Trends in the Global Starch Industry

World tapioca Conference 2011Presentation by Martin Todd, 28th June 2011

Presentation topicsHighlighting tapioca’s role in the starch world

• Global trends in starch production and trade

• Development of global starch prices and key drivers

• Dynamics of tapioca starch prices

• Challenges for the future

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

Global starch productionPrimary starch vs. native vs. modified

• Global more than 70 million tonnes of primary starch are produced to make starches and sweeteners

• Of this, around 33 million tonnes is produced and sold as starches

• This comprises approximately 25 million tonnes of native starch and 8 million tonnes of modified starch

• In 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 tonnes

Global native starch production by type of starch

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

mill

ion

tonn

es

Cassava Starch Corn Starch Other Starches Potato Starch Wheat Starch

Tapioca represents more than one third of global production

Cassava Starch34%

Other Starches2%

Potato Starch7%

Wheat Starch5%

Corn Starch52%

Global native starch production by type of corn starch, average 2008-2010

0 1 2 3 4 5 6 7 8 9

China

Thailand

EU27

US

Indonesia

Brazil

Japan

India

Vietnam

South Korea

million tonnes

Cassava starch Corn starch Potato starch Wheat starch Other starches

Top 10 global native starch producing countries by type of starch, average 2008-2010

Several of the world’s 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 output

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0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ion

tonn

es

Cassava Starch Corn Starch Other Starches Potato Starch Wheat Starch

Global native starch exports by type of starch

Tapioca starch makes up about 40% of world starch trade

Cassava Starch40%

Corn Starch27%

Other Starches5%

Potato Starch19%

Wheat Starch9%

Global native starch exports by type of corn starch, average 2008-2010

Thailand is by far the largest exporter of any single type of starch

Top 10 global native starch exporting countries differentiating by type of starch, average 2008-2010

0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75

Thailand

EU27

China

Vietnam

US

Canada

South Korea

India

Mexico

Paraguay

Argentina

Australia

million tonnes

Cassava starch Corn starch Potato starch Wheat starch Other starches

China is the largest importer And, tapioca dominates this list

Top 10 global native starch importing countries differentiating by type of starch, average 2008-2010

0.0 0.2 0.4 0.6 0.8 1.0

China

Taiwan

Indonesia

Malaysia

Japan

US

Philippines

South Korea

Russia

Singapore

'000 tonnes

Cassava starch Corn starch Potato starch Wheat starch Other starches

Global trends: conclusions

• Corn is the most widely used raw material for starch production

• However, traded volumes are limited, because the largest producer (USA) consumes most of its output and has limited outlets because of its GM status

• Wheat 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 trends

Rising 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 >$1,000

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100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

trad

e unit v

alues

(US$

/tonne)

Cassava (Thailand) Corn (EU) Potato (EU)Wheat (EU) Corn (USA)

Native starch prices, differentiating by type of starch

Tapioca, wheat and potato have all increased relative to corn

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-50

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400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

trad

e unit v

alues

rel

ativ

e to

corn

sta

rch

Cassava (Thailand) Potato (EU) Wheat (EU) Corn (EU)

Native starch prices relative to US corn starch

The reason for rising prices is the upward trend in raw material prices

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20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Tapi

oca

root

s (U

S$/t

onne

)

0

60

120

180

240

300

Corn

, wheat (U

S$/tonne)

Tapioca Roots NE Thailand Wheat, EU Corn, EU Corn, US

Prices 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-products

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75

100

125

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

US$

/tonne

Tapioca Roots NE Thailand Wheat, EU Corn, EU Corn, US

Net 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 prices

Index of net raw material prices of corn, wheat and tapioca

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100

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400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2000

= 1

00

Wheat, EU Tapioca Roots NE Thailand Corn, EU Corn, US

Price trends: conclusions

• Starch prices are rising because of higher raw material prices

• US corn starch prices low because of low net corn costs

• Despite 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 prices

• Potato starch is suffering from this problem this year

Dynamics of tapioca starch prices

China’s dominant role

What drives tapioca starch prices?

• The key driver is China

• China has become increasingly dependent on starch imports, in particular tapioca starch

The link to tapioca starch is through:

China’s starch markets, which is linked to its corn market

China’s ethanol market also influences the starch market via tapioca chips

Meeting China’s demand

• China’s starch demand has been growing at an annual rate of more than 10% per annum

• And, it will continue to grow very rapidly in the future

• But, 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, China’s has become more dependent on imports

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200

00/01 01/0202/03 03/04 04/0505/06 06/0707/08 08/09 09/1010/11 11/12

Pro

duct

ion &

consu

mption (m

n tonnes

)

-5

0

5

10

15

20

25

30

Exports/im

ports (m

n to

nnes)

Exports/(Imports) Production Consumption

China’s corn supply/demand balance

China’s tightening grains sectorA constraint for starch production

China’s increased dependence on imports

China’s native starch supply/demand balance

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2.0

4.0

6.0

8.0

10.0

2000 2002 2004 2006 2008 2010

Consu

mption (m

illion tonnes

)

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0.2

0.4

0.6

0.8

1.0

Net im

ports (th

ousan

d to

nnes)

Net imports Consumption

China has turned to tapioca starch

0

200

400

600

800

1,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

'000

tonnes

Cassava Starch Potato Starch Corn Starch Wheat Starch Other Starches

China’s imports of native starch by type of starch

And to Thailand (as well as Vietnam)

China’s imports tapioca starch by origin

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

'000

tonnes

Thailand Vietnam Other

The result is a link between Chinese corn/starch and SE Asian tapioca

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450

600

750

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Star

ch (U

S$ p

er tonne)

0

100

200

300

400

500

Corn

(US$ p

er tonne)

Cassava Starch FOB BKK Corn starch NE China Corn NE China Futures

Thai tapioca starch prices vs. Chinese corn and corn starch prices

But, cassava starch is a premium starch for functional reasons

0

150

300

450

600

750

2008 2009 2010 2011

US$

per

tonne

Tapioca starch - corn starch Corn starch NE China Tapioca Starch Guangxi

Chinese prices of Tapioca starch and corn starch

The link also exists between Chinese corn/ethanol and SE Asian tapioca

Thai tapioca starch prices vs. Chinese corn and corn ethanol prices

0

250

500

750

1,000

2000 2002 2004 2006 2008 2010

Ethan

ol (

US$

per

cubic

met

re)

0

100

200

300

400

Chip

s, corn

(US$ p

er tonne)

Corn-based Ethanol North Jiangsu Cassava Chips FOB BKKCorn NE China Futures

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

-50

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250

300

350

2000 2002 2004 2006 2008 2010

US$

per

tonne

China corn - US corn Corn FOB USG Corn NE China Futures

Tapioca starch prices in Indonesia, Thailand and Vietnam

Tapioca starch prices are similar throughout SE Asia

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50

100

150

200

250

300

350

400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US$

per

tonne

Indonesia Thailand Vietnam

Price dynamics: conclusions

• Tapioca starch prices are linked to China’s 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 starch

• China’s corn market does not track the world corn market in the short term because of government intervention

Challenges for the future• China: meeting its demand• EU: 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?

China’s starch supply/demand balance and projected demand

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17.5

2000 2003 2006 2009 2012 2015

Consu

mption (m

illio

n tonnes

)

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0.75

1.00

1.25

1.50

1.75

Net im

ports (th

ousan

d to

nnes)

Net imports Consumption

?

EU potato starch: still aliveBut, what will happen after the reforms?

EU exports of potato starch by destination

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600

700

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

'000

tonn

es

East Asia NAFTA South East Asia East Europe Other

Can Thailand continue to grow?Short run: mealy bugLong run: yields (land is limited in SE Asia)

Thai production of tapioca roots

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35

1998/99 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11

mill

ion

tonn

es

How long will this last?

Conclusions

Conclusions

• Tapioca starch plays a huge role in world trade and in supplying China’s import needs in particular

• As a result, its price dynamics are now linked to China’s corn, starch and ethanol markets

• Tightening supply in China’s corn market suggests its imports will continue to grow

• Can cassava continue to meet China’s demand?

• Land is scarce in SE Asia, so productivity will be key

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