Potato processors have long struggled with the increased cost of making chips. The increased costs of transport (supply of potatoes to the factory), energy costs, cooking oil and packaging made having a chip factory into challenging times.
Processors have long struggled with the question of how to deal with rising costs and how to pass them on to customers. Long-term price agreements with customers made it difficult to maintain margins. According to a buyer at a processor, if the purchasing of the various raw materials is not managed properly, the profit margin disappears like snow in the sun.
Historically high price jump
However, the price of chips now seems to have made a clear price jump. Figures show that the price of export fries increased by almost 10% in April. A historically large leap that has never been seen before in the chip market. Over the entire first quarter of 2022, the price of fries increased by 25%.{{dataviewSnapshot(2_1655888397)}}
Part of this significant price jump was caused by potatoes becoming more expensive in April, which reversed at the end of May. It is therefore interesting to see whether chip prices have risen again in the months of May and June.
Europe dictates the price
European chip processors continue to offer the cheapest fries in the world, compared to processors from other continents. For example, fries from America are still a lot more expensive than European fries. Something that mainly has to do with the purchasing of potatoes and the logistics costs of selling the fries to the rest of the world. Dutch and Belgian processors are located close to the world ports of Rotterdam and Antwerp.
What consequences does the 25% price jump in the first quarter have for export volumes? In any case, the first export figures for processed products for the month of April show that exports are clearly lower. This may indicate a drop in demand due to higher prices. However, the figures also show a drop in demand, especially towards Russia and Ukraine. These sales disappeared after the introduction of the various boycotts. This may result in a lower total volume sold outside Europe, but it does not say anything about the decrease in demand due to a higher price.{{dataviewSnapshot(2_1655889122)}}