Global fries sales falter, but don't panic

It is well known that over the past 5 years the trees for the chip processors seemed to grow into the sky. This resulted in a huge increase in processing capacity. For 2017/18, there is processing capacity ready for more than 4 million tons of potatoes in the EU-10 (Belgium, the Netherlands, Germany and France). That is more than a doubling in 10 years.

Increasing demand seems endless
Last year alone, the Belgian industry invested more than 300 million euros in new processing capacities (and significant investments were also made in previous years, see table). That is an unprecedented expansion. The increasing demand from the world for pre-baked products seems to grow indefinitely. It is a matter of time before the magical barrier of 1 billion euros in sales is broken. This concerns the total export value of pre-fried fries with sales outside Europe.

Growers are following the growth of processors and areas continue to grow. This year, an area expansion in the EU-4 of 5 to 7 percent is expected. This despite the lack of seed potatoes. The scale among potato growers is also increasing considerably. For example, in the past 5 years, a record amount has been invested in potato-related mechanization, such as storage and harvesting machines. International research agencies predict a growth of approximately 5 percent per year in the demand for pre-baked products. That also explains the significant investments.

Hairline cracks in international sales
However, some hairline cracks are visible in the international sales of pre-baked products. The first signal comes from America. Sales there fell by no less than 11 percent last month. It was mainly Asia that failed.

In addition, Europe also has its problems. At first there was the import tax from Brazil. For protectionist reasons, the country wants to protect its own domestic market against the ''dumping'' of cheap fries from Europe. Also the Brexit can have major consequences for the sales of pre-baked products from the EU-4 countries.

In addition, the scarcity of containers towards the Middle East and Asia. Transport costs are rising sharply, negating the advantage of the cheap euro. 

Finally, there are also the geopolitical ones tensions of a country like Turkey affects the international sales of the pre-baked product. Turkey itself has also been significantly scaling up its processing capacity in recent times. This makes the country very competitive for the fixed sales markets of the EU-4 countries. Last year, Turkey's export volume increased by more than 36.000 tons.

Become less dependent on superpowers
America and Europe, together, meet 93 percent of the world's demand for pre-baked products. The rapidly rising chip prices and dependence on these two continents means that the various countries are actively taking up their own production. As a result, they hope to be, and become, less dependent on the superpowers.

This phenomenon has also become visible in recent years in the global demand for milk powder, for example. The demand was so great that unlimited investments were made in processing capacity within Europe. Ultimately, it turned out that Asian countries had built up a larger stock, economic growth was somewhat disappointing and therefore the demand for milk powder also fell. This resulted in the implosion of the milk powder price. 

The amount of money that is currently being invested in agriculture in both Asia and Russia should also ensure that these countries become less dependent on countries such as Europe and America. This then applies to their food supply.

Time will tell whether we will immediately notice this on the global market for pre-baked products. And whether trees really grow into the sky remains to be seen.