Future Directions for the Starch Industrythe business, societal and regulatory environment in the next 20 years, and especially how it will affect Europe – Analyse key drivers influencing

GIRACT

Future Directionsfor the Starch Industry

Dr. Jo Goossens

59th Starch ConventionDetmold, April 16-17, 2008

GIRACTwww.giract.comDetmold Starch Convention 2008 - Jo Goossens 2

Predicting Economy?

BiomassAvailability

WTO andGlobal

Economy

Climate Change

Peak Oil And AlternativeEnergy Supply

Growth ofDevelopingCountries

NationalFood and Energy

Security

EcodiversityPreservation


Organisationor company

Transactional environmentwhat we can influence

Contextual environmentwhat we cannot influence

More Exposure = More Uncertainty• Since the mid 90’s, the industry has become increasingly exposed to

external factors beyond its control and thus risk and strategy option assesment have become more difficult

>’90’s GMO

Nutrition & Health

Safety & Traceability

CAP reform

China competition

Sustainability

Bioenergy

<<’’9090’’ssCrop variation

Energy cost

Intervention prices


Examples of the Starch Industry’sShrinking Sphere of Influence

• Farmers depended largely on starch industry’s quantity and quality needs

Bio-energy producers are now setting other standards

• Agri companies R&D had special starch oriented development programs

Focus now on other energy crops and other ingredients (cellulose, oil)

• Starch industry had enormous buying power as cereal markets were typically a buyer’s market

Persisting worldwide cereal shortages have created a seller’s market and the starch industry, nor the biofuel industry is in a position to dictate prices


Consequences?Running Quarterly Prices for Maize Starch


A new horizon

Biomass availabilityand sustainable production

Growing raw materialand energy demand from

developing economies andchanging consumption

patterns

Shrinking availability and sustainable exploitation

of traditionalenergy sources

Prevention of climate change and need for biopreservation

to protect global ecosystem balance

What new biomass regime will emerge in the future ?What new biomass regime will emerge in the future ?What new biomass regime will emerge in the future ?

Starch


2025- Fields for Food or Fuel?

A multistakeholder scenario planning initiative

• To explore how the demand and supply of agricultural raw materials for food, fuel or renewable raw material might shape the business, societal and regulatory environment in the next 20years, and especially how it will affect Europe

– Analyse key drivers influencing the system

– Determine which drivers have the highest impact and are most uncertainty: critical uncertainties

– Identify relevant combinations of these critical uncertainties to tell challenging but plausible and logical stories about how the future might unfold


Driver Database

• ROM (renewable organic material) production• Demand for ROM• ROM production• Consumer aspects• Economic drivers• Policy drivers• Developing economies impact• Integration of sustainability• Alternative technologies• Competing technologies• Land availability• Environmental impact• Knowledge distribution


A systemic view of the biomass regime


2025- Fields for Food or Fuel?

4 scenarii are in development

• In each of these future worlds the threats and opportunities differ substantiallly for the various stakeholders, be it industry, civil society actors or consumers

BIOMASSBOTTLENECK

FRAGILEUTOPIA

MANDATEDMANIA

ROMBULLIES


What opportunities for the starch industry?

• Europe?

• Biofuel?

• Specialities/commodities - integrated or split production?

• Engage in 2nd generation and be technology leaders?

• Bio-refinery concept – become an integrator of more agri-streams?

• New raw materials? GMO or not? Waste recovery?

• Food or technical markets – who will be the customers?

• New values? Sustainability, fair trade, eco-friendly, natural?

In short, is there a place for the starch industry as it is today or does it has to mutate into something else?


The Chinese dragon

• 2006 data exclude all bioethanol

• 2003 only bio-ethanol by starch players included (~ 5 mio tons starch)

• 2000 included all bioethanol production (~6 mio tons starch)

mio tons: 56.9 61.4 63.3

0

10

20

30

40

50

60

70m

io t

ons

prim

ary

star

ch p

rodu

ctio

n

2000 2003 2006

ROWOther asiaChinaOther AmericaN.AmericaEurope


Russia/Ukraine – a major raw material opportunity

0

50

100

150

200

250

300

350kt

ons

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

native starchglucose

• With a huge maize production potential at worldwide competitive conditions, Ukraine and Russia are extremely interesting but remain almost undeveloped territory for primary starch production


Integration of primary starch andstarch derivative production

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%%

sta

rch

der

ivat

ives

by

seco

ndar

y p

rod

ucer

s

2000 2003 2006

China

Indonesia

Japan

Thailand

• While China integrates, Japan focuses on speciality secondary production

• In a future of expensive raw materials, specialisation may be key for players in areas with more expensive raw material availability


Commodities – Buffer Stocks of Corn and Wheat

• Corn and wheat stocks (in corn days of forward coverage) are dwindling, foreboding a return to the ’60s when cereal shortages were abound limiting industrial development

• What raw material to choose? Maize, wheat, potato, tapioca?


Will GMO help to overcome biomass shortages?


Biofuels - Is Europe the place to be?

• Land requirement per unit of biofuel production and energy input/output ratio for various crops

• Crop options in Europe and N.America not good for biofuels

Suga

rbee

t

Suga

rbee

t

Cor

n

Cor

n

Whe

at

Whe

at


Globalisation?

• Unintended consequences of globalisation are raising questions as to how far this can go– Energy and transport being very costly and a major

environmental hazard, the ‘global supply dream’ may have to be revisited; e.g. food miles concern in UK.

– Rather than stability, instant economic vulnerability for everyone seems to be a key product of globalisation; e.g. the emerging food riots are less a result of the economic growth and biofuel boom and more fundamentally a consequence of the globalisation effort

– People migration at unseen rates due to lack of incentives for local development, while worsening the environmental and social catastrophy of mega-cities

• Local integrated production initiatives may have to be reconsidered as a long term alternative to assure sustainable and self-sufficient living communities


Food or technical markets?

• Who will be the future users of starch?

• A lot will depend on technological developments and more importantly of 2nd and 3rd generation bio-energy

– more pressure on cellulose which will require the paper/board industries to further economise on raw material use

– Waste and biomass-to-gas (BTG) technologies will relieve the pressure on starch crops

• Profits are more thinly spread over an increasingly complex fooddistribution system with many intermediary players

• Health issues will finally dictate food starch and sweetener markets, both in developed and developing countries


Conclusions

• More questions than answers

• But one thing should be clear:

– We are at the crossroads with many opportunities and threrats and thus important decisions need to be made today

– Given the uncertainty, choices should be such that they still work out in very different future scenarios

– This is a chance for prime movers to create new business models and the new standards they will require and reap the benefits of being the first in a new market


Can the starch industry reinvent itselflike the telecom industry?

?

Who will be the Nokia of the starch industry?

GIRACT

Thank youand good luck

Documents

Future Directions for the Starch Industrythe business, societal and regulatory environment in the next 20 years, and especially how it will affect Europe – Analyse key drivers influencing