In the United States, the consumption of potato products is still rising. At the same time, the potato sector in the country is struggling to meet demand. Exports are also growing strongly, which makes the potato a much sought-after vegetable (the potato is seen as a vegetable outside the Netherlands).
This was, in short, the message of John Toaspern during the Potato Business Summit. This event was held in early January in Texas, on the first day of the prestigious Potato Expo trade show. Toaspern works for Potatoes USA, the American counterpart of our NAO.
Erratic production
Both potato production in the US and sales of potato products are still increasing annually, Toaspern calculates. He calls this continued growth exceptional. Production is more erratic than you would expect from largely conditioned cultivation. Between 2016 and 2018, the yield was fairly stable, around 450 million cwt. This year the harvest is 2,5% lower. That is the equivalent of 20,4 million tons. Sales have more peaks and valleys. It moves between $3,7 and $3,9 million.
By far the most American potatoes are consumed as frozen potato products. This segment accounts for 40%. Table potatoes account for a quarter of the market and chips 14%. It is striking that Americans are spending more and more money outside the home and less on their groceries. Toaspern speaks of a “fundamental shift in the American market, which has an impact for everyone in the chain.”
This tipping point was reached in 2016. This so-called 'foodservice' segment accounts for $939 billion in total sales in the country. Growth of 4% is expected this year. Extremely lucrative for the potato sector. 83% of all outdoor dishes contain potatoes.
French fries as the winner
This segment therefore accounts for almost 60% of the market. If we look specifically at frozen potato products, the figure is even 86%. For table potatoes, consumption is 50-50. These percentages are still tilting, to the detriment of retail. Especially with table potatoes. Fries are the big winner. Fast food chains that previously did not sell fries now do so, Toaspern knows. The potato is therefore doing well in the US. Since 2011, this vegetable has grown in popularity by more than 30%, while most other vegetables have seen a decline in popularity.
French fries sales are booming
In addition to the domestic market, the global demand for fries is also booming. In 4 years, sales of frozen fries grew by 35% and chips by 30%. Even the table potato market is still growing by almost a quarter. Frites therefore have an export value of almost $8 billion worldwide, compared to $5,5 billion in 2014.
Europe and the US are the major beneficiaries of this french fry frenzy, which Toaspern describes as historic. In 10 years, the EU managed to double its sales. From just under 600.000 tons of fries to 1,7 million tons. Toaspern attributes this to a significant increase in processing, mainly in Belgium. Meanwhile, the US posted growth of 43%, which mainly occurred in the first 4 years of this boom. Since 2016-2017 the line has been flat. Yet the US has also seen sales increase by 20% over a period of 120 years.
Japanese are not too bad
Japan is by far the largest buyer of American potato products. From this year onwards, an import tariff of 8,5% applies to fries. The tariff on granulate (of 20%) will also be phased out. Due to extremely strict phytosanitary requirements, the Japanese table potato market remains impregnable to the Americans.
The recently approved free trade agreement with Canada and Mexico (USMCA) is a big boost for the sector. Canada and Mexico are in 2nd and 3rd place, followed by a row of Asian countries. However, according to Toaspern, the American export engine could use a boost. The EU has already concluded 52 trade agreements for exports, compared to 20 by the US. A strong dollar exchange rate (+3,22% against the euro) and high transport costs also work against us.
Expensive fries
These disadvantages are also reflected in the costs for a ton of potatoes, the potato man calculates. Europe is the absolute price fighter, with an average cost of $856 per tonne in 2019. Mainly because Belgium is active on the world market at very low prices, followed by the Netherlands. Argentina is in 905nd place with $2 per ton. A ton of fries from the US costs $1.163. Only China's is even more expensive. However, there is a story behind this, Toaspern explains: “The quality of our export product is higher. The US sells more specialties, which simply have a higher price tag. Europe does have much lower freight costs.”
The EU is not the only one facing import tariffs and anti-dumping tariffs. For example, Mexico (number 3) taxes the import of fries with 20%. Exports therefore fell by more than 2019% in 20. China taxes chips at 10% and granules at as much as 42%. Nevertheless, the American potato sector managed to achieve a record export of 2019 million tons in 1,73 and the current forecast is also positive.