Rising Milk Tea Ingredient Prices: How China's Ethanol Industry Is Affecting Tapioca Pearls in Bubble Tea?!

Reading that title, you probably have a string of question marks. What do rising "pearl" prices have to do with pigs? The pigs, for their part, would like it noted: we don't eat cassava—we eat corn!

Here's what's actually going on. Japanese media recently reported that the price of "pearls"—the chewy tapioca balls essential to bubble tea—is set to climb. The reason: the price of cassava, the raw material for pearls, keeps rising. And the cause of that increase traces back, remarkably, to China's pig farming industry.

China's pig population once shrank sharply due to African swine fever. This year, thanks to advances in large-scale farming, the industry recovered faster than anyone expected. A rapidly growing pig herd means a huge surge in demand for corn—but ethanol and disinfectant producers need corn too. Since they can't take feed away from the pigs, many ethanol and disinfectant manufacturers switched from corn to dried cassava, most of which is imported from Thailand.

So what does this have to do with the pearls served in Japan? Japan's domestic pearls are produced in Taiwan, the cassava used to make Taiwan's pearls comes from Thailand, and Thailand's export prices for cassava and cassava starch have been climbing this year—driven precisely by China's surging demand.

According to statistics from the Thai Cassava Trade Association, Thailand's cumulative dried cassava exports to China from January to August 2021 reached roughly 3.84 million tons—already surpassing the full-year volumes of the previous two years. With China importing more, Thailand's cassava supply has naturally tightened. Figures from the Thai Cassava Starch Association show that as of September 2021, the export price of cassava had risen to 2,630 Thai baht per ton, a 15% increase from the start of the year; by early November 2021, Thai cassava starch was exporting at $480 per ton, up 13% from the lowest point in May 2020.

Some Japanese trading companies note that the current rise in cassava prices hasn't yet had a significant impact on the cost of pearls, so milk tea prices in Japan can hold at current levels. But given the direction things are moving, what happens next is anyone's guess.

After all, as global decarbonization accelerates, demand for biofuels will only grow. With COVID-19 still creating uncertainty, global demand for ethanol keeps climbing. And as the world's third-largest fuel ethanol producer, China's appetite for cassava is only set to increase. It's not far-fetched to say China's ethanol industry could end up influencing the price of pearl milk tea in Japan.

The pigs, meanwhile, still don't understand why they're being blamed.

Image source: Internet

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