A report published by Rabobank in September 2012 has highlighted the growing competition facing the EU flour milling sector from exporters in Turkey and Kazakhstan, both of which benefit from ‘proximity to major export markets’ in the Middle East and North Africa, and ‘lower-than-average labour and energy costs’.
The report notes that ‘EU wheat and rye flour production has fallen in the last six years from an estimated 40 million tonnes, to roughly 34 million tonnes today’ (-15%). This reflects declining household use of flour, although this is in part balanced by increased consumption of value-added processed bakery products. According to the analysis from Rabobank, ‘volatility in commodity prices and periods of increased scarcity… also [threaten] the operations of many millers’ in the EU, with the margins of profitability of EU flour millers falling in the past 6 years. Against this background, managing price volatility is an increasingly important challenge for EU flour millers.
According to Rabobank, a process of consolidation in the EU flour milling industry is expected, possibly involving ‘integration with end producers such as a bakery or pasta producer; brand differentiation; stronger sourcing relationships through co-operative alliances or building a pan-European presence’ through mergers and acquisitions.
In June 2007, at a symposium on EU agri-food export interests in FTA negotiations, EU flour exporters pressed for the elimination of non-tariff barriers to trade in flour and cereals products through FTA agreements (including the EPAs). It was argued at the time that these non-tariff measures represented the main obstacle to EU flour exports (see Agritrade article ‘ The wheat-flour industry perspective on FTA negotiations’, 1 September 2007).
Five years on, provisions related to the elimination of import licences and similar non-tariff measures remain a point of contention in many ongoing EPA negotiation processes. The EC insistence on the inclusion of the ‘Turkey clause’, granting the same tariff treatment to Turkish exporters as that accorded to EU exporters, may well be serving to complicate the export challenges faced by EU flour exporting companies, given the competition posed by Turkish flour exporting companies.