In Europe, starch makers have reduced production due to a decline in demand, especially from paper and cardboard manufacturers, and the influx of cheap imports from Asia. This has resulted in excess capacity, with little hope for improvement until late this year.
Industry sources have revealed that the European Union’s starch industry is currently operating at only 70-75% of its potential capacity, as demand has decreased from its peak during the pandemic.
Starch and its derivatives, which are derived from wheat, maize, potatoes, and tapioca, are utilized in a wide array of products ranging from ice cream to cosmetics, paints, pills, and cardboard because of their sweetening, thickening, and texturizing properties.
Key starch producers in Europe include companies like Archer-Daniels-Midland, Cargill, Tereos, and Roquette.
Data from Starch Europe indicates that EU starch production grew by 25% between 2008 and 2020 due to the rise of e-commerce and increased consumption of processed foods and beverages. However, output declined by 4.5% from 2021 to 2022 as people began returning to traditional retail outlets and restaurants.
Since the onset of the pandemic, European starch manufacturers have faced greater challenges than their US counterparts, grappling with higher energy costs and a sluggish economy.
On the other hand, Asian demand has remained buoyant, supported by population growth and a thriving textile industry.
In February, Tereos reported a 37% decrease in core profit at its starch and sweeteners unit in late 2023, signaling a shift from the consistent earnings growth seen in previous quarters.
According to Jamie Fortescue, managing director at Starch Europe based in Brussels, the past few years have been challenging for the industry, and there are no signs of a significant improvement in the near future.
Estimates suggest that EU starch production may have declined by more than 10% last year, with the industry consuming around 9% of the EU’s combined wheat and maize supplies.
The paper and cardboard sector accounts for approximately one-third of starch consumption.
However, output across the EU, Britain, and Norway dropped by 13% in 2023, as reported by industry group CEPI, due to destocking of inventory, economic conditions, and rising costs.
The dwindling production of starch has led to reduced demand for grains, with the projected usage of wheat and maize for starch in France, the EU’s primary grain producer, anticipated to reach its lowest level this century in the 2023/2024 marketing season.
Marie-Laure Empinet, head of French starch producer group Usipa, highlighted the necessity of cutting production when market demand wanes. Empinet, who also serves as the external relations director at Roquette, emphasized that her statements did not represent the views of the company.
Major players like ADM, Tereos, and Cargill declined to provide comments on the situation. Imports of cost-effective starch products from Asia have further impacted the market, with significant increases observed in exports of Chinese dextrose, sorbitol, and Vietnamese tapioca to the EU.
The rapid growth in imports from Asia has raised concerns within the European industry, especially as negotiations for a trade deal with Thailand, the world’s largest starch exporter, are ongoing.
While China and the US dominate starch production, primarily from corn, Thailand is a significant producer of cassava starch (tapioca), while Europe mainly relies on grains and potatoes.
Forecast adjustments by FranceAgriMer indicate a reduced utilization of wheat and maize by the starch sector in the upcoming season, partly attributed to a fire at a Tereos facility in northern France causing production interruptions.
Despite challenges, the industry could benefit from declining grain prices due to ample global supply, potentially improving profit margins. However, the outlook suggests that significant recovery may not occur until the latter part of the year.
