Most potato processing factories have come out with new contract prices for purchasing fresh potatoes of harvest season 2022/23 (intake between July 2022
and June 2023). The global situation in agriculture in combination with the fast increasing costs for planting, growing and warehousing fresh potatoes have led farmers
to reconsider planting potatoes in general. As a matter of fact, alternative cultures such as wheat, corn generate better income levels, so that for the first time in
decades the culture of potatoes is being put in a balance against alternative cultures. A similar effect has been seen in connection with the culture of vegetables for the processing
industries, where angry farmers have blocked access to several factories with the aim to emphasize the need for higher prices.
The war in Ukraine will result in considerably lower availability of wheat for bakeries, so that Western farmers will surely be attempted to increase their acreage of wheat and cereals.
Meanwhile some processing companies have come out with price increases as much as 15-20%, but this offer was mainly declined by farmers’ organisations, calling their
members to refrain from growing potatoes, so that shortages would lead to an automatic increase in price for all potato products. Exact figures are expected end of
April or early May, but this is an essential factor to bear in mind for the future. Not to forget that 2 kg of fresh potatoes are needed to produce 1 kg of fries and 6-7 kg potatoes
for 1 kg of flakes…..
The war in Ukraine not only has an immediate effect on prices for (Russian) natural gas supplied to Europe and electricity as an alternative source of energy, but also are supplies of
sunflower oil (seeds are grown and processed in Ukraine) seriously limited at this moment. Demand for Malaysian RSPO palm oil on the world market is so high, that spot purchases are as good as impossible.
As a consequence it is not excluded that the entire Western European potato processing industry will have to slow down processing facing lack of frying oils.
Just to fresh up your memory:
– spot prices for natural gas : + 420 % since September 2021;
– electricity : no shortage, but price follows the trend of natural gas;
– labour cost : high level of absenteism, caused by Covid infections, and shortage of classified labour have led to inimaginable competition between employers with the only purpose to keep or acquire the higher quality of staff;
– Western Europe faces a permanent shortage of over 15 000 truck drivers; often vehicles stand still simply because there are no drivers available;
– higher costs for packing materials and pallets > the impact of this factor, although considerable, meanwhile has become of minor importance, in view of the above;
– unreliable shipping lines which change journeys overnight and add increases and surcharges at any time and for whichever reason – ocean freight must be reconfirmed on a weekly basis in order to avoid bad surprises; no pay no cure……
It is clear that we have not seen the end of this season yet and very dark clouds hanging over the entire industry will surely affect global business in potato products even more than before.
We recommend vigilance and alertness.