Asian millers keen for closer R&D ties
GroundCover™ Issue: 111 | Author: Catherine Norwood
Singapore-based Interflour is one of the largest flour millers in Asia, milling more than 1.5 million tonnes of wheat a year
From the flour millers to the bakers and noodle makers, supermarkets and restaurants throughout South-East Asia, product differentiation and diversification are driving growth in the wheat market there.
However, as a major supplier to this market, Australia’s wheat production and supply systems are struggling to keep up, says Greg Harvey, managing director and chief executive officer of Interflour, one of the world’s largest wheat processors.
He sees the greatest opportunities for Australia being the development of new bread-wheat varieties for Western Australian and South Australian grain growers, and in the establishment of a new ‘industrial’ category somewhere between general-purpose and feed-grade wheat.
There is also a smaller but steady market for soft and biscuit wheats, although he notes that these have fallen into disfavour among Australian growers.
Mr Harvey says greater competition in South-East Asian markets has increased the number of products in all flour-based categories. This, in turn, is driving increased consumption across the whole consumer base. He says the largest consumer growth category is bread.
Australia dominates the South-East Asian flour market, accounting for about 70 per cent of imports, but Mr Harvey notes there has been no expansion of the export product range for some time. If anything, the flour industry in South-East Asia has been consolidating its Australian purchases – Australian Premium White (APW), at 10 to 10.5 per cent protein, and Australian Hard (AH).
Australian Soft (ASFT) wheat has disappeared, Australian Standard White (ASW) is disappearing, and most of the Australia Noodle Wheat (ANW) blend is too expensive for South-East Asia and goes to Japan and South Korea.
The main market expansion is the bread category, which Mr Harvey says Australia helped to initiate but is now missing out on the growth that is occurring: “Bread is the fastest-growing market segment in the region, but it is dominated now by the US’s DNS variety and Canadian wheat, with no comparable Australian variety. The closest, Australian Prime Hard, is used in the Japanese market.”
That said, Mr Harvey says the deregulation of the Canadian wheat board in 2013 could provide an opportunity for Australia to edge back in. Wheat exported from WA has a freight advantage compared with supply reliability issues in Canada and the US, caused by the longer supply chain and weather. This has already forced Interflour to increase storage infrastructure.
However, Mr Harvey says that geography alone is not enough. He would like to see a more direct engagement between Australian researchers and breeders and South-East Asian customers.
Mr Harvey says he and other millers would be keen to work with Australia’s R&D community to develop varieties with better bread-making characteristics for that market.
“While we are competitors with companies like Indofood and Federal Flour Mills, we are also industry colleagues and we would like to engage more with the Australian plant-breeding community.”
Interflour has identified several varieties and production areas where hard wheats have delivered the protein levels needed for bread wheats. In the past, the company has offered premiums for specific varieties and quality parameters and plans to continue doing so.
“We liked old ‘rock’ varieties, EGA Eagle Rock and EGA Bonnie Rock, but they have gone out of growers’ programs. Mace has good prospects, but seems to have better performance in bread-making when it starts hitting certain gluten levels, so that is one area to work on. Some of the shipments we have taken delivery of from the most recent harvest haven’t performed as well as expected from the specifications, so we are trying to understand that.”
The company has extensive data from its own testing program and from every shipment of grain it receives. It is able to identify wheats from specific regions with specific qualities.
Mr Harvey says one issue affecting the trade is the difficulty in providing direct price signals to growers that reflect customer specifications. He says that while the bulk-handling system can guarantee the average port-zone quality, it cannot send a price signal to growers for, say, Mace at 12 per cent protein.
“So if you go through the port-zone system you are not guaranteed to get what you’re paying for – but that’s the nature of a bulk-handling system.”
Another market that is changing as a result of supply-demand pressures is South-East Asia’s instant-noodle-flour industry.
“Increasing competition is squeezing this market, so we are now having to make compromises on quality. This is particularly the case for high-volume, lower-quality products such as noodle flours,” Mr Harvey says.
Australia is the dominant supplier, providing 75 per cent. Millers like Australian wheat because it provides high flour extraction and has low screenings, the key to maximising the quantity of flour that can be produced from a tonne of grain.
The high quality of Australian wheat also allows millers to add in lower-quality wheats as fillers, including wheat from the Black Sea region and from India.
To compete with other millers, Interflour has been working with its customers to develop products with higher ash and lower gluten specifications. “It means that we can run the mill harder and get greater extraction rates. It also gives us more flexibility on the wheat types we use. The lower gluten content makes those APW [10 per cent protein] or ASW [10 per cent protein] varieties work better.”
Mr Harvey says grain downgraded to feed wheat in Australia is still often suitable for industrial products such as instant noodles. “You call it feed wheat,” he says, “but even down to a falling number of 50 [on starch testing] it is still possible to use it for noodles.”
He says this is why an industrial category could offer another export grading that gives better returns to growers than feed grade.
Mr Harvey says while there is incredible demand growth in Asia that is being met by increased marketplace competition, Australia is expected to continue to be the dominant supplier.
It is for this reason that end users in South-East Asia are keen to develop closer relationships that allow an input into new varieties and trading mechanisms.
GRDC Project Code GTA10785
Region Overseas, South, West