Now that the planting out of the main harvest is slowly starting, there is also more clarity about the potato acreage in Europe. Will the acreage shrink due to the lower prices?
As is known, the area has grown explosively in recent years, partly due to an increase in processing capacity and the global demand for fries. Belgium takes the cake by almost doubling both in processing and in area in 10 years. A number of factors underlie this.
Availability of land
Firstly, the availability of land in Belgium is sufficient. With the rise of Wallonia as a cultivation area, a new area has been opened up with a lot of virgin soil and large plots. Further development of mechanization has also helped. The 4-row potato harvesters, 8-row planters and sprayers with a 5.000 liter tank have contributed to the rapid scaling up of potato cultivation.
We also see that new (and sometimes non-agriculture related entrepreneurs) are entering potato cultivation, attracted by the financial returns that are achieved. Fixed-price contracts also help to scale up cultivation quickly. Price guarantees ensure that growers take increasing cultivation risks in order to earn money.
Alternative crops
The other reason is the lack of alternative crops. Grain prices are low, and the cultivation of vegetables and beets also provides too low a return for Belgian farmers. The potato area in Belgium will therefore continue to grow this year. Fiwap announced this week that an additional 6% potato area will be added in Wallonia. In contrast, Flanders will shrink slightly by 2%. This means that the total harvest in Belgium could also exceed 5 million tons next season.
France is also riding on the success of Belgian processors. In recent years, a propaganda machine has been launched in Northern France to stimulate the cultivation of potatoes. French growers are generally not gamblers and like to grow at a fixed price. Something that will suit processors well.
The moderate balances of wheat cultivation also help to stimulate cultivation. And with a lot of (virgin) land at their disposal, an accelerated scale-up of potato cultivation is taking place. Our estimate is that cultivation in France will grow by 2% to 4% in the coming year.
Shrinkage in Germany
Germany sees a slight shrinkage of the current picture across the total area. With a decrease of 1%, they remain by far the largest potato producer in Europe. What is clear is the shift in cultivation in Germany. Many farmers are switching from table potato cultivation to the cultivation of consumption potatoes.
Fewer early potatoes will also be planted this year, partly due to the abundant harvest of the 2017 season. Processors have been very reluctant to contract early potatoes at the beginning of the season. For example, many processors have only contracted early potatoes from week 30 (normally week 27). The conclusion is therefore that the cultivation of consumption potatoes can grow by more than 1% and thus set a record for the past 5 years.
Don't praise incentive
The Netherlands appears to be shrinking slightly in the cultivation of potatoes. Previous figures from the VTA mentioned a decline of 2,4%. This seems logical, given the low prices of the 2017 season. A reduction in contract prices also does not seem to provide an incentive to grow in the cultivation of potatoes. However, VTA's figures must also be viewed in a different light. It is known that the largest group of VTA members are clay growers. And that seems to fit in with the national picture.
Clay growers seem to be slowly dropping out of consumer cultivation. The costs and risks are too high compared to the contract prices offered. Scaling up in clay areas is also difficult due to low land mobility and high land prices. Clay growers are therefore looking for alternative crops such as organic cultivation and seed potatoes that provide higher balances per hectare. There still appears to be scope for scaling up in the sandy areas.
Also due to a greater supply of land for dairy farmers. The shrinkage of the dairy herd due to regulations and legislation results in less feed requirement and therefore more land supply. These growers therefore see an opportunity to grow further. The lower contract prices are the only thing that has stopped them from really taking big steps again. Nevertheless, we expect a shrinkage of 0,5% to 1% in the total Dutch area.
Positive undertone
In general, we can say that the main potato growing countries will not shrink much despite the low prices. The lack of alternative crops and the continued expansion of scale means that the professional grower does not let his behavior depend on 1 bad crop year.
The demand for fries and the growing season will then further determine how the potato price will develop. In any case, the undertone is positive given the new harvest futures market, which stands at €15,50 today. Late spring, the demand for fries and the trade war between America and China have made an important contribution to this.