Prices continue to fall in all areas of the starch market. Margins are squeezed and suppliers believe that the market has touched bottom.
EUWID respondents observe a notable decline in prices for starch products. The market looks set to remain in motion for the time being not only because of high supply levels following the recent good harvest but also because of a pronounced propensity among customers to switch starch grades and suppliers.
Consequently, experts say some negotiations on supply conditions for the second quarter are extremely intense. It is learnt that suppliers sometimes feel like they are being "squeezed like a lemon” by customers: some paper mills demand massive price cuts and starch manufacturers do not want to let this decline happen. Market experts criticise that corn and wheat starch prices have dropped to such an extent that mills can barely continue operation but do not make any profit.
According to observers, the deterioration in corn and wheat starch prices is being influenced by the drop in potato starch prices which have been under immense pressure since the end of 2011. Although many players in this segment initially expected prices to remain stable, they are in fact continuing to fall.
Against this background suppliers say they will reshuffle the pack with the forthcoming potato campaign. So far it was widely believed that the end of EU potato starch subsidies was already successfully and permanently priced in last year. However, since prices have continued to decline, another price hike is up for debate again. This amount would offset the loss suffered by potato companies as a result of the changes to the EU regulation.