Cluster article
Flour Mill Feasibility Study: What a Real One Must Contain
The seven sections a credible flour mill feasibility study needs — demand analysis, wheat supply, technical design, capital cost, operating cost, financial model and risk — and the assumptions that most studies get wrong.
Key takeaways
- Most feasibility studies fail on demand analysis — they use national statistics instead of the radius you can actually deliver to.
- Model at 60–70% utilisation in year one, not 100%. If the project only works at full capacity it does not work.
- Wheat supply security is a harder constraint than demand. A mill without reliable wheat is a warehouse.
Section 1 — Demand analysis (the one that matters)
Not national flour consumption. Your distribution radius.
| Question | Why |
|---|---|
| How many bakeries within 150 km? | Direct buyers |
| What do they pay now, and to whom? | Price benchmark |
| What is their current supply reliability? | Your entry point |
| How many households buy flour retail? | Retail channel |
| What are the import barriers and duties? | Competitive floor |
| Who are the incumbents and what is their spare capacity? | Real competition |
The last question kills more projects than any other. If three mills within your radius are running at 60% capacity, they will cut price rather than lose share.
Section 2 — Wheat supply
| Question | Why |
|---|---|
| Where will wheat come from, season by season? | Continuity |
| What is the price history over 5 years? | Volatility risk |
| What is the quality (protein, moisture, impurity)? | Extraction rate |
| Can you contract forward? | Cost certainty |
| What storage do you need? | 30–45 days minimum |
| Is import required, and at what duty? | Cost floor |
A mill that sources wheat opportunistically will have a 6-point extraction swing between loads. That is a 6% revenue swing on 80% of your cost base.
Section 3 — Technical design
Must include:
- Flow sheet with passage count
- Cleaning line with machine list
- Sifter area calculation
- Power budget
- Building dimensions
- Storage capacities
- Utility requirements (water, air, effluent)
If a feasibility study says “a 60 t/d flour mill” without a flow sheet, it has not been designed — only specified.
Section 4 and 5 — Capital and operating cost
Capital must include the second 55%: building, electrical, installation, working capital.
Operating must be built bottom-up from local prices, not from a template.
Section 6 — Financial model
Build three scenarios:
| Scenario | Utilisation year 1 | Wheat price | Flour price |
|---|---|---|---|
| Base | 65% | Current | Current |
| Downside | 45% | +10% | Current |
| Upside | 85% | Current | +3% |
If the downside scenario cannot service debt, the project is fragile regardless of the base case.
Include:
- Monthly cash flow for 24 months (construction + ramp-up)
- Working capital cycle
- Debt service coverage ratio
- Break-even utilisation
- Sensitivity table on wheat and flour price
Section 7 — Risk register
| Risk | Mitigation |
|---|---|
| Wheat price spike | Forward contracts, multi-origin blending |
| Demand shortfall | Phased capacity, contract milling |
| Power interruption | Generator, UPS on controls |
| Key staff departure | Cross-training, documented procedures |
| Equipment failure | Spares inventory, service agreement |
| Regulatory change | Early permitting, compliance design |
The five assumptions that sink studies
1. 100% utilisation in year one. Reality is 50–70%.
2. National demand figures. Your market is a radius, not a country.
3. Wheat at today’s price forever. Model +20% at minimum.
4. Equipment cost as project cost. It is 35–45%.
5. Ignoring incumbent spare capacity. The cheapest competitor sets your price.
A simple sanity test
Before commissioning a study, answer these three questions:
- Who are the five bakeries that will buy from me next month, by name?
- Where does my wheat come from in month 7, after the harvest is sold?
- What happens to my numbers if flour price falls 8%?
If you cannot answer all three, the study will produce a document rather than a decision.