Report: European potato market under ‘severe pressure'
The firm has said that the EU potato area is increasing by 77,000ha to a total of 1.47 million hectares, an increase of 5.5%.
It claims that the expansion comes while European exports of French fries, and other frozen potato products, are facing significant challenges.
DCA has warned that the potential overproduction of processing potatoes could push the current market 'further out of balance'.
The Dutch firm said that Germany, France, The Netherlands, and Belgium – the largest potato-growing countries on the European mainland – now cultivate more than 600,000ha of processing potatoes, a 7.5% increase compared to last year.
DCA believes the growth is exceptionally large, and stands out as a considerable portion of the additional area is being grown 'without contracts'.
It said that farmers, when planning crops last winter, anticipated strong demand and maximised contract options with processors.
However, the open market has since collapsed, and processors have scaled back their contract volumes.
According to DCA, the harvest could reach over 25 million tonnes, based on average yields.
It said that while drought in parts of Europe will likely prevent a record crop, the balance between supply and demand remains under extreme pressure.
DCA
As a result of the pressure to the potato processing industry, the European fries industry is in a 'difficult position', the DCA stated.
There is competition for the sector from other countries, such as India, China, and Egypt, who are capturing market share in Asia and the Middle East through lower costs and improving product quality.
According to DCA, Europe is struggling to 'keep up' with the price pressure.
In The Netherlands, the contract price for potatoes now accounts for about 40% of the current trade price for French fries. This has led to processors trying to cut costs, while labour and energy prices remain expensive.
The DCA found that global demand for French fries continues to rise, but Europe is playing a 'diminishing' role in the growth.
A combination of high production costs, mounting competition from low-cost countries, and a surplus of potatoes is putting pressure on the margins of both processors and grower.
DCA believes that French fries will remain widely available, but price drops at northwest European supermarkets or fast-food outlets are unlikely.
A spokesperson for DCA told Agriland that all data was collected from various official sources such as Eurostat, and the European Commission, and that calculations were made by the firm's analyst.
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