US potato model does not work in Europe

This article is a production of Edwin Burgers and Niels van der Boom.

The area for 'autumn potatoes' (the main crop of French fries potatoes) is approximately 365.000 hectares. That is considerably less than the 830.600 hectares in the EU-5. In addition, the Americans harvested approximately 2017 million tons of potatoes in 18, compared to approximately 30 million tons for the EU-5 (25 million tons in the 2016 harvest year).

Beetroot or potatoes?
In the United States (US), French fries potatoes are processed by 4 major players: McCain, Lamb Weston, Simplot and Heinz. Almost all potatoes destined for fries are of the Russet Burbank variety. A very robust potato, which is more like a sugar beet (in terms of robustness). It's the Fontane of America.

Before the start of the season, growers and factories discuss the contract price. The growers, often a handful (certainly in comparison to Europe) with enormous areas, appoint a spokesperson. He talks to the factory and since they can't live without each other, they can always find a solution one way or the other. That, in a nutshell, is what it's like on the other side of the pond.

European system
Why then can't the American system be implemented in Europe? If the processors put a realistic price on the table, the arable farmers will sign and the factory is assured of purchasing raw materials. At least, in theory. The crux of the story is in the numbers. To do this, we need to list the yield per hectare. Over the past 8 years, the lowest measured yield per hectare in the EU-5 was 40,7 tonnes (2013). The best result was 46,5 tons per hectare, a variation of almost 6 tons.

The 2017 American chip potato harvest varies only -2% compared to 2016, compared to around +20% in the EU-5. This is an extreme example. Revenues in Europe are flying in all directions. In Europe, recording everything by contract does not actually guarantee sufficient potatoes. Today, after the 2017 harvest, it forces processors to get rid of a huge amount of excess kilos. Last season, factories had to bend over backwards to keep production lines running.

(Text continues below the chart)Comparison between area and yield in the EU-5 (Cons-Poot-Zet) and US (frites).

Growing according to demand
A predictable spring and summer period, plus the availability of sufficient water and good irrigation, ensure that the American yield is stable. There are plenty of hours of sunshine. Introducing a stable sales system in Europe takes a lot of effort. The competition between the countries makes it difficult to make mutual agreements, if that is even possible. The uncertain production factor 'climate' always plays a major role in this.

The export position also plays a role in the volatile European potato market. The level of potato exports can fluctuate greatly from year to year, while in the US cultivation is mainly for the domestic market.

The EU-5 consumption potato harvest amounted to less than 2015 million tons in 2016 and 26, compared to more than 30 million tons in 2017. However, you can see that the sector is increasingly regulating itself. Small growers are disappearing, with the logical consequence that large growers continue to grow. A large part of the potatoes they grow are fixed through price agreements. Just like in the US, the line with the processor is short and without noise.

No grease pot
As the volume on the open market shrinks, the chance of peaks also decreases. Even though American growers are having a relatively good year this season, that is not always the case. Growing chip potatoes is a margin issue and is grown wholesale, just like grain.

That is why you see interest in new concepts in the US, for example baby potatoes with a hefty premium on the price. A cultivation that you have to master and that is not about bulk. If you want to make money with potatoes, you have to pioneer.