Posted on February, 26, 2025 at 09:24 am
Neither alarm nor elation appear warranted in response to flour production data published Feb. 3 by the US Department of Agriculture. Production in 2024 was 425,179,000 cwts, up 1.2% from the year before, and millers have indicated the industry’s financial health remains strong, even if off from recent peaks.
Amid the positives, a look at longer-term trends around capacity utilization, milling capacity and production totals offers insights into the “state of flour milling” and its possible outlook for 2025 and beyond.
Flour milling operating rate: A basic barometer of the health of milling (and many other industries), the annual operating rate of US flour mills in 2024 was 86.4%, better than the 86% of six-day capacity utilized in 2023 and well above the recent low of 83.4% in 2019. The year ended on a softer note, though. The 87.2% operating rate of flour mills in the fourth quarter of the year, while up from 86.8% in 2023, was on the low side when measured against performance over the last 20 years, a full percentage point below the average since 2004 of 88.2%.
With new capacity scheduled to open over the next year to 22 months, additional operating rate erosion appears possible. Between 2006 and 2013, annual capacity utilization consistently held between 87.5% and 89.1%, a range that seems just beyond reach for the near and mid-range future.
Capacity: Despite the construction of numerous new flour mills over the last 24 years and the expansion of many others, flour milling capacity in 2024 was barely greater than in 2000. Capacity additions have been offset consistently over time by the shuttering of existing flour mills, many of which were old, poorly positioned geographically to compete in the marketplace or both. Milling capacity hit a record high in 2019 at 1,674,210 cwts per day and has hovered just beneath 1.6 million most of the last five years after a fresh wave of closings.
While numerous older mills, dating back at least to World War II, continue to operate, it appears most of the “low-hanging fruit” — mills that are obvious candidates for closing — has been picked already. Offsetting new capacity additions may become more difficult in coming years.
Production: The recovery last year in production from the 2023 trough was cause for cheer, and a continuation of last year’s growth into 2025 and beyond would be welcome. Unfortunately, the level of flour production entering 2025 is more concerning when viewed through a longer lens. When averaging production totals for the last several years, growth has been anomalously depressed.
The anomaly may be more clearly understood when reviewing the last 90-plus years on a decade-by-decade basis.
In the past, growth in flour production was the norm, even during times when per capita consumption was drifting lower (essentially the entire period from 1900 to 1972). Average annual flour production in the 1940s beat the 1930s average by 21%. Average production slipped 5% in the 1950s, rose 11% in the 1960s, 1% in the 1970s, and jumped 22% in the 1980s.
Flour export swings, together with changing domestic consumption trends, played an important role in the ups and downs during the era. With flour exports more recently accounting for a small share of the milling business (less than 1% in 2023), changes in the most recent decades — the average was up 25% in the 1990s, 3% in the 2000s and 5% in the 2010s — principally reflect changes in domestic consumption trends.
Halfway through the 2020s, average annual flour production has barely moved, up just 0.5%, from the average in the 2010s. Even if there is no cause for alarm, that flour production has not scored a single decade of double-digit growth about 25 years into this century is concerning.
The persistent lack of growth, now spanning a quarter century, suggests a compelling need for reflection on what it would take to reignite demand for flour-based foods.
Source: World Grain