Potatoโ Industry Shifts to Primarily Contract-Based Supply
The French fry processing industry is currently demonstrating a reduced need for potatoes available on the โopen market, driven byโ a notable increase in contract cultivation and unexpectedly strong processing returns. โThis analysis examines the factors contributing to this shift.
Initially, processors aimed to expand contracted acreage. Though, โa downturn in demand for finished fries lead toโข a halt inโค issuing new contracts.Despite this pause, the overall contracted โarea has โincreased compared to previous years, especially in Belgium and the โNetherlands, where processors secured additionalโค agreements.
This rise inโ contractโค farming directly impacts the demand for “free” potatoes – those not grown under โฃcontract. Historically, approximately 80% ofโ potatoes wereโข grown under contract, โฃwith the remaining 20% available for โdirect purchase. With contracted acreage now reaching around 89%, and possibly exceeding โ90% in certain specific cases, the โคindustry’s reliance on the open market has diminished.
Beyond โขsupply agreements, processing efficiency is also contributing to โthe current โsituation. Early potato yields have been โstrong, โwith low failure rates. โคThis โฃhas resulted in a processing efficiency of 58.2% in August, accordingโ toโ data from the VAVI trade association – a 2 percentage point advancement overโ the five-year average.
Despite a generally weak โฃmarket โsentiment, potato processing volume in August โขonly decreased by โข4.8% compared โขto the previous year.โข Furthermore, production ofโฃ finishedโ potato โฃproducts, like Kromp (consumption potatoes),โฃ experienced a limited decline of just 2.5%, thanksโฃ to the higher โprocessing returns.
These factorsโ combined – increased contract cultivation and improved processing efficiency – indicate a โrobust, albeit evolving, supply chain within the French fry industry.