European French fries exports are still at a slightly higher level than last year. However, figures show that global sales are beginning to show some glitches. There are several reasons for this.
The high price of chips, which buyers took for granted for a long time, is now causing chip exports to weaken for the first time. The average product price in the first 6 months of 2017 was at a level of €750 per tonne. However, an unfavorable exchange rate makes European fries unattractive. The potato price is currently under heavy pressure, causing buyers to resist current price levels.
Higher numbers for the time being
A decline is not yet immediately noticeable in the export figures of the EU-28. The export level in June, at more than 118.000 tons, is almost 3% higher than in June 2016. The financial value shows a plus of almost 10%. The EU countries exported €89 million worth of fries and other frozen potato products. However, if we look at the volumes per quarter, it is visible that sales in tonnes and money are decreasing compared to the period between October and December 2016.
Export of pluses and minuses
The Middle East in particular bought fewer fries in the EU. Saudi Arabia and Jordan in particular were less active in the market. The total volume to the continent fell 12%, good for 4.000 tons of product. South America was also less active in the market. Particularly because Brazil purchased less product. Due to a significant increase in Asia and Russia, the June figures are slightly higher.
European market is solid
Increases in export volumes within Europe are greater than on the global market. This has to do with pricing. In 2 years, the price of chips on the world market rose by more than €150 per tonne, while within the EU this was only just under €60.
Within the EU, the United Kingdom is the largest buyer of fries from the EU-5. The decrease increased slightly in May. This year the British market is heading for a top harvest, which means that self-sufficiency is high. In terms of volume, France and the Netherlands are in second and third place. Poland is the biggest increaser in percentage terms. The decrease doubled.
Eastern Europe is rising
Exchange rate changes have a major influence on the French fries market. This is noticeable worldwide, but also within Europe. The United Kingdom remains the largest buyer, but sales are not increasing further due to the weak pound. It is expected that as the euro and the pound move closer together, exports will switch from positive to negative. Germany, Belgium and Poland level out this effect by purchasing more product.
This year, further growth is expected from eastern Europe, despite a good chip potato harvest in Poland. Polish chip factories can easily sell their product elsewhere in the east.
Exchange rate determines the market
This week the euro reached its highest point in 2 years against the dollar. €1 now equals $1,20. At the beginning of this year that was still $1,05. Further skew growth is expected, because the European economy is growing faster than in the US.
The British pound is currently worth €1,08. Almost as low as the €1,04 that was recorded during the financial crisis in 2008. This situation is expected to continue as long as there is political unrest in the country as a result of Brexit.
Further factors
Despite exchange rates and market movements, potato processors try to maintain prices for the end product. The processors probably still have 'relatively' expensive contract potatoes, given the day market, in a position that has to be sold as fries.
Meanwhile, chip buyers are looking askance at the daily market, which the current end product price does not match. An improving global economy is causing container transport prices to rise, making exporting more expensive. There are still plenty of challenges ahead for the chip market.