The global potato sector has shaken off the consequences of the coronavirus worldwide. This can be concluded by looking at the volume sold in 2021. In terms of sales of potato products, we can even speak of a record within some segments. Despite the fact that processors have become experienced in crisis management, the future is uncertain. The war in Ukraine, increased transport and production costs and the disappearance of the Russian market. What does this mean for the processing sector and the grower? You can read all about it in this analysis.
Now that the first quarter of 2022 is over. All figures on exports and imports over the past year have now also been received. These are based on data from the globally harmonized trading system. This shows that almost 10,5 million tons of potato products have been exported worldwide, excluding table potatoes. That is 11% more than in 2020. The difference with record year 2019 is very small; less than 150.000 tons. Only other frozen potato products were exported less in 2021 than the year before.
French fries export reaches new record
Frozen fries showed the largest percentage increase in 2021. 14% more was shipped worldwide. About 8,5 million tons, which is one million tons more than in 2020. This makes this sector a record. Compared to 2019, 3% more volume was converted. The monetary turnover is still lower. Probably because sales prices were much higher in 2019 thanks to the high potato price in the 2018-2019 season.
Global exports of chips have remained virtually the same compared to 2021 and are still 10% behind record year 2019 in volume. Exports of potato flakes and potato flour each reached a new record. In total, the export of potato products is worth €10 billion. Slightly less than in 2019. Possibly due to seasonal influences, but it could also be that processors have become cheaper in the market to capture export opportunities.
Table potato exports stable
Immediately after corona entered the world, sales increased table potatoes to. This was visible not only in the Netherlands, but everywhere in Europe. Consumers rarely dined outside the home and paid more attention to what they bought. Both in terms of nutritional value and price. Packers did question this sales growth and its sustainability. Looking at the figures for 2021, the exported volume has remained approximately the same as the year before (12 million tons). This is still 5% below the volume in 2019. This segment has shown growth over the last 5 years.
The export of seed potatoes is striking. Globally, this fell by 2021% to 7 million tonnes in 1,6 (2020: 1,7 million tonnes). If you look at the import figures - which are always lower than export figures - then this decline is even greater. A smaller volume is the result of less potato acreage worldwide or a larger share of farm saved seed (FSS).
Expensive transport and packaging
Potato processors have no breathing space now that the next crisis is emerging: the war in Ukraine. The demand for frozen fries, potato flakes and flour may have picked up, but there are still plenty of hurdles. On the one hand, in terms of logistics. Despite recent price drops, container transport is still at very high price levels. A 40-foot container costs almost three-quarters more than a year ago, according to the World Container Index. Add to this the high fuel prices. The packaging costs are also still high. Compared to a year earlier, the price level is 35% higher, the Global Packaging Category Index.
Producers of potato products are affected by high energy prices. Cutting fries, baking chips or drying potato flakes is an energy-consuming process. This despite the efforts of companies to use more and more green energy and to become more energy efficient. The availability and price of sunflower and rapeseed oil for frying is also a sensitive issue. The market for vegetable oils remains at a high level this year and the consequences will also be felt in 2023. A significantly smaller harvest of sunflower seed in Ukraine is a recent reason, but this market has been in a rally for much longer.
The potato industry is cautious
With the above data in mind, chip manufacturers, among others, must ask the question: What should a ton of frozen fries cost on the global market in Q2, Q3 or Q4? That answer is difficult to find in these turbulent times. It creates uncertainty and waiting, as is also visible in the current purchasing behavior of potatoes. These have become a closing item on the account.
The demand for potato products is (yet) showing no signs of disruption worldwide. Price increases must be irrevocably passed on in the price of the end product. Will the buyer and ultimately the consumer accept that? The Dutch chip shop industry is sounding the alarm. In practice, a bowl of fries becomes a few tens of cents more expensive. A consumer pays for it – at most with some grumbling. This may be different worldwide in countries where spending levels are at a lower level.
Russian market is disappearing
What the entire potato industry is also dealing with is a drop in demand, mainly in Russia, Ukraine and neighboring countries such as Belarus. Russia still lives on hoarded supplies, but they are running out. The country is far from self-sufficient, but is also seeing important customers such as McDonald's leave. Does the Russian chip imports – about 100.000 tons per year – completely disappear, then the world market will be recreated. This is problematic for producers who supply a lot to these countries. Industry sources say this will have a major impact on the production sites in Poland of Farm Frites/Aviko and McCain. An unknown volume goes to Russia every year.
At the same time, the European potato area is declining this season. In theory, this means less potato production, which can compensate for smaller sales. In any case, it ensures that new construction or expansion plans by processors are temporarily put on hold.
Consequences for the potato grower
What does this mean for the potato grower in the Netherlands and Belgium? Processors deliberately stayed in the background during the final phase of contracting this spring. The extent to which this area costs in the EU-4 will become clear in a few weeks. Many markets, including for fries, remain demand markets. Consider an annually increasing demand in the US and South America, among others. This means that the French fries industry in Europe can continue to operate at high speed, although the biggest challenge remains cost management.