Due to an extreme growing season in many European regions and also in the rest of the world, many commodity prices have climbed to record highs in recent months. For example, €60 per 100 kg was paid for onions, €450 per ton for wheat and more than €60 per 100 kg for milk was recently paid. Something that many agricultural entrepreneurs would have thought impossible two years ago. What about the potato price?
The potato price is also at a relatively high level, with prices approaching €30. The €30 is a psychological barrier that seems difficult to break. Many potato growers can still remember 2018, when the price rose to €32. An absolute shortage of potatoes in Europe then resulted in this price rally. At one point there was a buyers' strike and processors started helping each other by selling contract potatoes to each other. As a result, there were no forced purchases in the open market, which took the sting out of the market. This makes €30 seem like a kind of upper limit. Some processors communicated that they were shutting down production lines because they would have to sell the fries at a loss if there was insufficient raw material or the price was too high. Or simply had to say 'no' to customers.
The price trend for potatoes this year seems to be the same as in 2018, the market is difficult but also very tight. There is little supply and there are relatively few free potatoes. Will the market find its top again this year at €30? There seems to be a lot to be said for that. However, the ingredients are clearly different than four years ago. This year there may be a possibility that the potato price will reach a new record of well above €40.
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What ingredients are those?
Firstly, we are dealing with a very tight market for potatoes in the EU-4. Belgium and France in particular have a mediocre harvest, with a great need for raw materials. But it is not only in the EU-4 that there is (too) little raw material. There is also a shortage of potatoes in the rest of Europe. Eastern Europe has a shortage due to a poor harvest, especially in Poland, which is normally the buffer for the rest of Eastern Europe. But Southern Europe also has a shortage. Italy and Spain are increasingly noticing that global warming is causing problems in potato cultivation. If irrigation is not possible, cultivation there seems to die a silent death. A decline of 15% in potato cultivation is expected in Spain for next season, despite good prices.
There is also a potato shortage in other parts of the world. The American harvest is below 50 million tons for the first time in 18 years. Due to the 100% contract system of processors there, it is difficult to buy free potatoes or to buy fries potatoes at all. The price of potatoes in Idaho has now increased by 120%. Australia also has a potato shortage and has had to turn to imports. The excessive wetness during the harvest was a problem there, causing a shortage.
More processing capacity than potatoes
Then the sales side of fries. Processors in the EU-4 have expanded their capacity enormously and can fry more fries than ever before. The growth in processing capacity in Europe does not appear to be stopping in the coming years. For this current season, it now appears that there is more processing capacity than there are potatoes. There was doubt whether the processors could continue to operate due to a lack of cooking oil and the extremely high gas prices. So far the penny is falling their way. Shortages for cooking oil appear to have been resolved and gas prices have now fallen sharply and are back to pre-war levels, thanks to a mild winter in Europe, among other things. But what especially helps the processors is the price of chips. This has risen to a record of above €1.050 per tonne (was still €2018 per tonne in 800). There appears to be no drop in demand, they process a full load of potatoes in Europe and sales appear to be unlimited.{{dataviewSnapshot(2_1674048781)}}
The only challenge is the availability of potatoes. This creates a situation that has never arisen before, namely:
Looking at the price sum and a well-functioning market that is driven by supply and demand, there is nothing in the way of the potato price setting a new record. Prices of more than €40 therefore do not seem to be excluded. Especially considering the cost price of potato cultivation and inflation, which is at least 30% higher based on €2018 in 20.
With a chip price of more than €1.000 per tonne, a potato price of €40 does not seem to be a problem, especially given the decrease in the cost price for processors due to lower prices for cooking oil, electricity and gas. In addition, container prices have now returned to the levels before the corona pandemic ($4.000, compared to $14.000 after corona). So it is a matter of psychology of the free grower and the buyer whether they believe that a market above €40 is possible.