Industrial Crops and Products 7 (1998) 175 186

Economics of starch production in the UK

Garth Entwistle *, Sheila Bachelor, Elaine Booth, Kerr Walker
Economics Department, Agro Industrial Research Ser6ice, SAC, Craibstone Estate, Craibstone, Aberdeen AB9 1, UK Received 6 August 1996; accepted 12 March 1997

Abstract To assess the potential for increased utilisation of UK-grown crops by the industrial starch industry, three starch processing options were considered. Starch production from: home-grown potatoes, home-grown wheat and imported maize. Wheat starch processing margins were found to be similar to, but slightly more attractive than, maize starch processing margins. Both wheat and maize margins were signicantly more attractive than potato starch margins. Productions refunds paid to industrial users of wheat starch are equal to maize refunds despite a lower European Union wheat procurement price, giving a small advantage to wheat starch. A review of EU starch policy indicates the UK is unlikely to be awarded a potato starch quota due to the absence of any potato starch manufacturing tradition, and the desire of the European Commission to restrict expenditure within the potato starch regime. These quotas allow the payment of xed premiums to potato starch manufacturers. Without them potato starch manufacture is likely to be uneconomic, discouraging any development of a UK potato starch manufacturing industry. Development of wheat starch processing technology would appear to be economically attractive as well as benecial, both in terms of import substitution and improving options for set-aside land use. The economics of wheat starch production was calculated for a 100 000 t per annum wheat starch plant. Margins were found to be highly dependant upon sale values of the co-product wheat gluten. Any increase in milling wheat imports within GATT agreements may reduce gluten demand, forcing prices down. Maize starch by-products are sold principally into the lower value animal feed markets and therefore, by-products prices, although important, have much less impact on processing margins than in wheat starch manufacture. 1998 Elsevier Science B.V. Keywords: Starch; Economics; Industrial use; UK

1. Introduction If the UK is to increase its utilisation of UKgrown crops for the manufacture of industrial starch some estimate is required of both the industrial starch marketsits requirements and

* Corresponding author. Fax: + 44 1224 276012

0926-6690/98/$19.00 1998 Elsevier Science B.V. All rights reserved. PII S 0 9 2 6 - 6 6 9 0 ( 9 7 ) 0 0 0 4 6 - 0

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likely development, and, the relative economics of producing industrial starch in the UK from homegrown crops. This paper reviews the market for industrial starch in the UK and compares the economics of manufacturing starch for this market from home-grown potatoes, home-grown wheat and imported maize. The research required to make this comparison was undertaken as a part of a UK LINK project, Industrial Markets for UK-Grown Crop Polysaccharides, commissioned as a part of the Crops for Industrial Use programme. The work was funded by the Biotechnology and Biological Sciences Research Council (BBSRC), the Engineering and Physical Sciences Research Council (EPSRC), the Scottish Ofce Agricultural and Fisheries Department (SOAFD), the Home Grown Cereals Authority (HGCA) and the Potato Marketing Board (PMB). A full project report has been published by the HGCA, January 1996, as their Research Review No. 32. The research team was drawn from SAC AgroIndustrial Research Service (Batchelor, Booth, Entwistle, Walker), Department of Plant Sciences, University of Cambridge (T. ap Rees), Dextra Laboratories Ltd (A Hacking) and the Scottish Crop Research Institute (G. MacKay, I. Morrison). This paper rst describes the size of the starch industry in the UK and the relative importance of industrial markets. The principle industrial markets for crop starch in the UK are set out and reviewed. Attention is rst given to the principle industrial market the paper and board sector. Following this, new and developing markets are considered followed by traditional and declining markets. The impact biotechnology may have on starch utilisation is considered separately. An extensive review of both published and unpublished literature has been supplemented by interviews with starch processors and starch users in the UK, Belgium and Holland. This itself, was supported by a survey of starch utilisation within the UK paper and board industry. Prior to our analysis of the economics of starch production, EU starch policy is reviewed and nancial support identied. The analysis of starch production economics considers in turn, wheat,

maize and then potato starch. In the absence of published data, this analysis builds up a net margin calculation for each product using a mass balance to give input output ratios, market prices and a calculation of both capital charges and processing charges per tonne of starch produced. These calculations allow the economics of production to be compared and conclusions to be drawn as to the most suitable starch type to be developed in the UK for the UK industrial market.

2. The UK starch market The UK consumes approximately 880 000 tonnes of starch per annum (Table 1). Of this,
Table 1 UK starch market 1993/94 1994/95 Starch supply 1993/94 (1000s tonnes) 1994/95 (1000s tonnes) 750

Domestic produc- 750 tion Of which: Maize 560 Wheat 190 Imports Of which: Maize Wheat Potato Total Supply Utilisation Food Of which: Maize Wheat Potato Industrial use Of which: Maize Wheat Potato 133.6 34.8 17.2 79.2 883.6

530 220 136.7 39.2 20.3 75.2 886.7

667.4 (75%) 471.5 179.4 14.3 216.2 (25%) 123.3 27.8 65.0 21% supply 13% supply 82% potato of total maize of total wheat of total supply

Source: HGCA, MAFF, EU.

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around 15% is imported with the remainder produced within the UK at four principle sites. The most important starch material is maize, representing 65% of total starch supplies to the UK market. Wheat starch supplies 25% of the total with the remaining 10% met by potato starch all of which is imported. Other starches derived from such materials as manioc, oats and barley, will at times enter the UK market but only in small quantities. Domestic producers concentrate on the manufacture of maize and wheat starch using imported maize grain, predominantly French, and homegrown supplies of wheat. Wheat starch production is increasing for a variety of reasons and displacing both maize and potato starch from the market. Maize continues however, to be the most important starch domestically produced. UK maize starch output averaging 550 000 tonnes pa currently compares with UK wheat starch production of around 200 000 tonnes pa. A number of other alternative starch materials are under consideration by UK industry. These include, potato, oats and barley; rye and triticale, quinoa and amaranth. Potatoes, oats and barley are widely available within the UK, being well suited to its agro-climatic conditions. They contain high concentrations of starch and provide the basic raw material for starch manufacturing industries elsewhere in Europe. EU starch policy does not however, encourage the use of these materials where no tradition of use exists. Rye and triticale are not important crops in the UK but could be grown given a demand. Quino and amaranth are being trialed to assess their agronomic suitability to UK conditions. Quinoa starch is of interest with an extremely small granule size and a low amylase content. Amaranth, requiring relatively high soil temperatures for seedling emergence (Webb et al., 1987), is unlikely to suit UK conditions. The food industry utilises 75% of UK starch supplies with the remaining 25% consigned for industrial purposes. Very little is exported. Within these industrial markets, maize starch again dominates, with 60% of total supply against 30% for potato starch and 10% for wheat starch. Interestingly, the industrial market takes approximately

Table 2 Industrial uses of starch in the UK (1993/94) ranked in order of importance Tonnes 1. Paper and board 2. Organic chemicals 3. Albuminoids 4. Starch ethers/esters 5. Industrial chemicals 6. Plastics 7. Pharmaceuticals 8. Organic surfactants 9. Enzymes Source: MAFF 128 000 32 000 24 700 9600 7500 6800 4800 2900 230 (%) 60 15 11.5 9.5 3.5 3 2 1 0.1

82% of total potato starch supplies to the UK market, but only 21% of maize starch supplies and 13% of wheat starch supplies.

3. Industrial utilisation of starch (UK) Industrial utilisation of starchas recorded by the European Commission in 1993/94, is described in order of importance in Table 2. The paper and board industry is the largest non-food, starch using sector of the UK economy, taking almost 60% of total industrial starch supplies. Starch is used within the paper industry to aid retention of llers and ne bres on the paper sheet to improve strength and also as a component of coating formulations. Fillers such as china clay are used to replace cellulose (wood pulp) and reduce production costs. In the manufacture of board, starch is used as an adhesive or ply binder. In the manufacture of paper from recycled bres, starch is added to restore the natural qualities of these bres. Starch consumption by the UK paper industry appears to be increasing as the economy moves out of recession and paper and packaging demand increases. A growing emphasis on the use of packaging from recycled bres will increase overall starch utilisation. Although potato starch is the traditional source of starch used by this industry, starch quality differentials appear to be narrowing with increasing interest in lower cost

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supplies of maize starch. Wheat starch may become important if quality can be improved. Improvements in protein separation during wheat starch manufacture may lift wheat starch qualities and allow for a greater uptake by the paper industry. Specialist applications where specic granule sizes are required may encourage on a small scale, production of starches with these properties utilising material such as oats or quinoa.

dependent upon price alone. Research interest focuses on the biodegradability of products after modication.

5. New and developing uses starchplastics Starch containing plastic was rst commercially produced during the 1970s to produce shopping bags with paper texture. The degradability of the material produced has supported its subsequent development. Plastic accounts for 510% of municipal waste by weight, and 2530% by volume (Koch et al., 1993). Volume is a critical factor in landll disposal as existing sites are rapidly reaching capacity and identication of new sites is increasingly difcult. The use of degradable plastics derived from starch could help alleviate this problem (Roper et al., 1993; Griffen, 1994), as well as reducing the worlds dependence on nonrenewable resources. Despite this potential and considerable academic and commercial interest, the future for starch based plastics remains uncertain. A greater emphasis on recycling waste and incineration reduces its attraction. Recently developed starchbased foam packaging materials are capturing a market where degradability and renewable are important as part of a rms green image.

4. New and developing uses of starch detergents While the detergent industry represented just 1% of the industrial UK starch market in 1993/94, this industry is considered to offer the largest potential of any new market for industrial starch. Interest in starch-derived products has arisen from increasing environmental concerns with a trend away from synthetic to more natural products. Starch based products are being considered for use as surfactants and builders, sequestering agents and bleaching boosters (Leygue, 1993; Roper, 1991). Leygue (1993) considers it possible to replace up to 75% of liquid detergent constituents and 60% of those in powdered detergents to give a European market of 800 000 tonnes by the end of the decade. Surfactants are the primary cleaning agent within detergents. Plant based carbohydrates may be used to provide the water soluble portion of surfactants with APG (alkylpolyglycosides) and example of starch products in use and under development. Commercialisation is dependent on price relative to synthetics. Builders and co-builders or sequestering agents buffer the wash medium, soften the water and disperse soil particles removed during washing. Starch derived products have shown satisfactory technical properties but are currently uneconomic to produce. Bleaching boosters allow bleaching at lower temperatures with starch derived products under investigation as potential compounds. In all situations, the source of starch is not important as extensive modication takes place. Selection is

6. Other new and developing markets Other new and developing markets for crop starches include the oil drilling industry, agrochemicals, pharmaceuticals, cosmetics and toiletries.

6.1. Mineral oil drilling

Starch can be used in the oil industry as a drilling aid included in water-based uids. Drilling uids, in the form of circulating aqueous clay suspensions are used to stabilise bore hole walls and enable drilled solids to be transported to the surface. Starch products are incorporated into water-based drilling uids to control uid loss. These products are degradable and reduce envi-

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ronmental damage when they replace oil-based uids. Their use is, however, limited by the restricted range of conditions in which they can operate, effectively. Modication of starch for high temperature use may increase its market potential.

6.2. Agrochemicals
Starch is of interest in the agrochemical industry as an encapsulation agent for pesticides, and for the production of aqueous base pesticide formulations. Starch encapsulation leads to the safer handling of pesticides and can improve the efciency of the active ingredient with an improved delivery to the target pest and a reduction in losses due to evaporation, leaching and light decomposition. Encapsulation costs have been reduced with the use of extruders reducing the need to solubilise and cross-link starch with chemical addition. Aqueous based coatings such as lipophilic, lm-forming polymers, are more water resistant and allow for a slow release of active ingredient. Amylose has good lm-forming properties and may nd an application and give encouragement to the development of high amylose starch crops. Also under development is the use of modied starches to build structured suspensions capable of carrying active ingredients with low solubility and which allow dispersion in water prior to application. Despite much research, little is coming forward for patenting leaving the future application of starch in this sector unclear.

starch derivatives can act as a feedstock for fermentation processes or as a base for chemical transformation. This is a high value, low volume market which is considered by some starch processors to have good potential for the development of important, high-value products. The development of active ingredients from starch itself, may be restricted however, by high investment costs associated with product registration.

6.4. Cosmetics and toiletries

Starch and starch derivatives, could potentially be used for the production of a wide range of cosmetics and toiletry products. The use of sorbitol in toothpaste and cosmetic creams is an example of a well established use of a starch derivative in this sector. Oat and maize starches are used as talcum powder substitutes. Cross-linked starches are used in their granular form in antiperspirant sprays. Starch grafted co-polymers with saponication, nd important applications as absorbents in disposable soft goods designed to absorb body uidsnappies, incontinence pads, female sanitary products. Much research has improved absorbency rates with various products patented. Starch derivatives of substituted dicarboxylic acids when treated with a polyvalent metal or alkaline earth metal ion, possess unusual and valuable properties; excellent free ow and water repellency. These properties give rise to modied starch applications in oil- or petroleum-based cosmetic pastes as opacifying agents and texturisers. Other starch applications are proposed within dental powders (carboxymethyl starch) and hair shampoos (cationic starches). Enzyme catalysed esterication of n -butylglucoside a process patented by Cerestar, gives a product with a number of equally interesting features that are useful within cosmetic formulations. Cosmetics and toiletries cover a very wide range of products with many starch applications with high-value products. The development of this market by starch processors will benet agriculture and industry alike.

6.3. Pharmaceuticals
Starch can be used in the pharmaceuticals industry for coating and dusting tablets, binding components together, as disintegration agents and in the manufacture of active ingredients. It can control or inuence characteristics such as texture, aesthetics, moisture, consistency and shelf stabilityin much the same way as it is used with food products. Within the manufacturing process for active ingredients, starch and

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7. Traditional and declining markets

8. Impact of bio-technology Genetic modication of plantsboth by conventional and bio-technological methods, offers the opportunity for producing radically different starch qualities suited to very particular industrial applications. It may become possible, for example, to modify a plant to produce starch with new functional properties similar or superior to, those achieved by post-harvest modication, while retaining the important characteristics of the native starch. Natural genetic modication has already resulted in the production of native starches with compositions and properties very different to the wild type. Maize has been researched the most with a number of useful mutants identied and classied. Waxy mutants containing only the wx locus contain no amylose with amylopectin as the sole polysaccharide. The sugary su mutant has amylopectin replaced by a more highly branched polymer with shorter side chains. Waxy mutations have also been found in barley but not in wheat. Wheat varieties are mostly hexaploid while barley is a diploid species. Increasing ploidy reduces the ability of a plant to establish a particular genetic trait. Potatoes, mostly a tetraploid species, like wheat does not exhibit the range of mutations found with barley and maize. Nevertheless, an amylose-free mutant has been found and commercially produced for market applications requiring good long-term stiffness. Many starch ethers or estersproduced with potentially harmful chemicals, could be replaced with these anylose-free starch products. Genetic engineering increases the range of options for crop modication potentially creating starches naturally with very specic functionality. Genetic engineering can be used to enhance or eliminate plant constituents or, to introduce constituents which are not native to the plant. Much work surrounds the potato in The Netherlands where amylose-free and high-amylose potatoes are under development. Less advanced, but equally interesting is the introduction of a gene, again to potatoes, that controls the production of cyclodextrina compound not found in potato but which occupies an increasing number of niche

7.1. Flocculation products for water purication

Starch based products have traditionally been used by the water treatment industry as a coagulant or occulant aid. Potato starch is associated with better performance than other types because of its high potassium content. Starch based products have been displaced to a large extent by synthetic polyelectrolytes because of the superior performance and lower dosage rates required of the latter. Starch occulants are however preferred in some countries. The biodegradability of starch may be undesirable for this use as it increases the biological oxygen demand.

7.2. Textiles
The textiles industry was an important market for starch but now only accounts for 1.4% of the industrial starch market in the UK. There are three main applications of starch: sizing, where potato starch is used, printing, for which cereal starch is preferred, and nishing, which uses dextrin and degraded starches. The decline noted for starch consumption for this market is due to the overall decline in the European textiles industry and the increased use of synthetic sizing products. Synthetic sizing products are more expensive, but have a superior performance as compared to starch products. Synthetics are used where certain sophisticated nishes are required. Starch products still retain a share of the textiles sector market because of their lower cost.

7.3. Adhesi6es
Adhesives are a traditional application for starch. Starch based adhesives are primarily used for paper bonds with the most important sector corrugated board production. Starch based adhesives have faced strong competition from high performance synthetic products, and are unlikely to maintain their current position within the adhesive market.

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chemical markets because of its unique properties. Opposition to genetically engineered crops is however high, making it difcult to predict the contribution this science can make to starch production and utilisation.

9. EU starch policy The manufacture of starch from cereals, potatoes and rice within the EU, is encouraged by the payment of production refunds under the terms of the common agricultural policy (CAP). These refunds compensate for high internal EU raw material prices relative to world prices. From 1/7/89, they have been paid only to non-food, industrial users of starch (Council Reg. 1722/93) and allow EU starch to compete with usually cheaper imported supplies in EU industrial markets. Industrial users are dened as those involved in the manufacture of non-annex II goods goods not covered by the terms of the CAP. The EU food and drink starch market (non-industrial products), is in turn protected by the imposition of a system of import levies and export refunds. Import levies discriminate against imported supplies while export refunds allow EU starch manufacturers to compete on world markets. Potato starch manufactures are given additional support with the payment of a xed premium per tonne of starch produced (Council Reg. 1766/92). Starch potato growers receive compensation for low starch potato prices in relation to starch yield. In 1995/96, starch potato growers were eligible for compensation payments of 85.51 ECU/tonne of starch. A typical starch content of 20% of the under-water weight gave grower compensation payments of 19.95 ECU/tonne of potatoes delivered to factory. This, together with typical market prices of 4045/tonne delivered the prescribed minimum 1995/96 price for starch potatoes, gave a total return to growers in 1995 of approximately 56 62/tonne. Table 3 sets out the direct support available to EU starch manufacturers in 1995.

Production refunds for maize, wheat, rice and potatoes are calculated monthly by applying a coefcient of 1.6 to the difference between the maize/barley intervention price for the month in question and the average world maize price over the rst 25 days of the preceding month calculated c.i.f. Rotterdam (delivered, cargo alongside; carriage, insurance and freight paid). These refunds are claimed by non-food industrial users of starch manufactured within the EU and support a high internal EU starch price. In 1995/96, to compensate for high internal EU maize prices approximately 40% above intervention price levels, the EU maize intervention price used to calculate production refund was lifted 15%. Production refunds paid on barley and oat starch are calculated separately by applying a coefcient of 2.7 to the difference between the maize/barley intervention price and the average barley c.i.f. price, calculated again over the rst 25 days of the preceding month. The distribution of barley and oat starch production refunds is restricted to the following quota allocation introduced from 1/1/95: Finland 50 000 tonnes and Sweden 10 000 tonnes.

9.1. EC Reg. 3125 /94

The potato starch xed premium is allocated within an EU quota system on socio-economic grounds, with the intention of supporting established potato starch industries, and their associated farmer suppliers. Fixed premiums are paid to potato starch manufacturers who pay the minimum prescribed price to potato growers within a cultivation contract. The distribution of these preTable 3 Direct support to EU starch manufacture 1994/95 Maize/wheat/ rice/potato Production refundb Fixed premium (potatoes only)c
a

Barley/oat

79.2 22.25

94.23

ECU/tonne starch. May 1995 OJ/L112 Com. Reg. No. 1131/95 c 1994/95 OJ/L16 Com. Reg. No. 97/95
b

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miums is limited to a maximum of 1.592 million tonnes (EC Reg. 1868/94) allocated nationally as: Germany Holland France Denmark Spain Total 591 717 538 307 281 516 178 460 2 000 1 592 000

These quotas, calculated independently of the other EU agricultural support schemes (e.g. the arable area payment scheme) are reviewed every three years and have been allocated on the basis of production over the base period 1990/91 1992/ 93. An additional reserve of 110 000 tonnes was allocated to Germany to cover an expansion in capacity within the Eastern La nder where investments were made prior to 31/1/94. There is a demand for potato starch in the UK, currently satised by imported starch, and a tradition of potato-growing. UK farmers could therefore supply a new potato starch processing industry thereby reducing imports. However, considering the rationale behind the allocation of the potato starch quota (i.e. to support established potato starch industries) and the desire of the European Commission to restrict expenditure within the potato starch regime, together with the lack of any potato starch manufacturing tradition in the UK. It is considered unlikely the UK would ever be awarded a potato starch quota that allowed the payment of Fixed Premiums to UK manufacturers. This will effectively prevent the establishment of a UK potato starch manufacturing industry.

The processing margin is dened as the margin over direct raw material costs, capital and processing charges. It is required to cover working capital, management and marketing, leaving a return to the business. Their calculation is fully explained below. Individual plant costs will vary in relation to their depreciation policy, the age of plant and method of working. Wheat starch margins at approximately 56.00 tonne (Table 4), are shown to be similar to, but slightly more attractive than maize starch (Table 5). Production refunds paid to industrial users of wheat starch are equal to maize refunds despite a lower EU wheat procurement price, giving a small advantage to wheat starch. Potato starch margins at 18.00 tonne (Table 6), are well below maize and wheat margins and match closely the value of the starch premium paid to potato starch manufacturers. Without this premium, given current market prices, potato starch manufacture would cease. These calculations assume a starch value of 300 tonne ex factory. This may be considered low in relation to 1996 values which are closer to 400 tonne, but is considered to represent the average price level achieved by the industry over recent years.

11. Wheat starch The mass balance reported in Table 4 indicates typical input/output ratios for a commercial wheat starch mill. Output values are costed using 1994/95 trade values and compared with wheat procurement costs, capital charges and estimated processing costs to give a processing margin of 55.73 tonne of wheat starch. Table 4 shows wheat starch margins to be highly dependent however, upon sale values of the co-product wheat gluten with wheat gluten sales representing 25% of the value of total sales per tonne of starch produced. An estimated value of 650 tonne for wheat gluten is low in comparison with 1994 levels which reached 1500 tonne when EU, Australian and North American wheat quality and availability was affected by drought. The 1995 values of 650700/t are more representa-

10. Processing margins Typical 1994/95 processing margins achieved by the wheat, potato and maize industry were calculated as: Wheat starch Maize starch Potato starch 56.00/t of starch 53.00/t of starch 18.00/t of starch

G. Entwistle et al. / Industrial Crops and Products 7 (1998) 175186 Table 4 Wheat starch economics Mass balance: 1.333 tonnes whole wheat yields: 1.0 tonnes wheat our, with the addition of wheat bran yields: (Source: Barr & Murphy)

183

1 tonne wheat our 0.1186 tonnes Gluten @ 8% moisture 0.625 tonnes A-Starch @ 12% moisture 0.124 tonnes B-Starch @ 10% moisture 0.320 tonnes Dry Feed @ 12% moisture

Processing margin per tonne of maize starch, input/output values 1994/95 trade estimates Outputs Tonnes Price (/t) Wheat A-starch Wheat B-starch Wheat dry feed Wheat gluten Total LESS Wheat input Annual capital charge per tonne of starch (1) Processing costs per tonne of starch (2) Total Processing margin per tonne of wheat starch (1) Assumes: (2) Assumes: 2.132 @125 delivered approximately approximately 1.0 0.198 0.512 0.192 @ 300.00 ex-factory @ 80.00 ex-factory @ 80.00 ex-factory @ 650.00 ex-factory

Value (/t) 300.00 15.87 40.96 123.50 480.33 266.60 105.00 53.00 424.60

55.73 Plant capacity of 46,000 tonnes p.a. starch/100,000 tonnes p.a. wheat. capital cost 30m charged @ 10% over 10 years (Industry estimate) Labour, energy, maintenance and material costs at 25/tonne of wheat (SAC estimate)

tive of normal trading conditions. Any increase in milling wheat imports within GATT agreements may reduce gluten demand forcing gluten prices below 650 tonne.

By-product values are, as a result, determined in relation to cereal and protein feed prices and while important, have much less impact on processing margins than with wheat starch manufacture. Maize procurement costs and starch value is the main determinant of processing margins.

12. Maize starch Table 6 shows typical input/output ratios for the maize starch process (plant capacity approximately 46 000 tonnes pa starch). When outputs valued at 1994/95 levels, are compared with maize inputs, capital and processing costs, a processing margin is calculated at 52.19 tonne of maize starch produced. Maize starch by-products are sold principally into the animal feed market. Some maize oil and maize germ will be utilised in food manufacturing. 13. Potato starch Potato starch processing margins rely principally on the sale of potato starch. By-product values are low with direct EU support payments making an important contribution to the nal margin. Input/output ratios for a potato starch plant with an annual starch output of approximately 40 000 tonnes pa are described in Table 6. A processing margin of 18.73 per tonne of

184 Table 5 Maize starch economics Mass balance 1.0 tonne maize yields:

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0.625 tonnes starch 0.195 tonnes corn feed 0.045 tonnes gluten meal 0.036 tonnes crude germ oil Processing losses may reduce yields by up to 2.5%. Value (/t) 300.00 25.00 14.40 5.22 16.34 360.96

Processing margin per tonne of maize starch, input/output values 1994/95 trade estimates Outputs Tonnes Price (/t) Maize Starch Corn Feed Maize gluten meal Maize germ Crude germ oil Total returns per tonne of starch (assumes no processing losses) LESS Maize input (French) Annual capital charge per tonne of starch (1) Processing costs per tonne of starch (2) 1.0 0.312 0.072 0.085 0.038 @300.00 delivered @80.00 delivered @200.00 delivered @90.00 delivered @430.00 delivered

1.6

@140 delivered approximately approximately

224 64.00 20.00 308

Processing margin per tonne of maize starch 52.96 (1) Assumes: Capital cost of 40/tonne of maize grain capacity charged at 10% over 10 years (Industry estimates) (2) Assumes: Labour, energy, maintenance and material costs at 12.50/tonne of maize (SAC estimate)

potato starch produced is calculated when 1994/ 95 values are put to inputs and outputs and allowance made for annual capital charges and processing costs. Where capital is fully depreciated, processing margins will increase giving encouragement to processors with little need to replace existing plant. The current system of EU support for the starch processing industry does not encourage the development of new potato starch processing capacity in areas, like the UK, with no existing industry. Given the nancial cost of these supports it is considered unlikely that the European Commission will allow any expansion of the quota to bring new potato capacity into production. Potato starch manufacture could only become viable without the xed premium if by-product values could be improved signicantly to match, for example, those obtained for wheat gluten.

Wheat starch manufacture is expanding with signicant maize capacity switching to wheat during 1995/96. 14. Conclusions Within the EU, the balance of industrial starch use from potatoes, maize and wheat is shifting in the direction of cereals. This is principally price driven with processors progressively prepared to accept some shortcomings of the cereal product where this allows them to secure a cheaper raw material. The particular characteristics of potato starch will ensure, however, that certain industrial sectors will continue to show a strong preference for potato starch. The development of low and high amylase potatoes may strengthen some, and develop new, industrial markets and help secure a long-term position for potato starch in starch markets.

G. Entwistle et al. / Industrial Crops and Products 7 (1998) 175186 Table 6 Potato starch economics Mass balance 1.0 tonne of potato (@ 20% starch content) yields: (Source: Hozex)

185

0.230 tonnes starch @ 20% moisture 0.140 tonnes pulp @ 86% moisture Processing losses may reduce yields by up to 2.5%

Processing margin per tonne of potato starch, input/output values 1994/95 trade estimates Outputs Tonnes Price (/t) Starch Pulp Fixed EU premium 1.00 @ 0.60 @ 1.00 @ 300.00 ex-factory 10.00 ex-factory 18.71

Value (/t) 300 6.00 18.71 324.71

Total returns per tonne of starch (assumes no processing losses) LESS Potato Input 4.35@ Annual capital charge per tonne of starch (1) approximately Processing costs per tonne of starch (2) approximately Total Processing margin/tonnes of potato starch (1) Assumes:

45.00 delivered

195.75 66.73 43.50 305.98

(2)

Assumes:

18.73 Plant capacity of 40,000 tonnes p.a. starch/170 000 tonnes p.a. potatoes Capital cost 16m charged @ 10% over 10 years (Industry estimates) Labour, energy, maintenance and material costs at 10/tonne of wheat (SAC estimate)

Quota restrictions on the allocation of EU support payments to potato starch manufacturers will prevent any development of a UK potato starch industry. The price assumptions and margin calculations set out here, show the commercial attraction of potato starch manufacture is poor and highly dependent upon the payment of the special xed premium. UK growers will not nd it attractive to grow starch potatoes for industrial markets without compensation. This compensation and the payment of xed premiums to processors is entirely dependent upon quota allocation. Any development of the UK industrial starch industry will need to focus on the processing of maize or wheat. Maize starch manufacture is, however, dependent upon imported maize supplies and is commercially less attractive then wheat starch manufacture. An expansion in wheat starch manufacture, either by the conversion of existing plant or the

establishment of new capacity within the industry, would allow: 1. The replacement of starch imports (potato, maize and wheat) currently running at around 130 000 tonnes per annum. 2. The substitution of maize starchboth imported and domestically produced, in industrial markets 3. A contribution to normal UK wheat gluten requirements estimated at 52 000 tonnes per annum of which approximately 17 000 tonnes are imported. A wheat starch plant with a processing capacity of approximately 100 000 tonnes, would produce 46 000 tonnes of native wheat starch and approximately 9000 tonnes of wheat gluten. The imposition of duties on cereal imports from 1/7/95, as part of the GATT agreement, is not expected to change the competitive position of wheat in the UK relative to maize and potatoes. EU cereal growers will continue to receive consid-

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erable protection from third-country imports. Import prices are forecast to be 155% of the intervention price after the imposition of xed tariffs. Export refunds will still apply to food items included within the CAP. Industrial starches, as now, will trade with no external trade support but with production refunds unchanged by GATT. These refunds will only fall as maize intervention prices fall. Wheat starch manufacturing economics, however, may be damaged by a reduction in wheat gluten values should imported quality milling wheats become more competitively priced in the UK. Any increase in bread making wheat imports will reduce gluten demand (and price levels) for fortifying home-grown wheats of lower quality. The overall attractiveness of wheat starch could however, be improved through the development of better protein separation at milling. Of all the industrial sectors examined, detergents, particularly surfactants, offer the largest potential new market with many companies active in R and D in this area. As the product is not

inuenced by native starch properties, the selection of starch source is very much price-driven thus opening up the opportunity for UK-produced cereal starch.

References
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