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Exploring the flour milling future in Russia

20 March 202410 min reading

In an interview with Miller Magazine, Igor Sviridenko, President of the Russian Union of Flour Mills and Cereal Plants, presents the strategic vision and challenges shaping the future of flour milling in Russia. He also sheds light on the ongoing trend of modernization within the milling industry, driven by increased profitability and growing export dynamics.

Russia, the world’s leading wheat exporter for the past three seasons, is poised to set a new record, targeting 51 million tons in sales for the current season. The country is expected to produce 91 million tons of wheat in the 2023/24 season, as per the latest USDA estimates. This surge in production aligns with Russia’s increasing focus on exports. The flourishing wheat exports are mirrored by a parallel surge in wheat flour exports. In recent years, Russia’s wheat flour exports have also experienced significant growth, showcasing the nation’s emergence as a notable flour exporter to diverse countries, extending beyond the traditional CIS nations. The country boasts approximately 280 large-scale flour mills, collectively producing over 15 million tons of flour annually. These mills are strategically concentrated across various federal districts, witnessing notable expansions and advancements.

In an exclusive interview with Miller Magazine, Igor Sviridenko, President of the Russian Union of Flour Mills and Cereal Plants, shares insights into the current state of the Russian flour milling industry. Sviridenko analyses the key challenges facing the industry and highlights the ongoing trend of modernization within the sector. This trend is primarily driven by increased profitability and the surge in export dynamics, showcasing the industry’s adaptability to evolving market demands.

Here are Igor Sviridenko’s answers to our questions:

Mr. Sviridenko, could you provide an overview of the current state of the flour milling industry in Russia? 

In the Russian Federation, there are currently around 280 large-scale (industrial) flour mills. This enables the production of no less than 15 million tons of flour annually, consisting of 13.5 million tons of wheat flour and 1.5 million tons of rye flour when needed. According to Rosstat data, the annual production volume is approximately 9.3 million tons. Thus, there is a significant amount of untapped production capacity. 

The mills are primarily located in the Central, Volga, Southern, Ural, and Siberian federal districts of Russia. There is a relatively small number of flour milling facilities in the Northwestern and North Caucasus federal districts. There are no flour milling enterprises in the Far Eastern federal district.

CHALLENGES IN RUSSIAN FLOUR MILLING

What are the key challenges you observe in the Russian flour milling industry? How can these challenges be addressed?

The key problems include enhancing the profitability of flour milling, improving the quality of the produced goods, and optimizing the rational utilization of bakery products. In recent years, grain production in Russia has significantly exceeded domestic needs. The cultivation of high-quality wheat (3 class) in Russia surpasses internal consumption requirements by twice the amount. This allows the allocation of the highest-quality grain to production. Together with the use of advanced technology, this enables the producing of products at the level of global standards.

The implementation of the Federal State Automated Traceability System for Grain and Grain Products has played a significant role. This system enables the traceability of the entire grain journey – “from field to shelf” and controls both the utilization of grain and the quality of the produced products. Currently, there is a need for the widespread extension of the system to all producers, including those who are not yet included. 

The use of high-quality raw materials and advanced technologies under strict control ensuring equal competitive conditions is the key to enhancing the economic stability of Russian flour mills.

RUSSIA’S FLOUR EXPORT SOARS TO NEW HEIGHTS

Can you provide an overview of the recent trends in Russia’s flour exports, including any notable changes in volume, destinations, or types of flour being exported?

For a long time, Russia being the world’s largest wheat exporter, held a relatively modest position in the flour export market. This trend has changed since 2022. The export of flour in 2022 exceeded 350% – from 250 to 880 thousand tons. The Russian export of flour experienced a remarkable surge, soaring by over 350%, escalating from 250 to an impressive 880 thousand tons.

There have been notable changes in the direction of exports. While flour was mainly exported to CIS countries in the past, now, along with traditional buyers like Georgia, Uzbekistan, Turkmenistan, and Azerbaijan, Russia has emerged as a major exporter to Iraq, Afghanistan, North Korea, China, Syria, and even Turkey, which itself is a significant exporter of this product.

How do you see technological advancements impacting the milling industry in Russia? Are there specific innovations or technologies that you believe will play a crucial role in the industry’s future?

The question is rather nuanced. After all, milling is one of the oldest industries mastered by humanity over 10,000 years ago. Development is undoubtedly ongoing. But breakthrough directions have been explored for quite some time, and obtaining products with characteristics surpassing the current best samples is either impossible or inexpedient. In the latter case, the costs required for improvement may not be justified, as the quality will not increase proportionally to the investments. In our opinion, the primary directions will involve the consolidation of enterprises and the increase in their automation. In recent years, Russia has seen the emergence of facilities with a processing capacity exceeding 1700 tons per day. Meanwhile, China is commissioning plants with a capacity of 5000 tons per day and even more. This allows for increased profitability through the reduction of fixed costs, primarily on management personnel, as well as on production workers replaced by automation. 

Another direction could be scientific developments in the field of flour processing technologies – the use of additives and improvers for a more complete separation of shells and endosperm, improving quality indicators (particularly whiteness), and enhancing the baking properties of flour. However, this path must be navigated very carefully and responsibly, as any introduction to the natural composition of raw materials and finished products can have both positive and negative implications.

THE EVOLVING FACE OF RUSSIA’S FLOUR MILLS

In a previous discussion, you highlighted the urgent need for re-equipment in the Russian flour milling industry. Can you elaborate on whether you’ve observed a noticeable trend within the industry toward embracing this urgent need for modernization in Russia? If so, what specific developments or initiatives have you seen that reflect a concerted effort to address the requirements for re-equipment?

The re-equipment of the industry has already begun. I’ve already noted a trend towards the construction of large enterprises. Additionally, the growth in exports has stimulated the construction and modernization of facilities in regions with the most convenient logistics – near sea and river ports. The increased profitability resulting from the implementation of the Federal State Automated Traceability System for Grain and Grain Products, export development, and the availability of relatively inexpensive raw materials also encourages the re-equipment of long-established enterprises. At the same time, Russian flour mills are considering both domestic equipment manufacturers, fully capable of providing mills with a complete set of equipment from intake to shipment, and foreign ones, primarily from Turkey and China. 

Despite being the world’s leading wheat exporter, flour exports from Russia have not reached their full potential. What factors contribute to this? What should Russia do to realize this potential? Are there specific goals or strategies in place to further enhance the country’s position as a leading exporter of flour? 

Russia has the ability to increase flour production by at least 3-4 million tons annually with minimal additional efforts if needed. As mentioned earlier, the quality of the flour meets global standards and, in some cases, even exceeds them. We are consistently growing our exports, even compared to the high growth of 2022. The goal for Russian exporters is to achieve the current global ratio between grain and flour exports, which stands at 10:1. This means that with Russia exporting 40 million tons of grain annually, the target is 4 million tons of flour. This requires government support for the flour export development program is necessary. Furthermore, when discussing export growth, we have so far focused directly on flour as a product. However, in Russia about 1 million tons of flour are used in confectionery products and over 1.5 million tons are used in pasta products. These types of products have also shown an increase in export sales in recent years. They are just accounted by the respective related industries, not directly by flour mills.

Looking ahead, what are your expectations and predictions for the future of the milling industry in Russia? Are there specific goals that the Russian Union of Flour Mills and Cereal Plants aims to achieve in the coming years?

The main task of Russian flour mills was, is and remains unchanged. We must provide the Russian population with high-quality products, in necessary quantities and at affordable prices. All the efforts that are being made are aimed at solving precisely this task. We have no doubt that it will be accomplished despite all the difficulties of recent years. The development accompanying the solution of the main task of Russian flour milling – the development of exports, improvement of technologies, interaction with related industries – contributes to the efficiency and sustainability of the whole industry. This is our goal and so far we are coping with it quite well.

SHIFTING FLOUR PREFERENCES IN RUSSIA

How have you observed consumer preferences regarding the type of flour in Russia? Are there any noticeable shifts towards specific types, such as whole wheat or specialty flours? Are traditional flour products still predominant in the market, or have there been notable increases in demand for innovative or specialty flour-based products?

This question is the most ambiguous for experts, as there are many opinions regarding the development of the flour milling industry in the near and distant future. Therefore, I will immediately clarify: my opinion is subjective and depends to a large extent on my, unfortunately, not so young age, my experience in specific directions, and even purely personal qualities (some are optimists and innovators, some are pessimists and conservatives). So, consider this opinion as a personal point of view.

I believe that currently, flour mills have been able to meet the basic needs of people in their products. After the issues with flour, bread, confectionery, and pasta were resolved, people developed a desire to try something new and unusual. Hence the interest in various exotic types of flour – from whole grain to cricket flour. By the way, whole grain flour is precisely the type of flour that primitive humans obtained ten thousand years ago by crushing grain between two stones. The interest in such products is quite understandable; people are curious to try something unusual. But I am sure that after satisfying their curiosity, the majority of the population will return to traditional types of flour and products made from them, which have long proven themselves and are familiar to many generations.

Is there anything else you would like to add?

We appreciate the attention that your magazine shows to the Russian flour milling industry and express hope for strengthening cooperation with the Turkish side, which will contribute to the development of both our nations, people who love bread and bakery products and professionals in our industry working for the benefit of these people living in both Turkey and Russia, as well as in neighboring countries.

Thank you!

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