Trends in the Global Starch IndustryWorld tapioca Conference 2011Presentation by Martin Todd, 28th June 2011

Presentation topics

Highlighting tapiocas role in the starch worldGlobal trends in starch production and tradeDevelopment of global starch prices and key driversDynamics of tapioca starch pricesChallenges for the future

Who are the leading players?Tapioca in South East Asia is very important

Global starch production

Primary starch vs. native vs. modifiedGlobal more than 70 million tonnes of primary starch are produced to make starches and sweetenersOf this, around 33 million tonnes is produced and sold as starchesThis comprises approximately 25 million tonnes of native starch and 8 million tonnes of modified starchIn this presentation, I will focus on native starch

Tapioca and corn lead the wayCorn starch: 13 million tonnes Tapioca starch: 8 million tonnes Potato: 1.5 million tonnes Wheat: 1.0 million tonnesGlobal native starch production by type of starch

Tapioca represents more than one third of global productionGlobal native starch production by type of corn starch, average 2008-2010

Top 10 global native starch producing countries by type of starch, average 2008-2010Several of the worlds top ten starch producers use tapioca as their main raw material

More tapioca starch is traded than any other starchTrade in potato starch is also large in relation to outputGlobal native starch exports by type of starch

Tapioca starch makes up about 40% of world starch tradeGlobal native starch exports by type of corn starch, average 2008-2010

Thailand is by far the largest exporter of any single type of starchTop 10 global native starch exporting countries differentiating by type of starch, average 2008-2010

China is the largest importer And, tapioca dominates this listTop 10 global native starch importing countries differentiating by type of starch, average 2008-2010

Global trends: conclusionsCorn is the most widely used raw material for starch productionHowever, traded volumes are limited, because the largest producer (USA) consumes most of its output and has limited outlets because of its GM statusWheat starch is not widely produced or traded because it is a low quality starch (especially in its native form) As a result, tapioca and potato starches are traded very heavily in relation to their production

Starch price trendsRising starch prices caused by higher raw material prices

All starch prices show a rising trend over the past ten yearsPotato starch prices have soared in 2011 to >$1,000Native starch prices, differentiating by type of starch

Tapioca, wheat and potato have all increased relative to cornNative starch prices relative to US corn starch

The reason for rising prices is the upward trend in raw material pricesPrices of corn, wheat and tapioca (axes are set to reflect relative starch content of tapioca and grains)

This is true also of net raw material pricesAfter allowing for grain processing by-productsNet raw material prices of corn, wheat and tapioca

Net cost of corn has increased by less than the others!

This has been reflected in corn starch pricesIndex of net raw material prices of corn, wheat and tapioca

Price trends: conclusionsStarch prices are rising because of higher raw material pricesUS corn starch prices low because of low net corn costsDespite this, US corn starch has not taken market share because of its GM status Tapioca starch prices have seen significant price inflation due to high root pricesPotato starch is suffering from this problem this year

Dynamics of tapioca starch pricesChinas dominant role

What drives tapioca starch prices?The key driver is ChinaChina has become increasingly dependent on starch imports, in particular tapioca starchThe link to tapioca starch is through:Chinas starch markets, which is linked to its corn marketChinas ethanol market also influences the starch market via tapioca chips

Meeting Chinas demandChinas starch demand has been growing at an annual rate of more than 10% per annumAnd, it will continue to grow very rapidly in the futureBut, the government is limiting the use of corn for industrial uses At the same time, production from other starches is small and will not meet the future growth in demand So, Chinas has become more dependent on imports

Chinas corn supply/demand balanceChinas tightening grains sector

A constraint for starch production

Chinas increased dependence on importsChinas native starch supply/demand balance

China has turned to tapioca starch Chinas imports of native starch by type of starch

And to Thailand (as well as Vietnam)Chinas imports tapioca starch by origin

The result is a link between Chinese corn/starch and SE Asian tapiocaThai tapioca starch prices vs. Chinese corn and corn starch prices

But, cassava starch is a premium starch for functional reasonsChinese prices of Tapioca starch and corn starch

The link also exists between Chinese corn/ethanol and SE Asian tapiocaThai tapioca starch prices vs. Chinese corn and corn ethanol prices

The relationship between corn prices in China and the world (US) is influenced by politics (e.g. 2008, 2010)Chinese corn prices vs. world (US Gulf) prices

Tapioca starch prices in Indonesia, Thailand and VietnamTapioca starch prices are similar throughout SE Asia

Price dynamics: conclusions Tapioca starch prices are linked to Chinas corn market via starch and ethanol (and are similar across SE Asia)Tapioca starch commands a premium over corn starch reflecting its superior qualities as a food starchChinas corn market does not track the world corn market in the short term because of government intervention

Challenges for the futureChina: meeting its demandEU: where next for potato starch?Thailand: mealy bug

Will China need more imports?Will corn for industrial use remain restricted?Can tapioca & potato step in?Chinas starch supply/demand balance and projected demand?

EU potato starch: still alive

But, what will happen after the reforms?EU exports of potato starch by destination

Can Thailand continue to grow?

Short run: mealy bugLong run: yields (land is limited in SE Asia)Thai production of tapioca rootsHow long will this last?

Conclusions

ConclusionsTapioca starch plays a huge role in world trade and in supplying Chinas import needs in particularAs a result, its price dynamics are now linked to Chinas corn, starch and ethanol marketsTightening supply in Chinas corn market suggests its imports will continue to growCan cassava continue to meet Chinas demand?Land is scarce in SE Asia, so productivity will be key

Thank Youwww.lmc.co.uk

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