“One of the biggest problems in Turkish milling industry is the difficulty of accessing quality, cheap, and sufficient raw material. It is necessary to increase measures for domestic wheat to carry out the export with our own wheat and for the domestic market. It is necessary to take steps to move to industrial agriculture without becoming a country dependent on foreign trade in wheat and necessary works should be increased in order for the farmer to return to wheat production.”
Board Member of Ozmermer Flour
Turkey’s export sector has long been experiencing a golden age. But it also struggles with many problems. There are two fundamental problems of our sector. The first is the idle capacity problem and the second is the lack of sufficient, high quality and cheap raw materials. Unless there is a solution to these two major problems, it is clear that the difficulties faced by our sector will continue.
According to the 2018 Cereal Sector Report published by the Turkish Grain Board, the number of active flour mills in Turkey is 659. The actual capacity utilization rate of these 659 factories is 52 percent compared to the installed capacity. In other words, half of the capacity is idle excluding the non-active factories.¹ Every inactive production facility and any idle capacity show that our national wealth is idle. In order not to waste any more of the national capital, wheat flour production should be urgently subject to a license. Opening new facilities should be prevented through legal regulation.
Another problem that awaits us in idle capacity is the risk of contraction in the export market. Turkey alone carries nearly one-third of the world’s flour exports in the last 6 years. But various risks await Turkey in the medium and long term.
Turkey should increase the number of countries it exports to and the export volume. Half of the export goes to Iraq. It is required to take precautions against this risky situation. As a matter of fact, while Iraq accounted for 51 percent of exports in 2017, this percentage decreased to 49 percent in 2018, and eventually declined to 42 percent in the eleventh month of 2019. This situation shows that Turkey’s market dominance in this market wanes although the country has political and geographical advantages. The Iraqi government takes new decisions to promote domestic production and has a good relation with Iran. The Iraqi government took a decision on 19/06/2019 and banned the import of pasta, eggs, common salt, and vermicelli from Turkey. The same risk is valid for flour. Mills in Iraq use 33 percent of their capacities. In the event that the Iraqi government imposes restrictions or prohibitions on the import of flour, our problem of idle capacity will exacerbate.
The second risk for the long term is that Russia and Ukraine may take more shares in the flour export. Both countries have ports and also produce cheap, high quality, and abundant raw materials. Flour has more added-values compared to wheat, and that’s why both countries’ investors are attracted to flour. As a matter of fact, Ukraine is the fifth in the world in wheat export and the seventh in the world in flour export. Ukraine has increased its flour exports by 70 percent in the last 10 years to 440 thousand tons.² In the same vein, the comment by Arkadiy Gurevich - President of the Russian Flour Mills and Grain Companies Association – should receive attention: “In Russia, all conditions have been created for the development of flour exports. The companies have the necessary production reserve capacities. However, Russia, unlike Turkey, does not support the flour export... We believe that Russia may increase its export by several times, and Russia may become one of the biggest exporters of this product.” ³
The other biggest problem in our sector is the difficulty of accessing quality, cheap, and sufficient raw material. It is necessary to increase measures for domestic wheat to carry out the export with our own wheat and for the domestic market. The average wheat consumption in Turkey is around 19 million tons. On the other hand, wheat production is around 19 million tons in 2019 and was 21.5 million tons in 2017 and 20 million tons in 2018. This year, wheat production fell by 5 percent below last year. Although production and consumption seem to be head-to-head, 16.1 million tons of 19 million tons of production is for bread, and the bread wheat consumption forecast is 17.3 million tons. (4). It is necessary to take steps to move to industrial agriculture without becoming a country dependent on foreign trade in wheat and necessary works should be increased in order for the farmer to return to wheat production.
In this context, the other problem of our sector in bread wheat is that it shares inadequate bread wheat with the pasta sector. In addition, the pasta sector, like the flour sector, must first import wheat and then export pasta. If precautions are not taken in these matters, our sector will face big difficulties.
We have to increase wheat production not only for ourselves but also to avoid the impasse for imports, especially for exports. Only in this way, we can eliminate the risk of Ukraine and Russia, which have rich wheat raw material in the medium and long term. If we can export the flour that we produced from our own wheat, we will realize great input to the national economy.
As the last word, unexpected weather conditions and natural disasters have begun to shape today’s world due to global warming and climate change. This year, the Turkish Grain Board’s (TMO) stocks are lower than the normal level. If TMO keeps its stock at the maximum level, it will be very valuable for unpredictable days.
1: TMO 2018 Grain Sector Report, Page 39, Table 46
2: HR Agriculture Base International Consultancy, Agricultural Markets Bulletin Issue-8, page 14
4: HR Agriculture Base International Consultancy, Agricultural Markets Bulletin Issue-7, page 2