|Global Market Analysis|
After falling to 30-month lows at the beginning of 2009, prices of internationally traded cassava products have since staged a sharp rally. The most pronounced increase has been registered in quotations for Thai cassava chips (destined for China), which have risen by 53 percent since January 2009, reaching USD 168/per tonne in November 2009. Over the same period, prices of Thai cassava flour and starch (f.o.b. Bangkok) rose by 35 percent and are currently at some USD 338 per tonne. Such has been the strengthening in quotations, that they are, on average, less than 20 percent below the historic highs of mid-2008.
Some of the strength of the Thai reference export prices has to do with the value of the Thai currency, which over the past six months has risen by 7 percent against the United States Dollar. However, a multitude of other developments have assisted. Among domestic factors, the Ministry of Commerce of Thailand intervened by purchasing 13 million tonnes of fresh roots (approaching half the entire crop), in the wake of a record cassava harvest. Beyond Thailand's borders, a shift in cereal policy in China - the world's principal buyer of cassava products, has led to an escalation in domestic maize prices, boosting the competitiveness of Thai cassava starch and chips. The demand-led rally in international prices also reflects a resurgence in the use of cassava chips as a feedstock for ethanol distilleries in Asia. Promising ethanol returns, combined with higher crude oil prices throughout much of the year, have buoyed the demand for cassava in energy and alcohol production.
The upturn in quotations could have been even more pronounced were it not for the continued slump of demand for feed pellets in traditional import markets. Cassava blended with protein rich-meals is an effective substitute for coarse grains and wheat, but ample feed grain supplies and falling grain prices in the European Union, the traditional destination of cassava feed products, has strained the local competitiveness of imported cassava pellets in European Union member countries.
The upward trend in cassava product prices is expected to continue in the near term, though much will rest on the recent reform of the support regime to Thailand's cassava sector and also of policies in China to sustain domestic grain prices. Large stockpiles of exportable cassava products in Thailand as well as in Viet Nam will bear down on prices, but ultimately the prospect of a smaller cassava crop in Thailand in the following season should provide support to prices. So too will a revival in the demand for cassava as a feedstuff in rising livestock production and as a feedstock in energy production, which are both being realized on the back of improving economic environments.
Table 7. World cassava market at a glance
* Source: Thai Tapioca Trade Association
Global cassava production in 2009 is forecast at 242 million tonnes, 4 percent above the record of the previous year. The high price episode of 2007/2008 for traded food staples reminded policy-makers in many vulnerable countries, as well as the international community, to look toward indigenous crops as an alternative source to potentially expensive and volatile cereals. Among these crops, cassava has been at the forefront. As a 'crisis crop', cassava roots require few inputs, can be left in the ground for well over one year and harvested when food shortages arise or when prices of preferred cereals become prohibitive. These attributes are behind an anticipated expansion of output in Africa, of about 3 percent, to some 121.5 million tonnes in 2009.
Table 8. World cassava production
Government food-security initiatives with the support of international donors could see production reach new heights throughout the continent. Support often takes the form of distribution of high yielding and disease resistant planting material, extension of 'good agricultural practices', as well as measures to strengthen the value chain, notably food processing into value-added cassava products. However, ongoing long-term programmes for the commercialization of cassava as a food crop constitute the major factor behind Africa's positive prospects. At the country level, Nigeria, the world's leading producer, could produce 45 million tonnes, up 5 percent from 2008, while Ghana is expected to reach an output of 10 million tonnes for the first time since 2003. Investment in the sector could yield strong gains in Malawi and Mozambique. Foreign investment is also set to play a role in boosting production in the region. For instance, China is reported to have provided substantial financial support to the cassava sector in Angola, a new entrant to its existing investment portfolio in the region. However, drought conditions prevailing throughout much of 2009 are likely to have led to output contractions in Madagascar alongside several important cassava producing countries in East Africa, such as Kenya, Uganda and the United Republic of Tanzania.
Cassava production is anticipated to record strong growth in Asia, much on account of Thailand, where, according to officials, a 20 percent rise in production is foreseen in 2009, exceeding 30 million tonnes for the first time. The international market for Thai cassava products has traditionally been the main growth driver for the country's crop, but concerns over subdued demand abroad prompted the Government to intercede heavily in the sector, through reinstating its usual price insurance and intervention purchase scheme, as well as granting preferential credit to farmers. However, the fiscal strain of supporting the agricultural sector has led the Government to launch in November an 'agricultural options programme', in place of the price pledging or insurance scheme. The programme seeks to remove some of the distortionary effects of price supports and will encourage quality over quantity. It will also minimize a longstanding problem of cross-border subsidization of agricultural production, whereby roots from neighbouring countries have been able to benefit from minimum prices. Against the backdrop of falling domestic root prices during the planting period, these incentives (or at least the expectations of continued strong support) were largely behind the record cassava area in 2009, but expectations of robust demand for the crop as a feedstock for ethanol in domestic and neighbouring distilleries have also played a role.
Indeed, biofuel initiatives and policy support, including subsidies and mandatory ethanol-gasoline blending requirements throughout the region have benefited from the allocation of additional land for cassava. Over the past few years, China has initiated large-scale investments within and outside of its borders to expand cassava output for ethanol production. Renewed food security concerns have compelled the Government to extend the moratorium on new grain-based ethanol plants. This has led to roughly over half of China's fuel ethanol and alcohol output now being derived from root crops in the form of cassava and sweet potatoes. Expectations now point to a record for China's cassava output of some 8.7 million tonnes this year.
While promising ethanol prospects are behind record cassava crops in Indonesia and Viet Nam, (the region's other principal producing countries), falling cotton and coffee returns in those countries have also prompted more farmers to switch to cassava cultivation. Officials in Viet Nam put the 2009 harvest at around 8.6 million tonnes. In less than one decade, cassava output in the country has more than quadrupled, reflecting a strategy to gear the sector towards predominantly supplying the international market. However, future progress is likely to be moderated by policy measures to limit the cassava area to no more than 400 000 ha. In the Philippines, public-private sector efforts to develop competitive domestic animal feed and ethanol industries through the commercialization of cassava could pave the way for a record cassava output of well over 2 million tonnes. The country has earmarked a doubling of the cassava area by 2014 from current levels. Smaller cassava producing countries in the region, such as Cambodia and the Lao People's Democratic Republic have also attracted foreign direct investment from mainland China and the Republic of Korea to expand their cassava energy feedstock and starch production, through land lease initiatives and capital outlays towards processing. This initiative contributed to a surge in cassava plantings in Cambodia in 2008 by around 60 percent giving rise to an official production record of 3.6 million tonnes. Prospects for 2009, however, have been marred by adverse weather conditions, which could see production fall by 10 percent.
The 2009 production outlook for Latin America and the Caribbean points to a marginal contraction reflecting an anticipated decrease in the harvested area in Brazil, the region's largest producer. Producer prices trended sharply downwards at the beginning of the year, and while they have rebounded strongly in the past five months, the recovery was too late to affect planting decisions. As for Colombia and Paraguay, the region's other major cassava producing countries, little is known about the current situation, but both countries have experienced firm growth in cassava production in recent years.
Prospects for global production in 2010 appear somewhat mixed. On the one hand, more attractive prices of competing crops, especially sugar cane, could slow the expansion in global cassava production. For instance, Thailand's recent annual planting survey for the 2010 season points to an expected 7 percent fall in cassava area. But, on the other hand, ongoing public and private support in the scaling-up of cassava crops to meet the needs of the food, energy and industrial sectors could provide an impetus for continued growth.
After experiencing a near 15 percent contraction in 2008, world trade in cassava products in the current year is expected to rise by 32 percent to a record 12.5 million tonnes (chip and pellet weight equivalent).
Table 9. World exports of cassava
|......................................... 000 tonnes .........................................|
|Flour and starch||4 852||4 686||4 265||4 651|
|Thailand||4 616||4 416||3 963||4 316|
|Chips and pellets||5 629||6 506||5 187||7 802|
|Viet Nam||1 041||1 317||2 000||4 000|
|Thailand||4 348||4 824||2 848||3 450|
This forecast is based on the improved competitiveness of cassava starch relative to grain based products, combined with soaring international demand for cassava as a feedstock for ethanol production, which have resulted in a stronger pace of cassava shipments to date by Thailand, by far the world's largest international supplier. Overall, the country is anticipated to ship around 7.8 million tonnes of cassava chips, pellets and starch in 2009, up by 14 percent in volume from the previous year. But the arrival of Viet Nam on the arena to fulfil rising industrial requirements in Southeast Asia represents the main reason behind the prospect of record trade in the year. China (mainland) looks set to consolidate its position as the most important buyer on the global stage, accounting for over 70 percent of all inflows in 2009.
|TOTAL||6 240||8 964||9 240||6 810||7 766|
|Flour and starch total||3 212||4 616||4 416||3 963||4 316|
|Chinese province of Taiwan||502||676||548||483||620|
|Others||986||1 244||1 523||1 284||1 176|
|Chips and pellets total||3 028||4 348||4 824||2 848||3 450|
|China||2 766||3 963||3 168||1 214||3 000|
|Republic of Korea||265||268||20||474||111|
|European Union||246||341||1 436||989||20|
The composition of cassava trade has undergone major changes. Trade in pellets (mainly for animal feed), once the bedrock of international cassava demand, has collapsed. In 2009, the share of pellets in the total volume of trade amounted to just over 2 percent, compared with over 84 percent at the beginning of the decade. Asian countries, especially China and the Republic of Korea, have taken over the European Union as the major destination for cassava feed ingredients, and look set to import around 275 000 tonnes in 2009. Concerns about a permanent retreat of the European Union from the import market are resurfacing again. Despite some activity in 2008, the European Union purchased just 17 000 tonnes in 2009 so far and is unlikely to engage in any major purchase in the foreseeable future. Increased availability of cheap feedstuffs in Member States has minimized demand for cassava, to close to disappearance.
Global trade in chips is again expected to be centred in Asia, with China established as the world's leading importer, principally to meet capacity of the burgeoning cassava-based ethanol sector. Indeed, demand for chips by the country is set to underpin aggregate cassava trade in 2009 and imports of the feedstock could rise by as much as 50 percent from the previous year, to 7.7 million tonnes. In the past, Thailand has met this demand, but in the current year, Viet Nam is likely to emerge as the chief supplier, with around 4 million tonnes of cassava chip exports, around double the level of last year. As members of the ASEAN community, imports to China from both Thailand and Viet Nam attract zero duty, which, by boosting the competitiveness of cassava, has constituted an important driver for the expansion of the regional market.
As for cassava starch and flour, world trade is expected to rebound, but not to the same degree foreseen in the global chips market. Thailand is expected to dominate international shipments, with China again anticipated to be the leading starch buyer, reflecting the policy-induced price advantage that cassava based starch has maintained over grain products in that market. The Chinese Province of Taiwan has engaged in significant international purchases during the course of the year, following the liberalization of alternative markets for maize starch.
Trade outlook for 2010
Prospects for trade in 2010 are shrouded with uncertainty. Much will depend on the continued presence of China in the global marketplace, which in turn will rest on the country's policy that has given cassava a competitive edge over grain-based substitutes. Indeed, a continued rise of cassava prices in the world market would alter the price relative and undermine the potential for further trade growth, especially when current indications point to a sustained increase in international grain supplies.
Another factor concerns the degree of capacity utilization and expansion in cassava-based ethanol industries in Asia, especially China, which in turn will depend on the margin of ethanol returns, the competitiveness of other feedstocks and the ethanol price relative to petroleum. In this regard, the surge in global sugar and molasses prices may well prompt Asian countries to rely more on cassava to fulfil ethanol mandates and industrial alcohol demand.
Food and ethanol drive cassava utilization in 2009
Regarding food utilization, widespread initiatives have been undertaken in many vulnerable countries that target cassava to meet more of the dietary staple needs. This is particularly evident in sub-Saharan Africa, where consumption of cassava (mostly in the form of fresh roots and basic processed products) is on the rise. However, the overall production gain in the region is expected to barely match growth in population, bringing about little change in per caput food availability. Measures to promote domestic cassava flour over imported cereals, either through direct consumption or through blending remain active throughout the world and constitute an important driver for higher cassava food consumption. Brazil mandates the inclusion of 10 percent cassava flour in wheat flour and it is estimated that 50 percent of the country's cassava crop is utilized in such blending. Though several major producing countries in West Africa have also promoted this initiative, especially Nigeria, many have fallen short of enforcement, owing to the limited availability of cassava flour.
The demand for cassava by ethanol sectors will again emerge as the most significant driver in the expansion of cassava utilization. A typical production system can produce about 280 litres (222 kg) of 96 percent pure ethanol from one tonne of cassava roots with 30 percent starch content. China is forecast to produce around 5 million tonnes of ethanol from cassava in 2009, requiring around 7 million tonnes of dried cassava. The country has also secured agreements with several neighbouring countries to supply its ethanol industry with the feedstock. In Thailand, an ethanol plant with a capacity to produce up to 0.5 million litres of ethanol per day was due to go on-line in 2008, but, owing to rising costs during that year, construction was suspended. However, the ethanol facility is expected to start production late in 2009. Thailand requires around 2 million litres of ethanol to meet its 10 percent fuel substitution plan. Likewise in Indonesia, cassava is set to be used in 5 percent ethanol mandatory gasoline blends. With soaring prices of competing feedstocks, sugar and molasses, cassava-based ethanol distilleries in both countries are expected to operate at full capacity.
Utilization of cassava as animal feed, in the form of dried chips and pellets, is mostly concentrated in Brazil and Colombia in Latin America and the Caribbean, Nigeria in Africa, China and the Republic of Korea in Asia. Little is known how feed usage has faired in the former two regions, but the demand for cassava feed ingredients in Asia has plummeted. Similarly, in Europe, cassava applications in the manufacture of feed ingredients have been virtually non-existent in 2009.
|GIEWS||global information and early warning system on food and agriculture|