In 2022, the French fries export market has become acquainted with a 'new kid on the block'. The high cost price and selling price of fries also has a downside. It ensures that new countries get a chance to export product. This also has an impact on exports from Europe and North America in the short and long term. Will 2020 be a turning point in French fries history?
When people write about China in relation to the potato and French fries market, it is almost always about consumption in the country. Although China may no longer be the country with the largest population, potato consumption is enormous. According to the FAO, this amounted to 2020 kilos per person per year in 48,2. For comparison: in the Netherlands that is 53 kilos.
0,44% French fries production
The crux is in the fries. Chinese chip consumption is only 300 grams per person, compared to 12 kilos in our country. Of the 94 million tons of potatoes (on 4,8 million hectares) produced in the 2021/22 season, according to USDA data, only 0,44% was processed into frozen fries. In total, 12% of the potato volume is processed industrially, but this is mainly into starch products. The Americans estimate total French fries production at 420.000 tons, with another 84.000 tons being imported. Something remarkable happened in 2022: China almost doubled its export volume compared to the previous year, becoming a net exporter.
Nearly a third of the global potato area and a quarter of global potato production can be attributed to China. So you can safely talk about a giant on the potato market that, at export level, was mainly asleep until last year. French fries exports have grown in recent years, to more than 50.000 tons in 2021. However, last year 98.000 tons were exported.
Chips cost price
The reason for this export explosion is the cost price of a ton of fries on the world market. And especially that of the EU-4. This has increased significantly due to high production and processing costs. In addition, freight and insurance costs have increased. In one year, a ton of Belgian fries has risen in price by an average of 57%, those from the Netherlands by 30% and fries from Germany by 42%.
In 2022, the average price of a ton of frozen French fries from China was 8.305 renminbi. Converted to €1.132. A relatively modest increase of 10% compared to 2021. The gap between the EU and China has therefore visibly narrowed. It has become more interesting for Asian destinations to get fries from China, partly because of the logistical advantage.
Net exporter
The Philippines is by far the largest buyer of Chinese fries. The annual volume is just above 30.000 tons. Japan is in second place with 20.000 tons and Thailand is in third place. New customers include Indonesia and Vietnam. In December 2022, more than 10.000 tons of fries were exported for the second month in a row. For the first time, the country is no longer a net importer of fries. In 2021, 22.000 more tons were imported than exported, but last year that role was reversed with 60.000 tons more exports than imports.
According to Chinese figures, the country has 35 chip factories (including 194 starch and flake factories). One thing to note is the low processing capacity, especially compared to potato production. This decade, Sino-European joint ventures have made the manufacturing industry more professional. Aviko Potato ended its collaboration with Snow Valley in 2018 cooks in 2020 another Hongyuan Louis factory, also in the northeast of the country. Farm Frites has had a joint venture with a French fries producer in the Inner Mongolia province since 2014. The largest potato processor in the country is Dali Food Group, which mainly produces potato snacks. The company was on the Forbes list of the two thousand largest companies in the world in 2020, but has since fallen off again.
Consequences for export opportunities
To what extent are Chinese chip exports a threat to the current world order in chip country? In the current playing field - where demand exceeds supply - the impact is not immediately felt. American export destinations in particular are now partly taken over by China, while the US itself supplied more fries to China in November and December. In total, China's chip imports halved during 2022, largely due to corona lockdowns in the country. It is precisely these limitations that have ensured that China is better able to find its way in Asia than the Americans and Europeans. Turkey also saw its exported French fries volume decrease, but remains an important supplier.
The impact in the medium term mainly depends on the cost price for European fries. Will it remain above €1.000 per tonne or will it fall to the previous level when energy, frying oil, packaging and raw material costs also fall in price. Despite its location, the EU remains in an excellent export position due to excellent logistics lines with hardly any internal transport. In China it's a different story. The US is seeing its grip on the market weakening. Because of the price, a strong dollar exchange rate and declining potato production in our own country. In this way, one giant slowly takes over the place of another.