Despite an expansion of the consumption potato area in the EU-4 for the 2023 harvest year, it is unlikely that the processing industry will have sufficient raw material to fully utilize their production capacity. What alternatives are available to keep new production lines running at full speed?
The news was full of it: Wednesday, August 2, was 'Earth Overshoot Day'. The day on which we earthlings have consumed more raw materials than the earth can produce in a year. A partly misleading allegation, but that statement can also be projected on the potato sector. It is cultivation that cannot keep up with processing and consumption. Therefore, an analysis of the most important potato producing countries in Northwestern Europe.
You need to know this:
Exceptional season
The 2023 potato growing season can be described as exceptional so far. The first early potatoes could be planted from mid-February. Planting was also carried out under good conditions at the beginning of March. The planting season was then largely halted for almost two months, until work could be resumed at the beginning of May. It then became exceptionally dry on a large scale and this period lasted throughout Northwestern Europe until the end of July. A fair amount of precipitation fell at the end of July and the beginning of August.
The above causes great heterogeneity among potato crops in Northwestern and Central Europe. Early potatoes have usually done well due to the early planting date and frequent irrigation. The mid-early varieties were planted considerably later - early May is no longer really early cultivation - but in Belgium and Northern France this was the rule rather than the exception. The setting varies greatly per variety, soil type and region. The overall consensus is that it tuber number slightly lower than a year ago.
Due to the recent heavy rainfall, phytophthora has also emerged in addition to alternaria. Another problem is the discovery of overgrowth in sensitive varieties, such as Agria. Insiders are concerned about the quality of the potatoes.
What about Poland?
Poland is an important European potato country. The expectation that the acreage there would again drop sharply has most likely come true, although here too there is no official figure. The most recent estimate puts a total of 176.000 hectares, which is in line with what we were talking about at the beginning of this year wrote. This decrease of 12% is largely caused by fewer hectares of starch potatoes and fewer table potatoes. Industrial processing (french fries and chips) is probably growing slightly, but there are no figures to substantiate this.
We see this image throughout the EU-27. In the peak year of 2019, the total potato area was still 1,63 million hectares. This is estimated to be 1,34 million hectares this year. A decrease of 72.500 hectares per year! Starch potato cultivation in particular has shrunk considerably due to challenging growing seasons - resulting in low returns - but also a decline in table potato consumption and exports. The area for industrial processing has grown in that time, at the expense of starch and table potatoes.
The venom is in the tail
All the potatoes have been in the ground for a long time and now it is only the yield that counts. That is also difficult to make firm statements about at the beginning of August. The six most important weeks are still to come. Also important is how the harvest chapter will proceed. The planting date – which is delayed by an average of one month – can not only cost yields but also push back the harvesting moment. That doesn't have to be a problem, but it does require a few nice autumn weeks. The devil is in the tail therefore applies.
If we calculate with the multi-year average hectare yields per country, the total consumption potato production in the EU-4 for the 2023 harvest year is 21,4 million tons. That is a small percentage decrease compared to last season and 3,6% less compared to the four-year average. We do not include 2018, because the 18,2 million tons of that year put an extreme downward pressure on the average.
Too few potatoes
The fact is that more than 21 million tons of potatoes is not nearly enough to meet the demand of the major European processors. Production has expanded considerably in recent years and new chip lines will also be running this year. It is very difficult to estimate the exact processing capacity. The new or improved factories have also become more efficient. One percent extra efficiency doesn't look like much, but it means more than 200.000 tons of extra potatoes on the total volume. That equals 5.213 hectares of European potatoes!
The potato market also makes it clear that demand will exceed supply in 2024. The price of the April 2024 contract fluctuates between €30 and €33 per 100 kilos. For delivery in June that is almost €40. The physical market is now trading at a similar level. Input on the DCA PAT Index shows that processors have committed potatoes for amounts between €32 and €34 for delivery in April or May 2024. That is roughly €10 above the contract price level.
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Healthy market
Processors are apparently willing to dig into their pockets to secure potatoes. Even if potato growth is positive and the total harvest approaches 22 million tons, there is still a good chance of a healthy market this season. The demand for the end product is there, the season has started 'clean' and the processing capacity is there. Now just the potatoes.