Table of Contents
Globally, the production of starch containing crops outweighs all other industrial and food crops. More than 50% of the world’s daily average calorie intake is provided by starch and derivatives thereof. Historically, most starch containing crops were used for direct human consumption. This changed during the 1970s and 1980s, when industrial farming systems became popular for producing meat, milk and eggs on the basis of compounded feed that was largely made up by grains and soy beans. Such use became particularly important when economic growth in Asia accelerated as a result of the liberalization of the Chinese economic system. Standards of living increased and the demand for meat developed fast and drove a rapid and massive expansion of the use of cereals for feeding. During the middle of the year 2000, another factor driving consumption entered the scene – the manufacturing of bio-fuels. Bio-ethanol has been produced for many decades in Brazil from sugar. The large-scale transformation of cereals into bio-fuels started only 10 years ago in the U.S., backed by political reasoning and decision-making. Subsequently, the conversion of starch into bio-fuels became also prominent in other parts of the world.
All these factors have contributed to an accelerated increase of consumption of starch crops over recent years. Growth in consumption became so high that it is surpassing production, resulting in a depletion of stocks.
The manufacturing of starch in this global context is only of subordinate importance and drains only a fraction of crop harvests. The industry is nevertheless strongly impacted by such global trends. Raw materials are less available and prices shoot up almost uncontrolled, making starch production more expansive. At the same time and due to changing life styles, processed foods, which demand the use of more starch in sophisticated systems, are enjoying increasing popularity. In technical applications, such as in paper and glue production or textile weaving and finishing, the demand for native starch and for modified powder starches is growing as well -- also as a consequence of a still increasing population, backed by increases of disposable incomes.
The largest single outlet for starches always has been for conversion into sweeteners. The global demand for cereal sweeteners is closely related to the development of the soft drink industry, which started several years ago in the U.S. Soft drinks became a symbol of the modern society and are now consumed in virtually every country. While juices and carbonated beverages can also be sweetened by saccharose sugar or by low calorie sweeteners, fructose and glucose syrups are typically preferred, partly for cost reasons but also for technical reasons, as such syrups do not re-crystallize and thus keep the beverages appealing. Despite the fact that cereal sweeteners are criticized as being responsible for obesity, diabetes, cancer development and many other health problems, their popularity on a global scale is uncontested, although in some countries the markets show signs of saturation.
A second large consumer of starch hydrolysis products is the fermentation industry. Many fermentation processes run on starch hydrolysates. This is partly for cost reasons and partly because the organisms in use have been trained to prefer glucose to saccharose. The only exception is yeast, which traditionally grows best in molasses. Markets for virtually all fermentation-derived products, whether they are penicillin based, citric acids or amino acids, expand at high rates and add to the demand for starch hydrolysis products.
Minor applications of starch syrups include their use in the manufacturing of sugar alcohols, particularly of sorbitol. Sorbitol is characterized by two main properties, which drive its market: it is a low-calorie sweetener and it imparts a refreshing aftertaste. This refreshing aftertaste in particular makes sorbitol the product of choice in virtually all toothpastes and for many other toiletry products, and its low calorie content and high degree of sweetness make sorbitol ideal for a number of different foods. Maltodextrin is an only mildly hydrolyzed starch that shows excellent properties for formulation and bulking. That formulation capability is even more pronounced with cyclodextrin, also a product derived from enzymatic hydrolysis of starch. As is the case with standard sweeteners, the market for these derived products is growing as a result of the increasing sophistication of daily life and the increasing number of people who can afford to purchase manufactured products that include such starch hydrolysis derivatives.
Overall, the markets for starches and derivatives are expected to expand on a global scale at a substantial rate. They are all confronted with the same major challenge: a shortening of the availability of suitable raw materials at tolerable prices and increasing energy costs. Both factors are beyond the control of the starch industry; developments are imposed by other drivers. Such inability to master a major element of the value chain of starch processing has driven a consolidation process and a change of the producer landscape over the past few years. There are still global players, which are integrated over the full value chain. They are engaged in major starch markets but also in many more markets so that they can spread business risk over different activities, while at the same time controlling the full value chain. And there are regional companies. These, frequently organized as cooperatives and integrating producers of raw materials into their business model, exploit the regional advantages in raw material sourcing, supply customers in a defined region with specialties, often beyond the standard product range.
It will be these regional players in particular that will be hit by the global price developments and procurement shortages anticipated. They will find it increasingly difficult to compete against the global players and against other users of the same raw materials. They might need to review their business strategy and positioning and ultimately consider integration into the full value chain.
REASONS FOR DOING THE STUDY
This report reviews in detail the mechanisms of the global starch value chain. It outlines the dynamics and driving forces of the raw material markets, discusses the technology and costs involved in the production of primary starch, and analyzes in detail the mechanisms of the markets for native starch, modified starches, starch sweeteners, maltodextrin and cyclodextrin, as well the sugar alcohols sorbitol and maltitol, and anticipates future developments throughout 2018. The main reason for doing this report is to analyze the starch industry from the angle of a value chain in a synoptic view. It therefore not only highlights the consumption patterns and prices of individual starch products, but also links such parameters to the dynamics of the raw material markets and the major factors involved in processing. This report therefore provides a comprehensive overview and background information.
CONTRIBUTION OF THE STUDY AND INTENDED AUDIENCE
BCC Research Inc. provides detailed insight into an industry that is decisive for the manufacturing of many foods and chemicals. The report provides the most up-to-date quantitative information on all elements of the full value chain from processing raw materials via intermediate steps to end uses and end markets, and forecasts developments throughout 2018. The report’s analyses will enable the reader to understand the current structure and dynamics of the different elements of starch markets and provide insight into their interrelationship and their interaction. The report is designed to assist decision makers in the starch industry and in related industries by providing background information to be considered in strategy formulation, capacity enlargement, and decisions on sites for new plants, on research priorities and particularly for any consideration on integrating a firm better into the full setting of the starch value chain in different regions of the world.
SCOPE OF THE REPORT
The report starts by analyzing the markets for raw materials. It reviews in detail the dynamics of supply and demand of wheat, corn, starch potatoes and cassava and to some extent even of rice and of sweet potatoes. In a second step, the technology for manufacturing primary starch is explained and the relevance of by-products for cost of production of primary starch is highlighted. In subsequent sections, the dynamics of supply and demand, pricing history and structure of native starches, modified starches, starch sweeteners and sugar alcohols as well as maltodextrins and cyclodextrins are discussed and illustrated in a quantitative form. In a synoptic conclusion, the different markets are amalgamated into a global picture. The report ends by profiling important actors in the starch business, highlighting and benchmarking their strategies with emphasis on their fitness to sustain anticipated developments.
There is abundant technical information on virtually all aspects of starches, starch manufacturing and raw materials available. Such information, however, is usually disaggregated, does not show any interrelationship between the dynamics of individual markets or the interaction with raw material supply, and is in many cases not connected to prices and values. However, understanding relationships in a value chain is perceived as essential for comprehending the future developments of the starch industry and for preparing for the major changes, particularly on the supply side, which are expected until the year 2018. By exploiting established relationships between relevant companies and industries, the author of the study provides the basis for the high value of this report.
Ulrich März is experienced both as a food scientist and technical economic analyst in the field of food, feed and fermentation ingredients. He has made significant contributions to technology and performed industry and market analysis of vitamins, carotenoids, enzymes, organic acids, amino acids, and other fermentation-derived food and feed ingredients with BCC multi-client studies. Dr. März has been with BCC for over 15 years. He has an MSc in Chemical Engineering and a Ph.D. in Economics and Management from the University of Stuttgart, Germany.
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