Trends in the Global Starch

Industry
World tapioca Conference 2011
Presentation by Martin Todd, 28
th
June 2011
Presentation topics
Highlighting tapiocas 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 production
Primary 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 way
Corn 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
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Cassava Starch Corn Starch Other Starches Potato Starch Wheat Starch
Tapioca represents more than
one third of global production
Cassava Starch
34%
Other Starches
2%
Potato Starch
7%
Wheat Starch
5%
Corn Starch
52%
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 worlds top ten
starch producers use tapioca as
their main raw material
More tapioca starch is traded
than any other starch
Trade in potato starch is also large in relation to output
0.0
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
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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 Starch
40%
Corn Starch
27%
Other Starches
5%
Potato Starch
19%
Wheat Starch
9%
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 years
Potato starch prices have soared in 2011 to >$1,000
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800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Cassava (Thailand) Corn (EU) Potato (EU)
Wheat (EU) Corn (USA)
Native starch prices, differentiating by type of starch
Tapioca, wheat and potato
have all increased relative to
corn
-150
-100
-50
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Cassava (Thailand) Potato (EU) Wheat (EU) Corn (EU)
Native starch prices relative to US corn starch
The reason for rising prices is
the upward trend in raw
material prices
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20
40
60
80
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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0
60
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180
240
300
C
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w
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Tapioca Roots NE Thailand Wheat, EU Corn, EU Corn, US
Prices of corn, wheat and tapioca (axes are set to
reflect relative starch content of tapioca and grains)
This is true also of net raw
material prices
After allowing for grain processing by-products
0
25
50
75
100
125
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
U
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$
/
t
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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
0
100
200
300
400
500
600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2
0
0
0


=

1
0
0
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
Chinas 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:
Chinas starch markets, which is linked to its corn
market
Chinas ethanol market also influences the starch
market via tapioca chips
Meeting Chinas demand
Chinas 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, Chinas has become more dependent on
imports
60
80
100
120
140
160
180
200
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12
P
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-5
0
5
10
15
20
25
30
E
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(
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Exports/(Imports) Production Consumption
Chinas corn supply/demand balance
Chinas tightening grains sector
A constraint for starch production
Chinas increased dependence
on imports
Chinas native starch supply/demand balance
0.0
2.0
4.0
6.0
8.0
10.0
2000 2002 2004 2006 2008 2010
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0.0
0.2
0.4
0.6
0.8
1.0
N
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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
'
0
0
0

t
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Cassava Starch Potato Starch Corn Starch Wheat Starch Other Starches
Chinas imports of native starch by type of starch
And to Thailand (as well as
Vietnam)
Chinas 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
'
0
0
0

t
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Thailand Vietnam Other
The result is a link between Chinese
corn/starch and SE Asian tapioca
0
150
300
450
600
750
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
S
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(
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p
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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
U
S
$

p
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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
E
t
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(
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$

p
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0
100
200
300
400
C
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U
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p
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Corn-based Ethanol North Jiangsu Cassava Chips FOB BKK
Corn 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
0
50
100
150
200
250
300
350
2000 2002 2004 2006 2008 2010
U
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$

p
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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
0
50
100
150
200
250
300
350
400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
U
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$

p
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Indonesia Thailand Vietnam
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
starch
Chinas 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?
Chinas starch supply/demand
balance and projected demand
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
2000 2003 2006 2009 2012 2015
C
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0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
N
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Net imports Consumption
?
EU potato starch: still alive
But, what will happen after the reforms?
EU exports of potato starch by destination
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
'
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0

t
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East Asia NAFTA South East Asia East Europe Other
Can Thailand continue to grow?
Short run: mealy bug
Long run: yields (land is limited in SE Asia)
Thai production of tapioca roots
0
5
10
15
20
25
30
35
1998/99 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11
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How long will
this last?
Conclusions
Conclusions
Tapioca starch plays a huge role in world trade and
in supplying Chinas import needs in particular
As a result, its price dynamics are now linked to
Chinas corn, starch and ethanol markets
Tightening supply in Chinas corn market suggests
its imports will continue to grow
Can cassava continue to meet Chinas demand?
Land is scarce in SE Asia, so productivity will be key
Thank You
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