Is the contract price increase of the French grower moving?

Aviko Potato has done what Clarebout has not yet managed to do: set up a new chip factory. While Belgium's largest baker of fries is struggling against resistance in the Walloon town of Frameries, the chimneys in Poperinge have been smoking since September. In the long term, 175.000 tons of fries should be produced per year. That requires a lot of potatoes. Especially when you consider that fellow competitors are all also looking for potatoes to satisfy their hunger for raw materials.

Opportunities in Belgium are drying up
There are still opportunities for companies in Wallonia, but they are drying up. Expanding is no longer that easy and here too, the construction plans are increasingly full of potatoes. A new political policy also means that landlords are reluctant to offer a lot of rental land, because this may have consequences for their reporting. Belgian professional growers are therefore increasingly moving to Northern France. The language barrier is no problem for them. In addition, French growers are also highly professionalized; former grain and livestock companies that have invested heavily in machines, storage sheds and cultivation knowledge.

This is one of the main reasons why insiders do not see the potato area declining again in France. The companies have invested in cultivation and are committed to it. Although grain and rapeseed prices are at a higher level than before - and the beet price is also cautiously positive - this does not immediately mean a margin at the bottom line. Higher fertilizer prices in particular are eating up revenues. In addition, older arable farmers find it easy to rent out part of the farm at a good price.

No recovery area
As elsewhere in Europe, the potato area in France also decreased in 2021. At more than 10.000 hectares (minus 6,2%), the correction was quite significant. This put an end to pure growth since 2015. The area is now back at the level of 2009, before a sharp decline started. A decline may not be possible, but there are also doubts about a (large) increase. Processors also do not believe that the decline will be wiped away next season.

"You didn't find potatoes in my area until five years ago," says an arable farmer from Saint Quetin in Picardy. "You now also see them here. Even on plots with stones and that are of lower quality. Existing growers are expanding their acreage, but new companies are not joining them quickly. To achieve this, attractive contracts must first be offered and opportunities for a good market price ."

Opportunities within cultivation
Where will those extra potatoes come from that French fries producers so desperately need? According to industry insiders, the opportunities lie mainly with growers of table potatoes. Roughly 6 million tons of potatoes for consumption are grown in France every year. Of this, about 2,4 million tons are processed by McCain and other French industries. Another 2 million tons cross the border to Belgium. The remaining 1,6 million tons is the local table potato and export market. There, factories hope to be able to steal away hectares.

Increase in contract price
As in the Netherlands and Belgium, the contract price in France is also increasing by a relatively large step. Growers quote amounts that are on average €25 to €30 per tonne higher than last year, depending on the variety and the delivery period. This means that contract prices are often slightly higher than in the Netherlands. Aviko Potato offers French growers a contract price of €177 per ton for Fontane on week 17. For Innovator this is €197 per ton in the same week. According to the processor, potato growers in France have fewer options outside the fixed price contract. In the Netherlands, Aviko has many different contract forms and there is an extensive quality scale.

Gappi, the grower organization that supplies exclusively to McCain, speaks of a contract price increase of €27,11 per tonne. That amounts to 20%. Prices vary – depending on delivery period and variety – between €121 and €216,20 per tonne. What is new is a bonus of €5 per ton for those who opt for a 'regenerative' cultivation contract. Growers must meet seven pillars over a period of six years. Think of working with green manures, biodiversity, reduced tillage and more. There are three levels of measures: beginner, advanced and expert. Participation is now on a voluntary basis, says Maxence Turbant Agricultural France. Next season it is hoped that 10% of the growers will participate. In eight years, all eight hundred growers must participate at at least one level.

Consumer must pay
Gappi chairman Bertrand Achte is satisfied with the price increase but less so with the new contract. "The first two levels are workable, the third is much less so." McCain hopes that consumers in Europe will be willing to pay more for fries because costs are rising for all chain parties. In the long term, support in the field of regenerative agriculture is also required. The group is now in discussions with major retailers to discuss the concept.

In any case, the area of ​​potatoes must increase. For this year, McCain expects an increase of 1.415 hectares. A plus of 12% for the processor. The contract price increase is based on this. Gappi is happy with the Egalim 2-legislation which came into force in France at the end of last year. The law now stipulates that a buyer may not offer a contract price below cost price. The desired price increase from €30 to €40 was not achieved, but chairman Achte is satisfied with the contract.

Consequences for Europe?
It is possible that the French law – and its consequences – will also be followed in other countries if a better product price is structurally offered. One that takes the costs of inputs such as fertilizer and crop protection products into account as best as possible. That fits in with the POC, which recently launched another call stated that Europe-wide agreements on the potato market are required.

French arable farmers have good credentials for potato cultivation and a (slightly) better contract price for 2022-2023. Time will tell whether this provides sufficient reason to expand the area. Grain, rapeseed and beet prices have only a minor impact because input costs have gone through the roof. With about eight weeks to go until the new season, it remains to be seen how the situation will develop.