The price of a ton of frozen French fries from Europe has increased by 65% on the world market in one year. In October, the price increased by another 8%. That has not deterred buyers, although countries deal differently with the unprecedented price increases. The war clearly has an impact on the sales markets in Eastern Europe, but this does not detract from the record figures recorded by the French fries market.
New data from the Harmonized Trading System shows that the average price of a tonne of frozen chips from the EU-27 cost €1.160 in October. That is an increase of more than 8% compared to September and no less than 65% more than was paid a year ago. European French fries producers struggled last summer to cope with ever-increasing costs calculate, which ultimately succeeded.
In October, the EU-27 sold 10% more end products than in the same month last year. Compared to September, the export level was only slightly lower. This is not only due to the price level, but also to the limited availability of potatoes in Northwestern Europe. This is especially noticeable in the EU-5.
Chips price is reflected in the contract price
On top of the record prices, the potato processors have managed to create a price buffer in their product prices process, Vavi director Andries Middag said in September Boerenbusiness-studio. In this way, suddenly rising costs for energy, for example, can be partly compensated in advance. A combination of historically high chip prices and healthy demand ensures that companies are on solid footing. This confidence is reflected in the contract prices, which will increase by 2023% to 35% for the 40 harvest year.
Costs for the processing industry have not increased much in recent months. Energy prices have even come down considerably. The price level of vegetable oils is also lower. Prices for packaging materials are stable or showing a downward trend.
Consumers are ordering less online due to increasing inflation and the packaging industry is noticing this. The Drewry World Container Index for the Rotterdam - Shanghai route has decreased by approximately 50% compared to last year. On average across all routes, the fare decrease is even greater at 77%. The price has been falling for 43 weeks in a row. This is now lower than the pre-corona level. Insiders expect the price level to stabilize and possibly increase slightly again. The price of refrigerated containers (reefers) has also fallen, but less sharply than a standard 40-foot container. The spot price of a reefer is now $4.300, while pre-corona it was $2.185.
Volumes increase despite price
The largest buyer of European fries remains Saudi Arabia, while the price level has increased by almost 80% in one year. Slightly more product was purchased in October than in September. The United States is in second place, which continues to import large volumes thanks to its small harvest. A fifth more fries were imported in October. The country paid 55% more than in 2021. In third place is Brazil, which is one of the few countries that bought fewer fries. The country is struggling with the price level, which has almost doubled in one year. Yet total imports for 2021/22 are only 1,5% below the level of the same period a year earlier.
The largest decrease is visible in Russia. In October, imports almost halved and over a twelve-month period, imports of chips also halved. This picture is also visible in Eastern European countries such as Belarus and Ukraine. The entire region bought fewer fries in a quarter and also reduced the volume in October. An alternative to European fries is difficult to find for Russia and its neighboring countries. Our own production is far from sufficient. That is why rapprochement was sought with Turkey this year. The Turkish industry's capabilities are limited to fully utilize this demand.
Scarcity
Compared to last season, 52.733 tons less end product was exported to the European part of Russia and neighboring countries. If you convert that into tons of potatoes, you are talking about 90.000 to 95.000 tons of product. Given the size of the European potato harvest this season, we can conclude that the lack of Eastern European demand has no negative effect on the market given the scarcity of potatoes. In other words: if Russia had been on the market, Europe would not have been able to meet this need.
The South American continent also bought fewer potato products in October. In addition to Brazil, Argentina in particular is failing. This country is trying to develop its chip exports to neighboring countries and therefore imports less. Over a twelve-month period, exports to South America will remain in the green for the time being. Another country that bought fewer fries is South Africa, which is once again boycotting European fries after years of anti-dumping duties.
Frites are inflation-proof
Halfway through this year, the average chip price reached the crucial threshold of €1.000 per tonne. This hurdle was overcome after some hesitation without a drop in demand. The market is not yet cooling down, which leaves the question of what the price ceiling is on the French fries market. November is also expected to show positive figures. December is traditionally the biggest consumption month in many countries. Local economies ultimately determine what the maximum price is. High inflation rates have a smaller impact on chip consumption than, for example, on a steak on the same plate. French fries remain a relatively cheap food, which is why they are consumed more.
The EU-5 (including Poland) has taken full advantage of the French fries demand. Exports reached a record 530.000 tons in September, compared to 500.000 tons last year. For the Netherlands we already know that the French fries production peaked in October and declined in November. However, potato processing remains above average considering the multi-year average. The largest decline in exports is visible in Poland. Especially because the country is struggling with a tight potato harvest. France sees the biggest plus this season. Belgium remains the price fighter on the market, but the differences with its neighboring countries are visibly decreasing.
Internal question
It is also striking that growth in exports in the EU-5 is mainly made possible by greater demand within the European Union. Over a twelve-month period, exports to other European countries increased by 15%, while growth outside the EU was only 2,5%. The 'internal market' may be saturated, but due to the high consumption level of fries, there are also small percentage increases in export figures.