Potato processors have started the new season at full steam. Despite the fact that potatoes had to be bought at increasingly higher prices, this did not lead to a drop in demand for French fries on the world market. After a slump this spring, the European factories were even able to expand their lead again.
Unfortunately, the export figures from the harmonized trading system are several months behind reality. The most recent figures we have available are from May. This already partly includes the price increase that became visible from April this year and reached its apotheosis at the end of July.
Growing without potatoes?
In April, European exports of fries slowed down slightly, but sales picked up considerably in May. The EU-5 (including Poland) achieved a plus of 4,2% compared to May last year and even 15% more than was sold in April. The growth over a twelve-month period is comparable. Belgium and France in particular have achieved the greatest growth, despite a shortage of potatoes. That is exceptional, to say the least. This is partly due to purchasing potatoes from further away and partly due to increasingly efficient production lines. The export of Dutch fries remained stable in a year.
It should come as no surprise that the value of a ton of fries continues to increase given the price movements of the potato itself. In May the average price level rose by more than a third and over a full year that is more than 40%. Belgium is no longer the cheapest fries supplier in Europe. Poland has taken on that role, followed by our southern neighbors. The Netherlands comes in third. You now have to pay double for a ton of frozen fries compared to the 2020-2021 season.
US leaves a gap
It is not only the price level that is at record levels. This also applies to the export of European fries. The reason for this is twofold. On the one hand, the unbridled growth in demand for fries throughout the world. On the other hand, there is the lack of North America as a major competitor. The United States in particular has had to slow down season after season, because there was simply not enough product to export. We have already heard that things could be different this season proclaim.
Processors in the five major European production countries ultimately rely primarily on the European demand for potato products. The United Kingdom is the largest customer, followed by France and the Netherlands. Our country purchases a lot on paper, but probably largely as a transit vessel further into the EU via ports such as Rotterdam. Spain and Germany are also high on the list. All countries show considerable growth in the volume purchased. In terms of non-European destinations, Saudi Arabia is consistently at the top of the list, perhaps remarkably followed by the US. In twelve months, exports to this country increased by almost 50%. Brazil actually shows a significant decline because it sources more product from South America.
Declining processing
The summer months will reveal whether the April dip was actually a short-lived moment. From the Dutch processing figures we know that considerably fewer potatoes were processed in July and, more importantly, fewer fries were produced. This must also have been the case this summer in Belgium, France, Germany and Poland, given the shortage of potatoes. The average chip price of €1.140 per tonne probably has some room for a ceiling of €1.200 in a tight market without alternatives, but that could be different this season.
It is clear that Europe is facing a tight potato harvest this year. The area in many countries has increased, but this is offset by a late planting time and a challenging growing season with alternating high rainfall and long dry and hot periods. The high burden of disease also poses challenges. Given the increased processing capacity in Western Europe, customers are once again having to go out of their way to keep their lines running.
Will the US take the lead again?
A determining factor will be how the potato harvest turns out in the US and Canada. The US in particular has made significant losses in its traditional destinations in the Americas and Asia since 2018. The country has also been forced to make some mistakes in its home market. If current yield expectations come true, a shift could take place this season. The dollar-euro exchange rate ratio also has an influence. The dollar is relatively strong, which means that euro countries can benefit from this.
As described earlier, it is mainly the traditional chip countries that are responsible for the bulk of consumption. These are not only European countries, but also North America. In three years, consumption in the US increased by 10%. At a time when food is becoming more expensive on all fronts, the importance of fries is increasing. It is relatively cheap 'plate filling' and is still appreciated by consumers. A slightly higher price for a portion of fries is less noticeable among those for meat, drinks and more. This means that fries have proven to be a fairly inflation-robust food. Kinks in the cable are mainly in the production of the potatoes and the export engine.