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OPPORTUNITIES AND THREATS FOR STARCH EUROPE Jamie Fortescue 4 November 2014, Istanbul

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Introducing Starch Europe Starch Europe is the trade association which represents the interests of the EU starch industry both at European and international level Its membership comprises 24 EU starch producing companies, together representing more than 95% of the EU starch industry, and, in associate membership, 7 national starch industry associations Our mission To promote and protect the interests of EU starch producers to EU and international institutions and stakeholders, in order to ensure a reliable and sustainable supply of safe starch based ingredients in a fair competitive environment

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Members location Production facilities in 21 out of 28 European Union Member States Members location Production facilities in 21 out of 28 European Union Member States Starch producers Not starch producers

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Starch production in the EU - 2013 Processed raw materials Starch products in starch equivalent Total : 10 Mio tonnesTotal : 22 Mio tonnes

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Starch production in the EU EU 25 FROM 2004 EU 27 FROM 2007 EU 28 FROM 2013

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The markets we serve 15 million tonnes of starch and co- products Feed 5 million 6 million Food Industrial 4 million

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Main starch applications - 2013 * Excluding co-products amounting to about 5 million tonnes Total Market: 9 mio tonnes

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EU consumption of starch & starch derivatives - 2013 Total Market: 9 mio tonnes

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Opportunities and threats Opportunities EU sugar regime Bio-economy Threats (aside from overall EU economic outlook) International trade Potato starch Compliance costs Health policy

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EU Starch Industry the opportunity The Opportunity: 2012 EU bio-economy strategy 2017 End to EU sugar and isoglucose quotas USEU 25 million tonnes of starch for 320 million consumers 10 million tonnes of starch for 500 million consumers - No isoglucose quota - Significant support to bio- economy (notably bio-fuels) - Restrictive isoglucose quotas - Limited support to bio-economy

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Opportunity EU sugar regime EU sugar regime limits isoglucose (HFCS) production to 5% of 14 million tonne EU sugar market (700,000 tonnes) EU sugar regime will end in October 2017 Potential EU isoglucose market of 2-3 million tonnes

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Opportunity Bio-economy Well established EU objective to reduce fossil fuel dependency Complicated by economic downturn and bio- fuels discussion Progress on tangible benefits slow but 1 billion Euros support announced in 2013, to be matched by 2.5 billion Euros from industry

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Threat International trade EU produces 10 million tonnes of starch in 72 million tonne world market EU starch market currently protected by quite high import duties EU/US FTA significant potential threat Also EU/Thailand, EU/Vietnam FTA and others

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Threat - Potato starch End to EU coupled support in 2012 Predicted 40% decline in EU market But export opportunities still exist EU/Japan FTA End to anti-dumping / anti-subsidy duties in China

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Threat Food, feed and Environment law EU precautionary approach to food/feed safety issues e.g. mycotoxins, pesticide residues etc Also other policies Emission Trading Scheme, REACH Consumer attitudes also driving customer demands and policy approach e.g. GM, sustainability criteria As do unrealistic ideals e.g. origin labelling Increasing cost of energy (at least 15% of production cost) but increasingly understood (Ukraine, industrial renaissance)

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Threat - Health policy Ongoing consumer mistrust of processed food WHO draft guideline to halve recommended daily sugars consumption Not yet adopted but likely before end 2014 More active/coordinated anti-sugar lobby Likely impact on national/EU legislation unclear but the message to consumers is Need for better international coordination, also with sugar industry and users