In contrast to the Netherlands, the Belgian chips industry exported more chips in the first half of 2020. The price of the sold product also rises. Especially in the first 2 months of the year, producers write good figures. A downward trend is clearly noticeable in the Netherlands.
Belgian producers of fries and other frozen potato products exported 4 tons of product in the first 890.000 months of this year. This is an increase of 8% compared to the same period a year earlier. This means that growth is greater than a year earlier. Then sales increased by 6%. In the same period, Dutch companies shipped 12% less product. The other major European chip producers also sold fewer fries.
Dutch processing at its peak?
From 2016 onwards, the Dutch potato sector entered a new growth spurt. Between 2016 and 2018, exports increased by 22%, while in the previous 6 years this was only 1,6%. Dutch processing reached an absolute peak in 2018. At that time, almost 2 million tons of fries were produced and exported. The more than abundant potato harvest of 2017 provided large volumes of potatoes at very low free market prices. This compensated for a poor start to the 2018 harvest. A year later, exports fell by 5%. This trend will follow at the beginning of 2020.
How different is the picture with our southern neighbors. Belgian processors have not seen a year without growth figures in recent history, although 2020 could break this trend. In 10 years, the exported volume increased by no less than 350%. This is partly due to the significantly increased processing capacity, possibilities for expanding the area and - not entirely unimportant - the price per ton of fries.
Price fighters
Belgian fries are always cheaper on the export market. They are the price fighters on the world market and have thus been able to conquer many countries. Competing with the Belgians on price is impossible. In April this year, the gap between the Netherlands and Belgium was €115 per tonne. This difference was smaller, especially in the last quarter of 2019. Back then it was only a €45 price difference. Pricing in both countries follows the same line, but there is always an advantage of €75 to €100 for Belgians.
In the first 4 months the gap between the two countries has narrowed, although the movements are marginal. In Belgium, fries became €4 more expensive per ton, while in the Netherlands they fell by €12. According to insiders, this has to do with the sales segment. Belgian processors sell more product to higher segments, where a higher sales price can be achieved. One of the most important outlets is retail. Many Belgian processors focus on so-called 'private label fries'. These are bags of frozen chips that are sold under the supermarket brand.
More home consumption
That is probably why Belgian sales have also been positive in the first 4 months of 2020 and the pain of corona is (slightly) less. Turnover at supermarkets increased during the corona crisis. This also applies to home consumption of fries. Belgapom even called for deep-frying not once but twice a week. In the Netherlands, a trend towards more healthy food was previously visible, although (table) potato sales did increase from retail.
The figures published by the EU are 4 months behind. How have things been during these months? Looking at Dutch potato processing, April of this year was the absolute low point. In May and June, processing picked up again by 40%. The question is whether the lion's share of this production was carried out in the many cold stores or whether a buyer was actually found for it. It is a matter of guesswork about the Belgian sector, because the industry there does not publish monthly processing figures. What is striking is that Dutch factories have imported relatively many potatoes from Belgium.
Fries figures significant
The corona crisis has reshaped the entire potato sector in several ways. In the 'old normal', the potato grower was concerned with growing his product and achieving a good price. He didn't have to worry about the processor, he did the baking. In increasingly larger volumes. Growth was therefore actively encouraged. This also applies to Belgium. For the first time, the potato chain is now faltering on the sales side. The export and pricing of fries therefore becomes very important, also for the grower. This gives an indication of how healthy the sector is.
If we look at the figures that Belgium and the Netherlands have recorded up to and including April, compared to the 5-year average, a growth of 25% is visible for Belgium and a minus of 7% for the Netherlands. This ratio is also visible after 12 months. Belgian exports increased by more than 8% and those of the Netherlands actually decreased by 4%. If the Belgians manage to hold on to this growth, and the worst of the pain is already behind them, this could be a positive point for the potato growers there. In the Netherlands, recovery in processing is visible and a downward trend has been visible for some time.
Joker in your pocket
The chip sector also has a wild card: the chip stock. Cold stores have been built en masse in recent years to store large quantities of product for long periods of time. If we compare the export figures from the Netherlands with the processing figures, we see that they follow each other flawlessly for the time being. New data should show whether production and export are diverging, which could indicate an increasing stock. The sector can use a large stock to require fewer potatoes.
The corona crisis not only resets sales. It also causes market protectionist behavior. For example, New Zealand, Australia and the US made the news because they demanded tariffs on products from Europe. This could further hinder factories. The US in particular is a growth market for the Belgians and Dutch. Any additional disruption in the sales chain is undesirable for everyone at this time.