SIC 2041
FLOUR AND OTHER GRAIN MILL PRODUCTS



This industry comprises establishments primarily engaged in milling flour from wheat, rye, and other grains except rice. Rice millers are categorized in SIC 2044: Rice Milling. Establishments involved in corn milling by the wet process are categorized in SIC 2046: Wet Corn Milling.

Products of this industry include plain flour or mixes and doughs prepared from milled ingredients. Establishments that supply mixes and doughs prepared from purchased ingredients are categorized in SIC 2045: Prepared Flour Mixes and Doughs.

NAICS Code(s)

311211 (Flour Milling)

Industry Snapshot

In the flour milling industry, explosive growth during the mid-1990s had been tempered by growing environmental and health concerns, as well as a weakening economy, by the turn of the century. Shipments of flour and other grain mill products fell from a record high of $8.045 billion in 1997 to $6.650 billion in 2000, according to the U.S. Census Bureau. There were 385 mills in the United States in the late 1990s, slightly reversing the trend of the past few decades toward fewer mills, and highlighting milling companies' optimistic investment patterns. Most of the industry's value ($6.1 billion) was derived from wheat flour, while corn mill products accounted for $696 million in shipments.

While the industry has expanded, its customer base and marketing focus have changed radically. Especially after World War II and accelerating rapidly beginning in the 1970s, domestic flour-consumption patterns shifted away from household consumers and toward commercial bakers, including fast-food outlets. Due to general lifestyle changes and economic expansion, household baking has declined considerably; individual consumers increasingly tend to purchase their bread, dough, and mixes prepared from grocery stores and bakeries. Flour use, then, has become more and more institutionalized. At the same time, the domestic market overall has flourished, much to the industry's benefit; the United States was, for much of the twentieth century, by far the world's leading exporter of flour and grain mill products, and exports were the industry's lifeline. By 2000, exports accounted for only 3 percent of all flour. The fading international presence of the United States in the flour industry has, moreover, coincided with a growing worldwide demand for flour and grain mill products. Nonetheless, the bulk of the flour industry has contented itself to focus on the domestic market.

Organization and Structure

Although any grain (rice, oats, barley, corn, millet, sorghum, and wheat) can be ground into flour, most of the world's flour was produced from wheat; the industry consumed more than 790 million bushels of wheat in 1998. Using standard milling procedures, 100 pounds of wheat yielded approximately 72 pounds of white flour. In addition to flour, the milling process produced millfeeds, which were made from pieces of bran and other portions of the wheat kernel. Millfeeds were used as ingredients in livestock food.

Flour could be packaged for sale to the household or bakery markets or used as an ingredient in bakery mixes, breads or doughs, or pastas. Different bread varieties were made with varying recipes but, on average, 100 pounds of flour could make about 150 one-pound loaves of bread. The bread and cake industry consumed approximately 75 percent of the flour milled in the United States. Other flour products included cookies, cereals, gravies, soups, whiskeys, and beers. Flour products were also used in nonfood applications such as the manufacture of plywood adhesives, industrial starches, fertilizers, paving mixes, polishes, and cosmetics. Approximately 85 percent of the flour used by industrial users was milled from hard and durum wheat varieties.

Furthermore, mills used a process called fractionation to separate the flour according to the fineness of its particles. Course fractions were reground. Intermediate fractions were used in applications requiring low amounts of protein, and fine fraction flour was blended with other flours or used alone in applications where high protein content was necessary. White flour was often bleached with agents such as potassium bromide, methyl bromide, methyl iodide, iodate, acetone peroxide, azodicarbonamide, ascorbic acid, and chlorine dioxide. In addition to providing consistent coloring, bleaching improved the condition of the flour gluten, which in turn improved its baking quality. These chemicals were often also used as fumigants to defend stored flour and grains against rodents and insects, an increasing concern as storage capacity continued to increase; total commercial grain storage totaled about 220 million tons in 1999.

White flour is made only with the endosperm portion of the wheat kernel. Farina is also made from the endosperm, but it is ground to produce a granular product. The term "wheat germ" refers to the part of the wheat kernel from which a seed sprouts. It contains oil that is sometimes extracted for separate processing. Wheat germ is also used in breakfast cereals, breads, and other bakery products. Whole wheat flour, also called graham flour, is made from the endosperm, bran, and germ combined; it has a higher protein content than regular white flour. Pastas such as spaghetti, macaroni, and noodles are made from durum wheat. A popular pasta ingredient, semolina, is a granular grind of durum endosperm, comparable to farina.

The diverse end uses of flours require a wide variety of milled grain products produced from different types of wheat. In the late 1990s, approximately 14 different wheat species were grown. The three most frequently used varieties are common wheat ( Triticum aestivum ), club wheat ( Triticum compactum ), and durum wheat ( Triticum durum ). Together, these three accounted for 90 percent of the wheat grown in the United States.

Different wheats are classified as hard, soft, or durum. Hard wheats are used to make flours for breads and rolls. Soft wheats are used primarily in cakes, cookies, crackers, and prepared mixes. Durum wheat is almost exclusively used to make pasta products. Although a single modern flour mill might offer more than one product, it typically grinds only one class of wheat. Approximately 70 percent of the U.S. milling capacity during the late 1980s was devoted to hard wheat. Soft wheat mills accounted for 20 percent, durum wheat accounted for 8 percent, and mills dedicated to whole wheat production represented 2 percent of the nation's milling capacity.

Background and Development

Milled grains have been used as principal food staples for thousands of years. Corn has been the predominant grain used by people in Latin America and the sub-Saharan regions of Africa, while many Asian nations have depended on rice. Inhabitants of Europe and North America relied primarily on wheat products.

The origins of wheat farming and milling are obscure. Historians estimate that wheat cultivation began between 10,000 and 15,000 years ago, marking the beginning of civilization. Because they could be stored, stocked, and transported, grains led to the evolution of trading practices. Documents in the form of artistic depictions and early writings chronicled the development of wheat grinding technologies and baking methods in ancient Egypt, Assyria, Greece, and China.

One of the oldest types of wheat known is bulgur wheat, and the earliest means employed to separate the parts of the wheat kernel involved rubbing the grain between the hands. Another method used the action of hoofed animals walking over grains that had been spread on hard ground. Winnowing was a process in which grains were tossed in the air so that the chaff would blow away. Removing the individual grains from the rest of the plant was necessary before milling could take place.

Wheat kernels are made up of three components: endosperm, bran, and germ. The endosperm represents about 83.0 percent of the kernel and contains the starchy portion used to make white flour. The bran accounts for about 14.5 percent of the wheat kernel and is used in whole wheat flour and animal feeds. The smallest portion of the kernel, the germ, represents only about 2.5 percent of the kernel. The most common uses of wheat germ are in human food products and in animal feeds. Historically, the germ was separated from the rest of the wheat kernel because it contained fat and did not keep well in long term storage.

Grain milling practices were developed to separate the kernel components and make flour. The first types of milling procedures involved the use of rubbing stones, mortar and pestles, or querns. Querns were devices made from two stacked, disk-shaped stones. Wheat grains were poured into the quern through a hole in the top stone. As the two stones turned against each other, the abrasive movement separated the parts of the wheat kernels and ground the endosperm into flour. The flour was then discharged between the stones.

More efficient methods of grinding grain progressed along with the development of alternative power supplies. Horses and oxen could turn millstones better than humans. Wind- and water-operated mills supplanted animal power. As the United States was settled, mills were constructed in almost every town. Typically the mill relied on water power and was, therefore, located near a source of running water.

The first continuous system for milling wheat into flour was developed during the last part of the eighteenth century by an American, Oliver Evans. Evans' mill design utilized steam technology and employed conveyors and bucket elevators to move the grain through a multi-phase milling process. Further advances in milling technology occurred during the nineteenth century. In 1865, Edmund La Croix developed a middlings purifier that separated the granular endosperm from the bran so that it could be reground to produce a better grade of flour. During the 1870s, the first roller mills in the United States were constructed. Roller mills possessed several advantages: they eliminated the need of dressing millstones; they were able to produce flour through a more gradual extraction process, which enabled millers to yield a larger percentage of better grade flour; and they lent themselves to greater efficiency, thereby making the construction of larger mills more feasible.

As U.S. citizens moved westward, milling centers moved with them. Mills became larger in size but fewer in number. In 1870, an estimated 22,000 mills served the nation's population of about 30 million. One hundred and ten years later, the nation's population of 220 million was served by an estimated 150 to 250 mills. In Michigan, for instance, the number of mills fell from 534 at the turn of the century to 6 in 1990. The consolidation of mills and the trend toward facilities with greater capacities led to the creation of giant corporations such as Pillsbury Co. and General Mills, Inc. Millers began offering a wider variety of products during the early 1900s. Self-rising flour, biscuit and cake mixes, and prepared doughs were introduced during the 1920s and 1930s but failed to gain widespread popularity until after World War II.

During the middle of the twentieth century, fundamental changes occurred in the primary location of mills. Prior to the 1950s, the cost of shipping wheat and the cost of shipping flour were approximately equal, and mills were frequently built close to wheat fields. During the early 1960s, the cost of shipping grain decreased following the introduction of hopper rail cars. At the same time, costs surrounding sanitation requirements increased the price of shipping flour. As a result, mills were constructed in close proximity to end markets rather than near the wheat fields.

Granular flour, a product made with particles of a uniform size with carefully controlled amounts of atomized moisture to reduce clumping, was introduced during the 1960s. Although granular flour was more expensive than regular flour, it offered several advantages. It had less dust, was easier to pour, did not require sifting, and it dispersed in cold liquids.

During the 1970s, sales of household flour declined as society moved away from home baking and homemakers demonstrated a preference for the convenience and consistency of prepared mixes. In addition, many mixes were less expensive than individual ingredients. Baking from "scratch" ceased to be an activity of necessity and was relegated to hobby status. Demographic information revealed that households with higher incomes were more likely to use flour than lower income households. Flour volume losses within the household sector were partially offset by increases of flour sales to commercial bakers.

Current Conditions

Although overall flour consumption dipped somewhat during the early 1970s, annual per capita flour consumption underwent dramatic growth in the final three decades of the twentieth century, from 110 pounds in 1972 to 147 pounds in 1997. Flour production increased as well, to a record 18.3 million tons in 1997, up 14 percent from 1990, aided by the increase in per capita flour consumption. A healthy economy favorable to the baking industry, especially marked in the wild proliferation of specialty baking stores like bagel shops, further fueled robust growth. Such skyrocketing consumption was unprecedented in U.S. history. Several factors contributed to this phenomenon, including the surge in consumption of fast-foods and other flour-based convenience foods such as sandwiches and pizzas and. However, growing environmental and health concerns, along with a sluggish global economy, contributed to a decline in consumption at the turn of the century. Per capita flour consumption fell from 146 pounds in 2000 to 143 pounds in 2001.

Consolidation was perhaps the most consistent trend in flour milling. Since the 1980s, the number of mills has declined, while market shares of the top companies have escalated rapidly. In 1973, the top four milling companies controlled 34 percent of the nation's capacity, while the top ten accounted for 61 percent. One of the most radical ownership restructurings occurred in 1989, when Pillsbury Company, one of the largest flour millers in the United States, sold its mills to Archer Daniels Midland Company and Cargill Flour Milling and became one of the nation's largest purchasers of flour for its mixes and refrigerated doughs. At the dawn of the twenty-first century, six of those former top-ten companies were no longer in business. The largest flour miller, Archer Daniels Midland Milling, held nearly a quarter of total capacity, and the top four firms controlled two-thirds of the market; the top ten accounted for 83 percent.

Average milling capacity, meanwhile, has expanded enormously, increasing about 80 percent between the early 1970s and late 1990s. In 2000, most mills held a capacity of more than 45 tons. Most of the mills shut down over the last two decades were those with smaller capacity. The trend toward corporate mills was driven by the goals of reducing labor and transportation costs and increasing profits, favoring those companies with large production facilities that can create economies of scale. The efficiency of the mills in place has escalated along with consolidation, evidenced by the 90 percent capacity at which most mills in the United States now operate. Finally, the pace of this expansion continues to grow, particularly as a faltering global economy has forced companies of all kinds to implement new cost cutting initiatives.

The trend toward fewer, yet larger, firms has further resulted in a heightened willingness of and need for companies to invest heavily in technological innovation. Whereas the flour milling industry was once characterized by the drive for low-cost operations as its basis of competition, firms in the late 1990s were pouring money into modernization schemes aimed at streamlining their larger facilities.

Other effects of the industry's consolidation have generated uncertainties. A by-product of increased capacity and centralization of production is the dual needs of increased quality-control measures and more efficient production. Biotechnology, generally agreed, especially among the larger players, to be a practical and feasible solution to these problems, is hailed by some as an integral and welcome aspect of flour milling's future. Critics, however, tend to view this trend as dubious or worse. The research and application of processes aimed at improving flour quality, maximizing production, and staving off pests via gene manipulation is one of the most contentious and crucial issues the flour and grain mill products industry faces in the twenty-first century, as environmentalists, consumer advocates, and many scientists and other critics question the safety to humans and the environment of genetically modified foods.

A number of environmental concerns topped the industry's challenges in the early 2000s. Global environmental accords, such as those reached at the Kyoto Conference in Japan, have aimed at completely phasing out the use of chemicals with an ozone-depletion level of 0.2 or higher; this includes methyl bromide, the most popular fumigant in U.S. flour mills. The United States, the largest producer of methyl bromide, agreed to reduce emissions by 2012 seven percent from their 1990 levels. Not all millers have accepted the news graciously; many are concerned about the costs involved in continuing to meet governmental standards regarding cleanliness and pest control without their staple fumigant. One existing alternative is methyl iodide, which carries an ozone-depletion level of 0.016, compared with methyl bromide's 0.6. However, the price for methyl iodide in 1999 was $12 per kilogram, about three times that of methyl bromide.

The Environmental Protection Agency (EPA) implemented regulations in 1999 aimed at reducing levels of phosphine, another fumigant typically used in grain and similar agricultural storage facilities, including flour mills to control insects and rodents. Commonly used in the form of an aluminum or magnesium tablet, phosphide, like methyl bromide, actually penetrates the kernel or grain mass. In forty years, twelve deaths have been attributed to the chemical; the particular separate incidences that spurred the EPA into action involved two women, one elderly and the other pregnant, who died from organophosphate poisoning after storage facilities near their homes were fumigated. While some industry players hold that such tragedies could be avoided with proper application procedures, the industry must adopt to the new regulations.

Potassium bromate has also attracted the ire of environmentalists and health monitors. The additive, for decades a staple of the baking industry used to improve dough texture, has been found to cause cancer in laboratory animals. Moreover, potassium bromate is an oxidation material; oxidation has generated concerns over insect infestation. The U.S. Food and Drug Administration (FDA) has urged millers and bakers to cease the use of potassium bromate since the early 1990s, though so far there is no mandate against its use. The American Bakers Association, meanwhile, maintains that potassium bromate residues can and should be eliminated with proper handling and baking techniques, without necessitating the banning of potassium bromate altogether.

Another major challenge facing the grain mill industry was the charge that flour performance was diminishing. Industry researchers speculated that one cause of deteriorating quality was a grain breeding program that had emphasized increasing yield per acre without paying sufficient attention to the quality of the end products produced with the grain. Other possible causes included a drop in the amount of protein, a declining protein quality, an ever-increasing number of wheat varieties, the impact of agricultural practices such as irrigation and fertilizers, and milling practices that improved efficiency but with potentially inferior results.

Various flour-treatment procedures exist to improve the appearance, nutritional content, and baking quality of flour during the milling process. Flour enrichment, for example, adds iron and B vitamins to stave off vitamin deficiencies; enrichment is credited with eliminating diseases such as beriberi and pellagra in the United States. Today, about 95 percent of bread in the United States uses enriched flour.

Industry Leaders

The largest miller in the United States in 1999, ranked by milling capacity, was Archer Daniels Midland Company, a diversified food producer, at 46.8 million pounds. Established in 1923 via an acquisition that made it the world's largest linseed oil producer, the firm has continually expanded its operations, covering the gamut of agribusiness, including wheat milling and cereal grains. ADM's milling products include dry and wet milling corn, wheat flour, durum flour, and bulgur for both retail and institutional customers worldwide. The firm posted sales of $13.7 billion in 1999 and employed 23,600 people.

ConAgra Inc. was second-largest, with capacity of 29.67 million pounds. Another diversified food products organization, ConAgra classified its businesses into three areas: Grocery and Diversified Products, Refrigerated Foods, and Food Inputs and Ingredients, whose combined sales reached $24.9 billion in 1999. In addition to its wheat flour production mills, ConAgra operated oat, dry corn, and barley processing facilities. ConAgra operated 30 mills in the United States, with others in Canada and the United Kingdom.

Cargill Foods, which began as a grain elevator in the mid-nineteenth century, occupied the number three position in milling capacity, at 24.98 million tons. One of the largest food companies in the world, with operations in 65 countries worldwide, Cargill maintained 80,600 employees and generated $45.7 billion in revenue in 1999. In 1998, Cargill acquired Continental Grain Company, a top industry player. In 1997, Cargill reorganized its milling operations along Eastern and Western regional lines. Cargill Foods' Flour Mills produce bulk and packaged flours and mixes.

Once the nation's largest flour miller, General Mills' milling capacity has shrunk to 7.6 million tons. Its milling and baking products, however, continue to position it as an industry leader, with 10,000 employees and 1999 revenue of $6.49 billion. The company produces leading household flours, sold under the Gold Medal and Robin Hood labels, and mixes, such as Bisquick and Betty Crocker.

Workforce

Employment in the flour and grain mill products industry registered a slight upswing in the late 1990s, to 12,800 workers, after years of incremental declines; in 1993 the figure stood at 12,400, and dipped below that in the interim. In 1997, industry employees earned an average of about $14.53 per hour. Out of the 380 active mills, 172 maintained a staff of 20 or more workers, while 75 had more than 50 workers.

Safety issues within the industry included dust control, noise abatement, and controlling hazards that presented risks for fire and explosions. Concentrations of grain dust above certain limits were susceptible to burning rapidly if ignited. Dust control was also necessary to limit possible worker exposure to microorganisms, pesticide residues, toxins, insect parts, and animal hairs. Some studies suggested that workers with high levels of exposure to grain dust might be susceptible to respiratory diseases such as chronic bronchitis. Noise in mills was primarily attributed to pneumatic blowers and vehicles. Finally, complications relating from fumigants, a major concern to the industry as a whole as regulatory scrutiny clamps down, was of acute concern to employees.

To control potential work place hazards, modern mills reduced dust generation by minimizing grain handling, reducing the velocity of grain movement, and installing enclosed conveyor systems. Protection from excessive noise was achieved by isolating work stations and limiting exposure.

Further Reading

"Methyl Bromide Update." World Grain, February 1998. Available from http://www.sosland.com .

Posner, Elieser S., and Arthur N. Hibbs. Wheat Flour Milling. St. Paul, MN: American Association of Cereal Chemists, 1997.

Sosland, Morton I. "Project Apollo: Milling Technology Enhanced by Human Milling Skills." Milling & Baking News, 15 June 1999.

Sudgen, David. "Defining Flour Strength." World Grain, June 1998. Available from http://www.sosland.com .

Trood, Ian S.V. "Flour Power." World Grain, September 1999. Available from http://www.sosland.com .

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

United States Census Bureau. 1997 Census of Manufacturers. Washington, D.C.: Department of Commerce, 1999.

Wheat Flour Institute. From Wheat to Flour. Washington, D.C.: Wheat Flour Institute, 1981.

Wylie, Stormy. "Battle Over Phosphine." World Grain, February 1999. Available from http://www.sosland.com .



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