Trends in the Global Starch Industry World tapioca Conference 2011 Presentation by Martin Todd, 28th June 2011 Presentation topics Highlighting 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 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 25 million tonnes 20 15 10 5 0 2000 2001 2002 Cassava Starch 2003 2004 Corn Starch 2005 2006 Other Starches 2007 2008 Potato Starch 2009 2010 Wheat Starch Tapioca represents more than one third of global production Global native starch production by type of corn starch, average 2008-2010 Cassava Starch 34% Corn Starch 52% Other Starches 2% Potato Starch 7% Wheat Starch 5% Several of the world’s top ten starch producers use tapioca as their main raw material Top 10 global native starch producing countries by type of starch, average 2008-2010 South Korea Vietnam India Japan Brazil Indonesia US EU27 Thailand China 0 1 Cassava starch 2 3 Corn starch 4 5 6 million tonnes Potato starch 7 Wheat starch 8 9 Other starches More tapioca starch is traded than any other starch Trade in potato starch is also large in relation to output Global native starch exports by type of starch 5.5 5.0 4.5 Million tonnes 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2000 2001 2002 Cassava Starch 2003 2004 Corn Starch 2005 2006 Other Starches 2007 2008 Potato Starch 2009 2010 Wheat Starch Tapioca starch makes up about 40% of world starch trade Global native starch exports by type of corn starch, average 2008-2010 Wheat Starch 9% Potato Starch 19% Cassava Starch 40% Other Starches 5% Corn Starch 27% 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 Australia Argentina Paraguay Mexico India South Korea Canada US Vietnam China EU27 Thailand 0.00 Cassava starch 0.25 0.50 Corn starch 0.75 1.00 million tonnes Potato starch 1.25 Wheat starch 1.50 Other starches 1.75 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 Singapore Russia South Korea Philippines US Japan Malaysia Indonesia Taiwan China 0.0 Cassava starch 0.2 Corn starch 0.4 0.6 '000 tonnes Potato starch 0.8 Wheat starch 1.0 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 >$1,000 800 Native starch prices, differentiating by type of starch trade unit values (US$/tonne) 700 600 500 400 300 200 100 0 2000 2001 2002 2003 Cassava (Thailand) Wheat (EU) 2004 2005 Corn (EU) Corn (USA) 2006 2007 2008 2009 Potato (EU) 2010 Tapioca, wheat and potato have all increased relative to corn trade unit values relative to corn starch 400 Native starch prices relative to US corn starch 350 300 250 200 150 100 50 0 -50 -100 -150 2000 2001 2002 2003 2004 2005 Cassava (Thailand) Potato (EU) 2006 2007 2008 Wheat (EU) 2009 2010 Corn (EU) The reason for rising prices is the upward trend in raw material prices 100 300 80 240 60 180 40 120 20 60 0 0 Corn, wheat (US$/tonne) Tapioca roots (US$/tonne) Prices of corn, wheat and tapioca (axes are set to reflect relative starch content of tapioca and grains) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Tapioca Roots NE Thailand Wheat, EU Corn, EU Corn, US This is true also of net raw material prices After allowing for grain processing by-products Net raw material prices of corn, wheat and tapioca 150 US$/tonne 125 100 75 50 25 0 2000 2001 2002 2003 Tapioca Roots NE Thailand 2004 2005 2006 Wheat, EU 2007 2008 Corn, EU 2009 2010 Corn, US 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 600 2000 = 100 500 400 300 200 100 0 2000 2001 Wheat, EU 2002 2003 2004 2005 Tapioca Roots NE Thailand 2006 2007 2008 Corn, EU 2009 2010 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 China’s tightening grains sector A constraint for starch production China’s corn supply/demand balance 30 180 25 160 20 140 15 120 10 100 5 80 0 60 -5 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 Exports/(Imports) Production Consumption Exports/imports (mn tonnes) Production & consumption (mn tonnes) 200 China’s increased dependence on imports 10.0 1.0 8.0 0.8 6.0 0.6 4.0 0.4 2.0 0.2 0.0 0.0 2000 2002 2004 Net imports 2006 2008 Consumption 2010 Net imports (thousand tonnes) Consumption (million tonnes) China’s native starch supply/demand balance China has turned to tapioca starch China’s imports of native starch by type of starch 1,000 '000 tonnes 800 600 400 200 0 2000 2001 2002 Cassava Starch 2003 2004 Potato Starch 2005 2006 Corn Starch 2007 2008 Wheat Starch 2009 2010 Other Starches And to Thailand (as well as Vietnam) China’s imports tapioca starch by origin 900 800 '000 tonnes 700 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 Thailand 2005 2006 Vietnam 2007 Other 2008 2009 2010 The result is a link between Chinese corn/starch and SE Asian tapioca 500 600 400 450 300 300 200 150 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cassava Starch FOB BKK Corn starch NE China 0 Corn NE China Futures Corn (US$ per tonne) Starch (US$ per tonne) 750 Thai tapioca starch prices vs. Chinese corn and corn starch prices But, cassava starch is a premium starch for functional reasons 750 Chinese prices of Tapioca starch and corn starch US$ per tonne 600 450 300 150 0 2008 2009 Tapioca starch - corn starch 2010 Corn starch NE China 2011 Tapioca Starch Guangxi The link also exists between Chinese corn/ethanol and SE Asian tapioca 400 750 300 500 200 250 100 0 2000 0 2002 2004 2006 Corn-based Ethanol North Jiangsu Corn NE China Futures 2008 2010 Cassava Chips FOB BKK Chips, corn (US$ per tonne) Ethanol (US$ per cubic metre) 1,000 Thai 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 350 300 US$ per tonne 250 200 150 100 50 0 -50 2000 2002 2004 China corn - US corn 2006 Corn FOB USG 2008 2010 Corn NE China Futures Tapioca starch prices are similar throughout SE Asia Tapioca starch prices in Indonesia, Thailand and Vietnam 400 350 US$ per tonne 300 250 200 150 100 50 0 1998 1999 2000 2001 2002 2003 Indonesia 2004 Thailand 2005 2006 Vietnam 2007 2008 2009 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? 17.5 China’s starch supply/demand balance and projected demand 1.75 15.0 1.50 12.5 1.25 10.0 1.00 ? 7.5 0.75 5.0 0.50 2.5 0.25 0.0 0.00 2000 2003 2006 Net imports 2009 2012 Consumption 2015 Net imports (thousand tonnes) Consumption (million tonnes) Will corn for industrial use remain restricted? Can tapioca & potato step in? EU potato starch: still alive But, what will happen after the reforms? EU exports of potato starch by destination 700 600 '000 tonnes 500 400 300 200 100 0 2000 2001 2002 2003 2004 East Asia NAFTA 2005 2006 2007 2008 2009 2010 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 35 30 million tonnes 25 20 15 How long will this last? 10 5 0 1998/99 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11 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 Thank You www.lmc.co.uk