1. DIFFERENT POLICY APPROACHES CREATED DEEP STRUCTURAL DIFFERENCES BETWEEN EU AND US STARCH INDUSTRIES
The US industry produces almost 3 times as much starch as the EU for a smaller population from less than half the number of starch plants. The average US starch plant is more than 6 times the size of the EU average and benefits from significantly lower energy costs.
US starch is made almost exclusively from maize and has 3 major market outlets: starch and starch derivatives, ethanol and high fructose corn syrup (HFCS), which each represent on average about 1/3 of the maize used by the US starch industry. The supplementary market outlets of ethanol and HFCS, which are supported by incentives to ethanol production for fuel use (US authorities granted $6bn for the development of ethanol production from 1980 to 2011) and by a free market for HFCS production, have been fundamental in creating the structural advantages and economies of scale that the US starch industry today enjoys.
EU starch is made from 3 different raw materials: maize, wheat and starch potatoes, and is primarily focused on one market outlet: starch and a wide range of starch derivatives. The market outlets of HFCS and ethanol are almost non-existent in the EU because , under the EU sugar regime, the production of isoglucose (the EU equivalent to HFCS) is limited by a quota of 690,000 tonnes (4% of the EU sugar market) and ethanol production is not subsidised. Even with sugar and isoglucose quotas coming to an end in 2017, the EU starch industry will need significant time to invest and develop to be able to increase its production capacity.
Table 1: Structural differences between EU and US starch industries
|Total annual production||25 million tonnes||10 million tonnes|
|Average production per plant||960,000 tonnes||144,000 tonnes|
|Isoglucose/HFCS production||8 million tonnes||0.7 million tonnes|
|Isoglucose/HFCS share of sugars market||42%||4%|
Ethanol production by starch industry
|6.8 billion litres||< 0.5 billion litres|
During the starch production process, the starch industry produces co-products, such as fibres and proteins, for both animal and human nutrition. Any negative impact on EU starch production will also impact the production of co-products, the plant’s efficiency and the overall competitiveness of the industry.
2. PRESENT AND FUTURE CHALLENGES FOR THE EU STARCH INDUSTRY IN ITS TRADE RELATIONS WITH THE US
- The end to the US ethanol subsidy will result in lower ethanol production in US starch plants. They will instead likely produce more starch products and HFCS. In the absence of increased domestic demand and production capacity to spare they will be looking for more export markets.
- The difference of energy cost, already up to 7 times lower in the US compared with the EU, will increase as the US increasingly benefits from the use of non-conventional fossil sources such as shale gas and oil sands.
- US starch products are based on GM maize and, as such, benefit from a raw material price advantage.
- GM based starch products can already be used in the 40% of EU starch outlets which are non-food applications (such as used in the paper and pharmaceutical sector) without the need to label them as GM. The argument that the EU starch industry will still be protected as long as there is GMO-reluctance in the EU does not hold.
- The US potato starch industry benefits from cheaper production costs as it is produced from side-streams of the US potato processing sector and not from starch potatoes as in the EU. A reduced custom duty applied to US side-stream potato starch entering the EU market would also represent a significant threat to EU potato starch, particularly in non-food applications.
The EU starch industry calls on EU authorities to exclude the various starch products and co-products for which the US competes directly with the EU from these negotiations.
1 Over 2008-2010
2 In 2010
 Corn refiners association -CRA (2012) Annual report, p.5; http://issuu.com/sweetenerinfo/docs/2012cornannual?mode=window&backgroundColor=%23222222
 European starch association – AAF, https://starch.eu/
 CRA, Annual report 2012, p.5 - including ethanol production
 AAF, own statistics - including ethanol production
 LMC – Sweeteners Analysis, 2012, “HFCS industry annual review”
 CRA, Annual report 2012, p. 5.
 AAF estimate