Potato starch is surely set to emerge from its slump, with promising prospects ahead.

Editor's Note: In 2024, China’s actual total potato starch production surpassed the one-million-ton mark for the first time—a statistic that is both significant and encouraging for the industry. However, sluggish consumer demand has kept over 100,000 tons of starch—beyond immediate market needs—from boosting overall sales prices, creating downward pressure that has persisted from last autumn until today.

Recently, many people have been asking whether potato starch can actually rise. Taking this "market question" as an opportunity, I’ll analyze the current challenges facing the potato starch industry, as well as the next steps needed to break through these obstacles and the emerging trends shaping its future development.

1

Currently, the biggest challenge facing potato starch is undoubtedly the "price slump." The persistently low prices of potato starch have made it difficult for everyone to make a profit—farmers who grow the potatoes, manufacturing companies that produce the starch, retailers who sell it, and even downstream consumers (primarily users of potato starch).
The sustained low prices of potato starch are mainly due to the following factors:

First, last year’s significant increase in production led to a supply exceeding demand, leaving the downstream consumer market consistently saturated or nearly saturated. Coupled with the sluggish economic conditions, the total annual consumption of potato starch—as a key raw material for high-end food and pharmaceutical industries—has remained stagnant at around 800,000 to 900,000 tons in recent years. Meanwhile, a reckless wave of factory construction has swept across various regions, exacerbating the already severe issue of overcapacity.

Second, last year, a large number of speculative funds and investors from outside the industry accumulated substantial inventories, and this year they have continuously dumped their stocks at rock-bottom prices—regardless of cost—forcing starch prices to remain stubbornly low.

Third is the ultra-low-price sales strategy employed by newly built factories. With 10 to 20 new factories coming online each year, most of these newly established plants face challenges such as tight working capital, unstable product quality, weak brand appeal, and low market recognition. As a result, their strategy invariably revolves around aggressive price competition—often disregarding investment costs, cultivation expenses, and tax liabilities. Their sole aim is simply to get operational as quickly as possible and carve out a foothold in the market. Alternatively, some factories even opt for an even riskier approach: pre-selling products directly to distributors at fixed, ultra-low prices—prices that remain unchanged regardless of fluctuations in raw material costs. Naturally, these prices are far below cost—and this relentless, blind competition among these factories continues to drive down starch-selling prices across the board.

Fourth, raw material costs vary significantly across North China, Northwest China, Northeast China, and Southwest China. Regions with established potato-processing cultivation bases—and those lacking nearby processing plants—tend to have relatively lower raw material costs. For instance, if the cost of raw materials for one ton of starch in these regions is 5,000 yuan, then in areas where factories are concentrated and competition is fierce, the cost can rise to 5,500 yuan or even higher. This disparity directly influences the final sales prices of starch, even when the products are of comparable quality.

Due to the aforementioned factors of vicious internal competition, many normally and properly operating businesses have been forced to struggle for survival. Their survival strategy has involved continuously driving down the purchase prices of raw potatoes year after year, severely harming farmers in the process. Of course, businesses must never allow potato farmers to bear the brunt of their challenges—and they certainly shouldn’t exploit resources to the point of exhaustion. In recent years, potato-growing areas across more than ten provinces in Northwest China, Northeast China, and North China have seen a steady decline in planting acreage. As a result, this year local enterprises have even had to venture into other regions to secure raw materials, further exacerbating the vicious cycle.

2

In 2023, potato starch prices soared to over 9,000 yuan per ton, with raw material costs in some regions reaching as high as 8,500 to more than 9,000 yuan per ton (cost of starch-making raw materials). At these exorbitant prices, production companies weren’t making much profit—and in fact, some factories even ended up losing money due to overproduction.

Therefore, excessively high or abnormally low prices for starch would severely harm the industry. Only when every player in the industrial chain earns a fair and reasonable profit can we achieve scientifically sound pricing.
So, what price is truly scientific and reasonable? The answer lies in long-term thinking, safeguarding the foundation, and operating with rationality.

Zhang Peng, a seasoned expert in the potato starch industry, believes that first and foremost, we must ensure farmers’ profitability. The purchase price of raw materials will be set based on starch content—ranging from 600 to 970 yuan per ton, depending on whether the starch content falls between 10% and above 15%. By offering premium pricing for high-quality starch supplies, we can encourage and motivate farmers to expand their cultivation of high-starch varieties, helping them realize the "prosperity" that comes with profitable farming. Secondly, when it comes to selling starch products, pricing should be calculated as follows: raw material cost plus direct processing costs plus the company’s operational expenses (covering the three major expense categories). Additionally, established, well-known brands—and even those with strong brand equity—can add a premium to this base price. Ultimately, this approach will keep the final starch price within the range of 6,500 to 7,500 yuan per ton, ensuring both farmers and businesses enjoy modest yet sustainable profits.

Of course, in addition to this, cultivating high-starch processing potato raw material bases is also a core strategy for breaking through challenges. By controlling both raw material prices and starch quality, some factories in regions like Xinjiang and Inner Mongolia have already achieved remarkable success in this area.

3

Making a preliminary forecast, this year's harvest season is expected to see a significant drop in potato yields—potentially halved—due to sharply reduced planting areas in the Northwest and Northeast regions, coupled with historically severe flooding in the North China production area, where potatoes are particularly sensitive to excessive water. As a result, the nation's overall starch output will decline substantially compared to last year. Starting in mid-November, potato starch prices are set to rise steadily, with first-grade starch from mainstream brands likely reaching 6,500 yuan per ton by the eve of the Spring Festival. Meanwhile, premium-grade starch from leading enterprises and high-end brand companies could even surpass 7,500 yuan per ton.

This prediction is based on two key factors: first, the superior quality of potato starch. Among all types of starch, potato starch stands out for its large particle size, high viscosity, low gelatinization temperature, exceptional clarity, excellent expansion properties, strong water absorption and retention capabilities, and rich trace mineral content—qualities that have earned it the industry’s accolade as the "aristocrat" of starches. Second, based on current raw material availability and production conditions across various growing regions, industry experts estimate that this year’s total national output of potato starch will decline by more than 30% compared to last year.

All of the above factors will help potato starch prices return to a "scientifically justified level," enabling the industry to continue its recovery. At the same time, competition within the potato starch industry is set to intensify further. Zhang Peng believes that the future development of the potato starch processing industry will follow these trends: First, product diversification will support companies in achieving profitability. For instance, by turning protein and potato pulp into marketable products, manufacturers can maximize value from a single raw material—essentially extracting every last bit of utility from the potato.

Second, a streamlined industrial chain supports enterprise development. By establishing standardized raw-material bases that supply 50% of production capacity, companies can ensure the steady production of their core products and maintain stable market channels. This "cultivation + production + sales" integrated industrial chain model fosters business growth. Importantly, enterprises managing these raw-material bases should also carefully calculate their cultivation costs.
Third, investment diversification supports the growth of enterprises. A standard feature of industrial chain integration is investment diversification under a profit-sharing system—specifically, sharing raw-material cultivation profits with base-level investors, co-building production lines and pooling working capital with stakeholders who demand various products (such as starch, protein, and potato pulp), thereby jointly benefiting from product revenues, and ultimately sharing the advantages of the entire industry chain system with investment partners.

Amidst the wreckage, a thousand sails glide by; before the sick tree, ten thousand saplings herald spring. Though the potato starch industry is currently facing numerous challenges, we firmly believe its future will shine brightly—like a single "potato" glowing with radiant vitality!

Source: https://mp.weixin.qq.com/s/DIVqFbcBBg9M6ReOotHpQQ