Several relatively convenient locations in Africa and Asia have stood out as the best places to set up a grain processing plant at a time when food security is a major concern due to climate shocks and the conflict in Ukraine.
Ethiopia ranked first in fDi’s latest assessment of the world’s 100 most competitive countries to set up a grain processing plant, followed by surprise contender Myanmar; Asian powerhouses China and India; and Ghana in west Africa. The model allocates a 50% weight to both quality and cost factors, but does not account for political risk.
In short, the study reveals the best countries to open a modelled 31-person manufacturing facility producing grain-based consumer products, such as cereals, packaged cookies, pasta and baking mixes. For countries to be considered in this fDi Benchmark ranking, they had to have attracted at least one foreign direct investment (FDI) project in the grains and oilseed sub-sector between 2003 and September 2022.
Millions of people have been impacted by spiralling food prices after Russia’s invasion of Ukraine blocked grain exports via the Black Sea. Although exports resumed in July 2022 after an agreement signed by Ukraine, Russia, Turkey and the UN, the food insecurity caused by this geopolitical development underlined the importance of domestic crops and processing capacity.
The overall top 10 reveals that attractive conditions to set up grain processing plants can be found in countries at different developmental stages across global regions. Ethiopia, which the World Bank classifies as a low-income country, tops the ranking, but is followed by lower-middle-income country Myanmar (second); upper-middle-income China (third); the lower-middle-income countries of India (fourth) and Ghana (fifth).
The study reveals that the sheer size of the grain processing industries in China, India and the US made them attractive locations, but cost factors ensure Ethiopia and Myanmar stand out. It costs just $81,309 to run a 31-person grain processing facility for a year in Ethiopia, according to fDi Benchmark estimates, primarily due to labour costs being 90% lower than the average across the study.
In May 2022, French multinational Union Invivo opened a new malt production site at the Bole Lemi industrial park near Ethiopia’s capital Addis Ababa. The company said the facility is based on the local supply chain in Ethiopia, which is Africa’s largest producer of barley.
The most competitive location in Europe, due to a balance of cost and quality in setting up a grain processing plant was Turkey, where wheat production is estimated at 17 millions tonnes per year, according to the US Department of Agriculture. In May, US-based Seaboard Corporation invested $1.22m to expand its vegetable oil manufacturing operations in the Turkish port city of Izmir.
Despite it costing an estimated $2.5m to operate a grain processing plant in the US, making it the most expensive country after Switzerland ($3.2m), the world’s largest economy ranks sixth overall and has attracted the largest number of FDI projects in the grains and oilseed sector. For instance, Miller Milling, a subsidiary of Japan’s Nisshin Seifun Group, announced in May 2022 it would expand its flour mill operations in southern California.