A major outlet for grains, the global starch industry is controlled by just a handful of players but is characterized by wide regional differences
From the way your loaf slices to the rate at which your ice cream melts, the taste of your drink — even the gloss on your toothpaste — chances are it’s starch at work. The amazing versatility of native and modified starches and starch derivatives makes starch one of the most widely used functional ingredients in the food and beverage industries as well as in industrial applications such as textiles, paper, ethanol and biodegradable polymers.
And this is good news for the grain sector. A 2003 report from Rabobank International shows that of 49 million tonnes of starch produced worldwide, 43.5 million tonnes was grain-based: 39.4 million tonnes from maize and 4.1 million tonnes from wheat. "Others," mainly tapioca, come in at 3 million tonnes while potato starch accounts for only 2.6 million tonnes.
The raw material base for starch production is determined by regional availability and opportunities for marketing by-products, an essential factor in the economics of starch production; thus we see maize dominating in North America, wheat and maize as the main raw materials in Europe and tapioca largely in Asia. (See Table 1).
The United States produces more than half of the world’s starch, and virtually all of it is from maize. The most important output of the U.S. starch sector is High Fructose Corn Syrup (HFCS) — or isoglucose — that is used extensively as a sweetener in the beverage industry, where it has largely replaced sugar as a sweetener. In second place is the production of ethanol, the rapidly growing renewable fuel alternative. (See WG July 2003: Ethanol processing – growing by the gallon; Ethanol – fuelling corn demand.)
In the U.S., Archer Daniels Midland commands 33% of starch production, dominating both the HFCS and ethanol markets, Cargill-Cerestar hold 31% of the market, A.E. Staley Manufacturing 14%, Corn Products International (CPI) 9% and Minnesota Corn Processors (ethanol) 9%. The remaining 4% comprises companies, such as GPC (Grain Processing Corporation), that specialize in value-added ingredients such as maltodextrin and modified starches.
Starch production in the European Union has undergone a remarkable transition in recent decades. Rabobank says that as wheat has overtaken maize to become the main raw material, particularly for syrup production; the industry has invested heavily to expand, modernize and modify plants as a result. Since wheat starch production is more complex than maize starch, the technology base has become very sophisticated.
In Europe, four main producers account for 80% of starch production capacity. Cargill, formerly a modest player in the European market, leaped to the leading position with its acquisition of Cerestar, part of the Eridania Beghin-Say conglomerate. This included the Dutch Sas van Gent processing plant, which was recently renovated and expanded to process 70% wheat rather than all maize; it is the largest starch processing plant in Europe at 1 million tonnes. The combined Cargill-Cerestar company commands 31% of European capacity.
The other main players are Roquette Freres, France, at 24%, Amylum, Belgium, which together with Staley in the U.S. forms the starch division of British Tate & Lyle sugar company, at 18% and Avebe, the Netherlands, which processes potato starch, at 8%. Other companies include National Starch and Chemical owned by Imperial Chemical Industries (ICI), Agrana in Austria and potato starch manufacturer, Emsland Staerke in Germany. A handful of smaller companies serve specialized niche markets, including leading rice starch producer, Remy of Belgium.
The starch industry is highly concentrated. The consolidation trend has been driven in the U.S. mainly by overcapacity in HFCS, while in Europe the motive has been strategic. The capital-intensive nature and scale of operation necessary for efficiency present a barrier to entry. Given the limited number of companies in the game, expansion has to come geographically, mainly in Asia, Central and Eastern Europe and South America, and these regions have already attracted investment from the major companies.
Production in Central and Eastern Europe is based on maize, wheat and potatoes. (See Table 2). Six corn wet milling plants are in operation in countries where maize is available: Hungary, Romania, Slovakia and Bulgaria. Wheat starch plants are found in the areas where maize is not available or would be too costly to import: Czech Republic, Slovenia and Poland, traditionally a potato starch producing country but where Cargill now has a 120,000-tonne-capacity processing plant for wheat starch.
The Cargill investment characterizes the pattern of Western European investment in grain-based starch facilities throughout the region that is hastening the decline of the potato starch industry. A joint venture company between Amylum and ADM, Eaststarch, has the greatest presence in Central and Eastern Europe but Cargill has the largest plant. Amylum is also present in Hungary with Hungrana, a joint venture with Agrana.
The starch business in Asia is heavily dependent on tapioca (also known as cassava or manioc), but substantial quantities of maize starch are also produced, specifically in Japan and Korea and importantly, in China, where around 80% of starch production is from maize.
Brazil leads the field in starch production in South America, followed by Argentina. Since Brazil is the world’s largest sugar producer, maize starch cannot compete in the sweeteners and ethanol markets. Rather than producing HFCS, therefore, the Brazilian starch sector is focused on lower value-added products such as modified starch, glucose and sorbitol, and tapioca is rapidly gaining ground at the expense of maize. Although Brazil is a major maize grower, producing 35 million tonnes (2002), only about 1.2 million tonnes are used to produce starch.
By contrast, in Argentina, starch sweeteners do play a role and compete with sugar. The main raw material is maize, at 1 million tonnes. Argentina’s fructose production fulfills both local demand and export markets in Chile and Uruguay.
Rabobank concludes that the future for starch industry lies in the further development of these regional markets and in biofuels.
The amazing versatility of starch
Starch is the most versatile industry in the agribusiness sector. Products find their way into sectors as different as soups, sauces, meats, bakery items, drinks, textiles, paper, fuels, adhesives, plastics — even paint stripper, where they serve to thicken, stabilize, texturize, replace fat or manage moisture. After the first processing steps that lead to native starch and modified starch, a wide variety of products can be formed by further processing, as shown in the diagram below for the hydrolyzed starch products. Ingredients such as glucose, isoglucose, maltodextrin, dextrose, sorbitol, citric acid and Vitamin C can all be traced back to starch.
Starch is a significant ingredient in the food sector, where it is generally listed in second or third place on the ingredient label. And many foods contain more than one form of starch. The development of starches and starch applications in the food and beverage sectors reflects advances in food technology and changing eating habits that are driven by convenience on the one hand and health on the other. An example of convenience is the use of microwave ovens, which require different modified starches to develop viscosity under lower temperatures than those of conventional ovens. A prime example of a health concern is the expanded role of starches to replace gelatin in response to BSE (mad cow disease) concerns.
In the beverage sector, glucose and dextrose syrups are used as fermentables in beer and alcohol production, citric acid as a flavor enhancer, polyols in the low calorie drink segment where they act as bulking agents, as do maltodextrins, which also thicken and bind.
But it is as a sweetener that starch really comes into its own. Beverages represent around 20% of the total sweetener market and starch-based isoglucose has almost completely replaced the more expensive sugar-based sucrose in the U.S. In the E.U. isoglucose accounts for only about 10% of the sweetener market as it is restricted by quota. However, in Japan, some 60% of sweeteners are HFCS.
Paper is the main end user of dry starches, including very high-value derivatives. Sizing and coating are the main uses in paper production, while in corrugated boards it is used mainly as a glue. Ethanol production is rapidly gaining usage share as governments put their support behind renewable fuels. The same drivers are at work in the nascent biodegradable polymer industry, but as yet, with a few notable exceptions, few have been in a position to take a risk on this emerging market.
For further details about the Rabobank International Food and Agribusiness Research Report "Starch: many sources, even more applications" please contact Martha van den Berg: firstname.lastname@example.org.