The fact that the laws of supply and demand are rewritten in a year with extremes is well known and we have experienced many times. It is therefore interesting to look at the development of the worldwide French fries market (pre-fried product).
Raw material prices in Europe are high; the last time we reached this level was in 2007 and 2011. However, at that time the processing industry was not as dominant as it is today and the sales of fries were not yet as international as they are today.
High raw material prices
The latest figures show that higher raw material prices in Europe are not an obstacle to French fries sales. The main buyers of the pre-baked product are showing an increase in import needs and purchases.
The large and rapid increase in French fries imports in China is striking. It also appears that Europe is the largest exporter to China and is conquering more and more markets. Despite the higher prices for fries, there is no brake on demand from China. Or partly because of this the trade war is not entirely clear. This is because the United States is also showing an increase in exports.
On the other hand, Brazil seems to be cooling down somewhat, which is partly caused by the import duties it has imposed on a number of processors from the Netherlands, Belgium and Germany. Part of this is now being offset by additional demand for pre-baked products from countries such as Chile and Mexico.
Lots of trade
It is also striking that a lot of trade takes place between the Netherlands, Belgium, France, England and the United States. Apparently the positions are moved around the world, so that the quality, specific product and stock can be maintained. For example, England is the largest buyer of pre-baked goods, purchasing from 13 countries. The Netherlands and England are important suppliers of pre-baked products. For example, the Netherlands buys 75% of its total imports from Belgium.
On balance, pre-baked products are taking an increasingly important place on the world's menu. In addition, a higher price does not appear to be an obstacle to increasing demand and price elasticity has not yet come to an end. Exports are therefore at a record level in both volume and price.
Price increase on the domestic market
There also appears to have been a significant price increase in the domestic market for fries. The buyers from the chip wholesaler register Boerenbusiness price increases of more than 20% in 2019. The processors can afford this, given that the world market is willing to pay higher prices for Dutch fries.
It must be kept in mind that approximately 75% of the raw material has already been captured by the processing industry at a much earlier time (and at a much lower level).