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Published June 26, 2008, 12:00 AM

Profits drop

High prices for spring wheat, coupled with weakened demand for flour to make bread, buns and rolls, have caused a quarterly loss at North Dakota’s state Mill and Elevator that could reach $3 million, its manager says.

By: By Dale Wetzel, The Associated Press, The Jamestown Sun

BISMARCK — High prices for spring wheat, coupled with weakened demand for flour to make bread, buns and rolls, have caused a quarterly loss at North Dakota’s state Mill and Elevator that could reach $3 million, its manager says.

Vance Taylor told the state Industrial Commission on Wednesday that he expects the mill to be “slightly above the break-even level” during its 2008 budget year, which ends Monday.

The Grand Forks mill made $3.02 million during the first nine months of its budget period, but its difficult fourth quarter has almost wiped out that profit, Taylor said.

The problems were “mainly due to increased grain costs ... and lower (flour) shipment volumes,” he said.

Restaurants and bakeries are buying less flour because of higher prices and a slumping national economy, and abnormally cold spring in the northeastern United States hurt demand for hamburger and hot dog buns, Taylor said.

The mill, which normally makes flour six to seven days a week, was running only five days a week because of slack demand. Taylor said it is now operating six days a week.

The mill’s fourth-quarter results and annual report will be made public in the next few months. It has not had an annual loss since 1994, when it was $1.1 million in the red. At the time, the mill’s struggles prompted debate in the North Dakota Legislature about whether it should be sold.

Taylor said he expects the mill to rebound quickly. He told the Industrial Commission that he believes it will make $2.5 million in profits from July through December.

Some of the mill’s customers switched to flour suppliers that used cheaper types of winter wheat, but most of them have resumed buying from the State Mill, Taylor said.

The mill’s principal product is bakery flour, made from hard red spring wheat. In recent months, prices topped $20 a bushel at the Minneapolis Grain Exchange, the primary market for hard red spring wheat.

The Industrial Commission gave Taylor permission to buy hard red spring wheat from Canada, which the mill has not done since it began operating in 1922. However, the authorization was rescinded when the mill was able to locate enough supplies to carry it through this fall’s harvest.

“Through all of this very challenging crop year, we were able to purchase all of our grain domestically, with a lot of help from North Dakota farmers and elevators,” Taylor said.

The profit decline closely follows some of the strongest financial results in the State Mill’s history. It set profit records from 2004 to 2006, and posted a $5.8 million profit during its 2007 budget year.

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