurs?”


McGuigan said alternative proteins may displace wheat and corn because of less demand for feed, but growers could pivot to growing more soybeans and pulses.

 
“It’s still agriculture,” he said. “The overall demand for protein would continue to increase, the mix will just change.”

 
Falling demand for biofuels in the future, as governments push electric vehicles over fossil fuel, could also cause a major shift in corn and soybean markets. In the United States, California has banned the sale of new gasoline-powered vehicles by 2035 and other states have legislation pending. Other countries have their own initiatives, such as Sweden, which has pledged to stop using fossil fuels by 2050 and Norway, which plans to ban the sale of fossil fuel cars by 2025.

 
“It will be a transition,” McGuigan said. “It depends on how quickly we ramp up on the electric side. The market share will grow over the next 10 years, and that will lead to a reduction in the demand for fuel. But you may see governments then mandating for more ethanol and biodiesel. So, you may have less fossil fuel going in and more ethanol and biodiesel, to keep the demand for those products the same overall.


“From the political point of view, the farm lobby from North and South America is pretty strong and they won’t want the mandate of biofuels to go away.”


Climate change could push soybean production northward, opening up further opportunities for regions such as Canada and the Black Sea, Basse said. Shorter variety soybeans are already making it possible to grow soybeans in Canada and encouraging construction of crush facilities in the Black Sea.


“Those kinds of things will keep happening,” Basse said. “Climate variability is something that will be with us. We’re only understanding a little bit of it today.”


Data has shown that severe climate events, whether it’s flooding, drought, or something else, seem more robust than the world has experienced in the last three or four decades, he said.

 
Hand-in-hand with climate change is the increasing focus on sustainability. Countries and regions are setting targets, as are individual companies, so it’s not a one-size-fits-all policy, Vogel said.

 
“Sustainability will remain a very important piece of global agriculture in the future,” he said. “It will have an impact on certain regions in the world.”
ADM has made serious commitments around responsible land use, no deforestation and no employee exploitation, said McGuigan, noting that the company launched its Strive 35 plan to reduce greenhouse gas emissions by 25%, energy intensity by 15%, water intensity by 10% and achieve 90% landfill diversion rate by 2035.


“We’ve already committed to not buying from deforested areas,” he said. “I do think that will have an impact on the land use in areas like South America where potentially people think there may be further expansion.”
Increased production will have to come from increased yields from the land already in use. Yields, in general, over the last 100 years are off the chart in terms of efficiency, McGuigan said.

 
“We’ve got to continue to look at that in an agronomic way to improve yields going forward,” he said.