Many factors hinder the growth of potato acreage

Almost everyone in the potato sector agreed at the beginning of 2022: the area was going to shrink. Cultivation costs increased noticeably, while the prices of grain and rapeseed, among other things, had already risen significantly before the war in Ukraine. After two 'lost' corona years, the processing industry did everything it could to prevent that from happening, and it succeeded. In the EU-4, the area grew by 2,9%, according to the NEPG. Good for more than 512.000 hectares of ware potatoes.

That the weather always has the last word was also evident last year. Due to severe drought, production ended up more than 5% lower in the EU-4. In fact, there is the smallest volume since 2018, while demand and processing capacity have both increased. This creates a demand market for potatoes.

Processor focuses on growth
The strategy of European potato processors has not changed. In fact, a 30% to 50% higher contract price should convince growers. The delivery conditions have also improved in many cases. These are prices that many potato growers are willing to sign for. The focus of the processors is mainly in the south of Belgium and northern France, where there has also been the largest capacity expansion of the chip factories. In addition, Northern Germany is a growth region. Logistically, that location is less favorable, but potato prices are at a lower level to compensate for that. The yields are also regularly better than in the coastal areas.

The Belgian PCA estimates the processing capacity in the EU-5 (reference date January 1 last year) at 15,5 million tons. That is a fifth more than ten years ago. Poland is not included in these figures, but the United Kingdom is. Poland processes about 1,25 million tons. Last year, Aviko Potato opened a new factory in Poperinge, Belgium, and McCain expanded production in Lelystad. The production processes at other factories have also been slightly expanded or optimized. Further expansions are planned for this year and 2024. Clarebout is even building a completely new factory in Dunkirk.

With the above figures in mind, it is realistic to set the industry's potato requirement for this year at at least 16 million tons. We must take into account that the efficiency of the new chip lines is higher than before. This now averages 53,6% in the Netherlands. One percent more than average.

Fluctuations in yield
Potato cultivation has grown approximately in line with processing over the past ten years. Only in 2021 was there a trend break, which processors want to avoid at all costs. During the same period, there have been strong fluctuations in the hectare yield and therefore the total volume. This fluctuates between 20 and 25 million tons of potatoes. It is unknown where the balance sheet will be in 2023. The 21,7 million tons harvested in 2022 is not sufficient for current French fries sales. More than 24 million tons turned out to be too much in 2017, but is that still the case?

An area increase of 3% to 527.800 hectares is a record in the EU-4. Calculated with an average hectare yield of 45,1 tons, this produces 23,8 million tons of potatoes. Due to an increasingly erratic weather pattern, it is highly questionable whether this average will be achieved. If we calculate with the 43,1 tons from last season, you arrive at a total of 22,75 million tons.

Inhibitory factors
An area increase of 3% is probably at the top end of what is currently possible in Northwestern Europe. In the Netherlands and Belgium there is great pressure from the new CAP, which means, for example, that land is being lost on buffer strips. Livestock farmers are reluctant to rent out land and that also has an impact. In Germany and France, the pressure on land is less in more extensive cultivation areas. There there is mainly competition from grain, rapeseed and sugar beets. They also made excellent balances last year. Winter grain was sown last autumn under good conditions.

The French agricultural statistics service Agreste estimates the winter wheat area at 4,76 million hectares. That is 91.000 hectares more (0,4%) than was grown in 2022. The area of ​​winter barley increased by 4% to 1,34 million hectares and that of rapeseed by 9% to also 1,34 million hectares. Growth in grain cultivation is partly in Northern France, which is also the most important chip potato growing area. In Germany, 1,9% less winter wheat has been sown (-55.600 hectares), 5,1% more winter barley and 7,6% more rapeseed.

Shift within segments
Taking land away from other crops is not easy. Chip potato cultivation may gain more hectares due to shrinkage in the segments for starch and flakes, seed potatoes and table potatoes. In the corona years 2020 and 2021, the latter segment saw a revival, but the market has now cooled down. In the Netherlands and Germany, starch cultivation in particular is in decline. In France this is table potato cultivation.

If we look at the growth figures per country in the EU-4 in 2022 - ranging from 3,6% to 8% - it is likely that such an increase in area will not be visible again this year. The higher contract prices mainly mean that growers commit more volume to a fixed price and do not expand their acreage. The current sales season is not bad, but it is also not what many had hoped for. In particular, the lack of sufficient market forces and the resulting lack of a custody premium ensures that contract prices between €25 and €27 on April 2024 provide a solid basis.

Price risk
There is a real chance that the free market will drop below the contract price (and cost price) level for more than 23 million tons of potatoes. The five-year price level of the PotatoNL category 1 is €16. Potato cultivation has now become too expensive and risky a crop for an arable farmer to run that risk on a large scale. The costs for diesel, fertilizer and energy have fallen sharply in the last six months. Those for seed potatoes, crop protection products, mechanization and not to mention interest are actually increasing. At the bottom of the line is the risk times reward that allows the grower to choose a side.