The consequences of the corona pandemic have shaken off the French fries sector worldwide. This is evident from new export figures. Exports are now stringing together a series of records. Nevertheless, the sector is asking itself the question of how long this unbridled growth can continue. The market price is under pressure.
The 10 largest exporters of frozen chips exported more than 1 million tons of product in the second quarter of this year. This is more than 50% more than was the case in the same period a year ago. This also breaks the old record that dates from 2019. The difference is 58.000 tons of product.
Belgium exports considerably more
All exporting countries in the top 10 recorded a significant increase. All except New Zealand. The largest exporter (Belgium) saw its exports grow by almost 40% in the second quarter compared to 2020. This concerns a volume of almost 355.000 tons in 3 months. For the US and the Netherlands – numbers 2 and 3 – the percentage growth is about 60%. In terms of volume, the difference with Belgium is large. France saw its exports almost double and in Germany exports grew by three quarters.
With a total export of 690.000 tons in the second quarter of 2020, we can consider this a 'lost year'. French fries manufacturers and exporters suffered from a widespread drop in demand. This spring, that demand was back more than 100%. Only 3 major destinations purchased less product compared to the previous quarter. It is an exceptional example of what the French fries industry shows. Despite shortages of raw materials, labor and sky-high transport costs, they even managed to break the record of 2019. That stood at 984.000 tons.
65% is EU product
Of those 1 million tons of fries, EU countries account for 522.000 tons of product. In addition to the US, Argentina and Canada are major exporters outside the Union. The growth of the EU countries is 50% compared to a year earlier. This means they control 65% of the global trade in frozen fries. Belgium, Poland and France all showed record numbers in Q2. Poland is a standout exporter in the list with a growth of 240%. This concerns a volume of 31.000 tons of fries.
In the second quarter, the United Kingdom was by far the largest buyer of fries. With a volume of 184.000 tons, they purchase almost double the amount of product compared to number 2: Japan. It is not surprising that the British eat the most kilos of fries per capita worldwide every year. Mexico – number 3 – shows spectacular growth in sales. The imported French fries volume has almost tripled compared to the first quarter. It is mainly the US that supplies these fries. The EU's market share shrank in Q2.
US major French fries importer
The US is the 6th largest French fries buyer with a volume of 46.000 tons, which is also a record. Only 4 years ago the average import volume was still 4.500 tons. After the Canadians, it is the Europeans who benefit from shortages present in the US. Belgium in particular supplies a lot of volume, but the Netherlands also gets a share.
Extreme weather conditions in the US Northwest and the Canadian Prairies mean a shortage of potatoes for North American processors is looming this season. On the one hand, this offers new opportunities for the export of fries to the US. On the other hand, this also makes it difficult for them to maintain their increased market share.
Lack of potatoes
Does this offer opportunities for European processors? That remains to be seen. The opportunities will come, but taking advantage of them is another matter. A shrunken area in the EU-4 and Poland plus a disappointing yield also means that processors here do not meet their raw material needs very much. The built-up French fries stocks were reduced this summer due to good demand and the low processing level.
There is another factor that plays a role and that is the price. The reason why European processors have grown so much is the relatively low price. During the 2020-2021 season, factories were able to benefit from low potato prices and thus operated extremely competitively on the global market. The market for 2021-2022 is different, especially for free potatoes. This makes fries from the EU slightly less competitive. In addition, price levels are rising worldwide. Yet prices for European fries are still just under 5% below the level of a year ago and even 15% below the level before the corona crisis.
Costs of fries are rising
French fries from the EU now have an average price level of €683 per tonne. If this rises to €700 or higher in the new season, buyers will be more likely to drop out. Especially countries with a less strong economy that have not yet fully recovered from the corona pandemic. It is striking that the extremely high freight costs for container transport are not reflected in the figures. Countries continue to purchase products and a reopening of the catering industry, festivities and events create demand for fries.
Factories look beyond just the current season. In 2022-2023, the costs of cultivation will increase above average. For the grower with 5% to 7%, figured Boerenbusiness recent. Processors realize that contract prices must evolve to keep cultivation attractive. A strong correction in the acreage this season has shown that confidence among growers is not great. With the planned and already realized expansions in processing capacity, factories need more potatoes. The demand is there, now it's production. It is necessary to raise sales prices to a higher level, so that the entire potato chain benefits.