Cashing in on phosphate price hikes

30-Jan-2009 - Last updated on 30-Jan-2009 at 12:12 GMT

The market for cheaper alternatives to phosphates used in food is expected to blossom over the next few years as prices for the ingredient are likely to remain high, according to an industry analyst.

Prices for phosphate rose more than 120 per cent in 2008 to around $1000 (€ 777) per tonne by end of the year, which has been blamed on “skyrocketing” demand from the fertilizer industry.

Vignesh Pitchiah, research associate at Frost & Sullivan told FoodNavigator.com that this has resulted in lesser availability for other industries such as the food.

He said that prices were estimated to increase further but there was a levelling off and now they are expected to stabilize at high levels for the foreseeable future, boosting the market for alternative ingredients.

The second biggest use of phosphates after the fertilizer industry is the food industry, particularly the bakery sector, because of its nutritional value and its ability to ensure quality baking. It is also used in beverages, cereals, cheeses and meats.

Pitchiah said the direct impact of phosphate price rises was to increase production costs, which means that formulators need to “infuse an extra cost into their products if they have to maintain the same inclusion volume”.

However, he added: “Companies that cannot transfer price increases to their customers may choose other bread processing aids that may not be as efficient but certainly more economic.

“Other companies may use biological leavening agents. Varieties of yeast have been known to be used for such purposes.

“This trend has worked out as a driver for many companies that manufacture specialized leavening agents that were earlier deemed non-economic when phosphate prices were low.

“Now, the market for such specialty products is bound to increase.”

The analyst said that at a broad level, the market for specialized leavening solutions that can improve bread quality and also reduce sodium and aluminium levels are expected to show growth

Similarly those that improve flavour profile and are natural may also benefit.

Meanwhile the Swiss ingredients firm Jungbunzlauer revealed this week that it is repositioning its ingredient, glucono-delta-lactone (GdL) on the back of rocketing phosphate prices. GdL is used as a natural leavening acid in bakery products and is an alternative to phosphates.

Advanced Food Systems has also recently developed the Actobind clean-label ingredient system for completely or partially replacing sodium phosphate in meat products.

The figures

Frost & Sullivan’s analysis of the market showed that at a total level, prices of phosphates increased by over 120 per cent in 2008.

For example, Di Ammonium Phosphate cost around $235 - $500 (€183 - €389) per tonne between 2003 and 2006 but increased to more than $600 (€466) in 2007 and around $1000 per tonne by the end of 2008.

Another example is Di Calcium Phosphate (DCP) which also rose more than 120 per cent in 2008 compared to 2007.

Pitchiah said that DCP producers have been trying to increase production in order to relax the strained supply to an extent.