Starch stiffens a lot more than expected

After tapioca starch had a sharp price rise, maize starch is witnessing one. Estimates of lower maize production in 2009-10 and firm sugar prices have propped up starch prices, which have risen by 10 per cent since December.

Rising starch prices also mean more profits for its manufacturers. Anil Products, Gujarat Ambuja Exports and Riddhi Siddhi Gluco Biols say they have already seen a substantial rise in their bottom lines during the third quarter of the current financial year. “Our profits rose due to diversification. However, considering the current scenario in maize, we expect profitability to increase this quarter,” said Amol Sheth, MD, Anil Products.

Maize starch was Rs 20,000 a tonne in December; it is now Rs 22,000 a tonne. Various reasons are given, which include higher prices of tapioca starch and sugar, as well as a forecast of lower maize production this year.

Industries such as food and adhesives use tapioca and maize starch alternatively, depending upon market prices. Tapioca starch was Rs 18,000-22,000 a tonne during May-July 2009; it had surged to Rs 33,000 a tonne in January. “The spiralling level forced many industry players to turn to maize starch,” said Gautam Chowdhary, managing director , Santosh Starch Ltd.

That, in turn, has helped prop demand for maize starch. “The prices have surged by 10 per cent since December and going by the market fundamentals, we expect maize starch prices to remain firm during the whole of 2010,” said Vishal Majithia, managing director of Mumbai-based Sahyadri Starch.

Maize starch is also gaining ground due to the forecast of lower production of maize in 2009-10 (July-June). Data from the All India Starch Manufacturers Association (AISMA) indicated production of maize in the country would probably fall by a million tonnes this crop year, from 16 mt last year. Though kharif maize acreage remained more or less the same as compared to the previous year, the crop in Andhra Pradesh and Uttar Pradesh was adversely affected due to erratic rainfall. Companies are now closely watching rabi production. It is mainly Bihar, Andhra and Karnataka which grow maize in the rabi season.

“The price of maize has also increased to Rs 1,000 a quintal from Rs 970 a quintal within a month. This has supported further rise in maize starch prices,” said Chowdhary.

Firm sugar prices also came as a blessing for starch manufacturers. The use of starch as a substitute of sugar has been on the rise.

With sugar prices ruling higher, liquid glucose, which is produced from starch, has increased usage of it as a sugar substitute for those manufacturing confectionery.