The Brexit deadline is getting closer and closer and that is clearly noticeable in the potato market. French fries exports in particular are strongly influenced by this, but Brexit will also have a major impact on other segments. The British are hoarding fish & chips because, after January 1, a large hole may arise.
British Prime Minister Boris Johnson visited European Commission President Ursula von der Leyen on Wednesday, December 9. Although progress has been made, little concrete agreement has been reached. That is why the consultation is extended. The United Kingdom still has a huge number of agreements to make with the EU. For example, about the import of fries and other (frozen) potato products. This will not be at the top of the agenda, but it is vitally important for the potato sector.
Marginal role in the potato market
Despite the UK's inclusion in the EU-5, area and production play only a marginal role in shaping the potato market on the continent. Growers can still remember the 'England Year' 2016, but then there was silence. This is different for the export market. There is no European country that imports as many fries as the British.
That is not surprising when you look at per capita consumption. This amounts to almost 20 kilos per person per year. There is no country in the world where so many fries are eaten. The British love their chips, which they prefer to eat with a fried fish. For comparison: in the Netherlands consumption is approximately 11 kilos per person per year. Annually, 382 million portions of fish & chips are sold by the islanders. Consumption that can continue reasonably well despite the corona crisis, because it often concerns take-away.
Hoarding
As with many other agricultural products, the country is far from self-sufficient in French fries. Last year the UK imported 387.000 tonnes of chips, mainly from Belgium and the Netherlands (95%). Trade in 2020 has already amounted to more than €500 million until October 1. British importers are currently hoarding chips, among other things. That is not surprising because if Johnson is unable to close a deal, an import tax of 1% will be applied to frozen fries and chips from January 14. For table potatoes this is 10% and for seed potatoes 4%. For fries alone, you are talking about a total levy amount of more than €70 million, of which €36 million is borne by the Netherlands.
The export of fries from Europe to the United Kingdom.
If a trade deal can be put together in the last days of the year, the potato sector will be turned upside down. From January 1, the EU will see the UK as a 'third country', which means that very strict phytosanitary requirements will apply to table and seed potatoes. Import is then prohibited in any case. The question remains when the country will receive approval to export to the EU. That will take years at the very least.
Transition period
Conversely, the UK has introduced a transition period of 6 months for European seed potatoes. That has not made trading houses decide to wait and see. The required seed potatoes have already been exported early, so that they can be delivered without delay.
In addition, there is export from the UK. This mainly goes to Ireland. There are also separate rules for Northern Ireland, because this part of the UK has separate agreements with the Republic of Ireland. The export of Scottish seed potatoes is being hit hard by Brexit. A weakening exchange rate of the pound also makes it more expensive to import products.
Cold stores relieved
How chip manufacturers are in the competition depends on their position. McCain and Lamb Weston/Meijer both have factories in the UK. Agristo exclusively supplies potato products to Aunt Bessie, but produces them in Belgium and the Netherlands. Also this company tries to get as many fries across the border as possible this month. There are also advantages to the Brexit tension for processors. Sales are brought forward and the cold stores here are relieved. This provides breathing space to continue operating in the factories at the beginning of 2021.
Export of potatoes and potato products from the Netherlands to the UK. Source: CBS.
Meanwhile, tensions are rising in Brussels, but there is also a small glimmer of hope. A cautiously positive word came out about possible agreements. It should become clear in the coming days whether a deal is possible. Johnson, meanwhile, is trying to approach countries individually, but without success. The EU acts jointly through 1 negotiator, Michel Barnier. The chance of an agreement is extremely small, but still worth fighting for. There is a lot at stake for continental Europeans, but especially the British. And that also applies to the potato sector