Historically, the period from week 27 to week 30 is always crucial for the price development of potatoes. This determining period is mainly dictated by the growing conditions in combination with the acreage becoming known in Europe.
In the past, the statement was that if the market chooses a direction above €15 after week 27, we will be faced with an above-average price year. And that when the market falls below €15, it is a below-average price year (read: minus €10).
Given the current pricing, €15 already sounds like a low price and the entire potato market appears to be recalibrating towards the 'new normal', with €15 more likely to look like a lower price than 'the average'. All this is motivated by the expanding French fries processing, increasing costs for growers and the decreasing yield per hectare in Europe. With the significant increase in contract prices, the battle for raw materials has only really begun and it seems that the current contract prices have become the benchmark rather than a middle price in the market. Where this was previously €15, it now appears to have been moved to €25.
Striking development in area
It is all the more surprising that the announcement of the first area figures Based on the combined statement via Boer&Bunder, the total potato area in the Netherlands appears to have shrunk. A decrease of 2% in favor of grain, onions and carrots. Growers were apparently unable to be motivated to grow more potatoes despite the large price increase in the fixed price contracts. The picture of the Netherlands is also different from Belgium and Germany, where there has been a slight expansion of 5% and 7% respectively, but comparable to France where there has been a contraction of 2% based on the first indications.
Another point in the changing market in terms of pricing is the French fries market. Since the war in Ukraine, the price of fries has exploded and has been at record high prices for months. That also explains why in the current daily market for the 'old' harvest, €60 is easily paid. For these raw material prices, processors can still profitably fry and sell French fries all over the world.
It therefore appears that from now on the potato price will no longer be leading for the market, but the chip price determines what processors can pay for their raw material. A change with potentially major consequences. The chip market seems infinitely large and has been driven for years by more demand than supply, which is now also translated into much higher prices for the end product. And apparently growth is still not over. Processors continue to invest in more processing capacity to continue to meet the global demand for fries.
Expansion of processing capacity
Another expansion of processing capacity of more than 4 million tons of potatoes is planned in the EU-1 in the coming years. Where the raw material should come from is still the big question, but the sale of chips is the least of the processors' worries, it seems. In price negotiations with customers (fast food, export and retail), there is more often discussion about availability than about price.
A crop failure or a mediocre harvest is therefore not very welcome in Europe. Europe is increasingly becoming the chip shop of the world and cultivation areas will therefore have to be expanded in the coming years by at least 10% to 20% to meet the need for raw materials.
This data linked back to the current market shows that the potato market is a demand market. However, this demand arises in a market with little supply. The offer is limited for several reasons. Firstly, the late spring, secondly the mediocre growing conditions so far and thirdly due to the insufficient increase in acreage in Europe. In addition, due to the large number of tons of potatoes contracted in advance and the lower expected yield, the average grower has few or no free potatoes to sell. This makes the processing industry more like an elephant in a narrow alley. One has walked into it, but cannot turn to go back.
Coming weeks of growth
Processors have been forced to take their foot off the accelerator in potato processing in recent weeks. Maintenance is carried out early and longer than normal because potatoes are not available or not for sale. The early harvest is taking a long time and some traders seem to want to get the early potatoes out of the ground, but there are simply not enough kilos under them or the underwater weight is not yet good. A few processors are currently working on potatoes from Bordeaux, where yields do not seem to be disappointing.
De first Belgapom listing was telling about the current situation in the market. This opened at a record level for early potatoes of €50. A price that has never been seen before and that many traders, processors and growers would never have dreamed would ever reach their plate.
The coming weeks of growth will be crucial for the final yield of the European potato harvest. Can the backlog still be made up somewhat and what will the subsequent growth be like? This can make the difference between good pricing and very good pricing.