table of contents · the global frozen french fries’ market was worth around usd 19bn in 2016...

Table of Contents

07Process PotatoMarkets: Fries

There are few foods that have been eaten at some point by just about everyone in the Western world & French fries are one of them. Call them fries or chips or frites, so many names, but fried potato sticks are one of the most universally beloved junk foods on earth.

15Process PotatoMarkets: Dehy

The high quality US Flake and Granules are made using the top grade sliced, cooked and dried potatoes. It has always been the economical choice because of the increased bulks density in shipping due to dried granular texture.

Frozen Potato Market: Canada

Editors Note Potato Global

Frozen Potato Market: PEI

News Impacting Potato Markets

Crude Oil Prices

Corn & Soybean Prices

Potato Market: Production & Stocks

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18Fresh Potato Market

Summary

Potatoes are the fourth most important food crop in the world and the leading vegetable crop in the USA. Altogether, Idaho and Washington produce more than half of the annual supply, which totaled 463 million cwt in 2012, up 8 percent from the previous year, and was valued at $3.73 billion.

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POTATO MARKETS POTATO MARKETS

Hello &WelcomeWelcome to our completely revamped February edition of the Potato Markets magazine. It is my pleasure to offer to you all with the latest Potato Market related news with a strong analytical insight to the readers. The issue covers Process Potato Market (Fries and Dehy) news for USA as well as the Frozen Potato Market news for Canada and PEI. The magazine also covers the Fresh Potato Market summary along with the news impacting the Potato Markets including the CAD-US exchange rates. Through this magazine, we have brought all the necessary potato global news of the potato market in the Potato Global section.

Agrometrics is proud to announce that keeping our previous promise we have also stepped ahead with a committment to provide world class analytical and technological solutions to support the Potato Growers and Community in order to strategize and analyze the current market scenarios w.r.t price. Please e-mail us at [email protected] with any other piece of information you may like us to incorporate in the future editions.

Thank You,Madhu Jamallamudi

Editor

725 Heartland Trail, # 201,Madison, WI 53717

+1 (870) 200-9080

The statistical data shows that the amount of potatoes used for frozen French fries in the United States from 2001 to 2018 has grown considerably with around 166.8 million cwt of potatoes used in the U.S alone.

There are few foods that have been eaten at some point by just about everyone in the Western

world & French fries are one of them. Call them fries or chips or frites, so many names, but fried potato sticks are one of the most universally beloved junk foods on earth.

The statistical data shows that the amount of potatoes used for frozen

French fries in the United States from 2001 to 2018 has grown considerably with around 166.8 million cwt of potatoes used in the U.S alone.

Also, according to a study, one of the popular fast-food chains such as McDonald's buys 3.4 billion pounds where a small fry is 71g, so that comes to around 10 billion small orders of fries or 320 billion fries per year.

One of the most loved & one of the fastest-growing snacks in the world

PROCESS POTATO MARKETS: FRIES

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POTATO MARKETS

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MAGAZINE

In this section, we will be covering the exports under HS code “200410 - Potatoes, prepared or preserved otherwise than by vinegar or acetic acid, frozen” except for USA exports which are specifically for fries alone. Flakes

and granules (dehy) will be covered in a separate section.

The global frozen French fries’ market was worth around USD 19bn in 2016 growing at a CAGR of around 3.8% during 2009-2016, according to a report named "Frozen Finger Chips (Frozen French Fries) Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2017-2022" by IMARC Group.

Now, we provide the current CAGR based on the latest historical series of data, which shows that the average Price/lb. is moving ahead at a CAGR of around 2.9% during 2008-2018. This is slightly behind the CAGR of 3.8 % by IMRAC group based on 2009-2016 data. Further, on an average 1.8 bn exports are happening in the USA from the period of 2008-2018.

The total Fry export volumes for 2018 YTD (till October) is 1.668 billion pounds. If we compare this to the same period last year i.e. 2017, the exports were at 1.697 billion pounds, which is quite higher than this year’s exports and therefore has set a record during the last decade. Based on the current market scenario, the volume data shows that 2017 is still a record year due to the heavy downfall in fries exports in the month of October 2018. Therefore, even when the 10 months volume data of 2018 is out, the difference is huge and difficult to cover in the remaining 2 months of 2018.

The average Frech fries' exports that has happened from 2015 to 2018 has been taken into consideration for each month in specific and it has been observed that November has recorded the highest average I.e. 177.78 million pounds, followed by a 11.5 % drop in the exports for the month of December, which is 157.2 million pounds.

From the graph, we can see that the average price was a constant until there was a severe downfall in the months of September and October, followed by a price appreciation for the rest of the months. However, we have observed a mild depreciation in the average price/lb by 0.31% from January to December.

Also, according to the initial reports, the average price/lb was growing at the rate of 1.3 % from the period of 2010- 2018 (till October), but based on the recent study, the average prices/lb have dropped to 0.93 %.

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The global frozen French fries’ market was worth around USD 19bn in 2016 growing at a CAGR of around 3.8% during 2009-2016, according to a report named "Frozen Finger Chips (Frozen French Fries) Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast

2017-2022" by IMARC Group.

The total Canadian Fries export volumes for 2018 YTD (till October) is 2.21 billion pounds. If we compare this to the same period last year i.e. 2017, the exports were at 1.92 billion pounds, which is quite lesser than this year’s exports.

Hence, we believe that 2018 could be a record year once the data for the remaining months is out.

The average Canadian Frech fries' exports from 2015 to 2018 has been taken into consideration for each month in specific and it has been observed that export market has almost remained the same for every month, with a constant decrease of 0.88 % from the months of January to December, with 172.76 million pounds, reported to be exported in December.

As we know, the major categories of packaged food are bakery products and frozen processed food. Some of the emerging categories in this sector are frozen ready-to-eat foods. Consumers obviously expect better food quality that can last long. Therefore, we have seen a tremendous increase in the frozen food packaging market with the consumer appreciation of the product quality.

Along with the growing economy and changing lifestyle of the people, there is an increased demand for frozen food packaging in Canada and the market is expected to grow lucratively during the forecast period.

Canada’s frozen food packaging market has been segmented based on primary material, type of food products such as readymade meals, fruits and vegetables, meat, baked goods and others, and type of packaging product.

Frozen Potato Markets: Canada

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From 2015-2018, we noticed that the average maximum exports of Canadian fries was in June, however, the average prices/lb remained the same throughout the period of 2015-2018.

We believe there would be a further downfall in the average exports of Canadian fries in the months to come with the price/lb, almost remaining unaltered.

Prince Edward Island has been known for its rich history of growing potatoes. There are around 330 potato growers in PEI, with most of them being from family farms.

However, there was a drought on part of the island last year, and the potato yields took a hit which had a severe impact on the supply of potatoes to Cavendish Farms’ French fry processing plant on P.E.I. and its fresh potato facility. The company had no choice but to import around 150 million pounds of potatoes from Manitoba, Alberta, New Brunswick and Maine to supply the plants.

The total PEI Fries export volumes for 2018 YTD (till October) is 4.17 billion pounds. If we compare this to the same period last year i.e. 2017, the exports were at 4.50 billion pounds, which is comparatively higher than this year’s exports, thus making 2017 a record year with the maximum export volumes from the period 2010-2018.

However, due to very mild difference in both year’s exports (till October), we believe that 2017 could remain a record year in terms of the total export volumes.

Frozen Potato Markets: PEI

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The average PEI Frech fries' exports that has happened from 2015 to 2018 has been taken into consideration for each month in specific and it has been observed that export market for June is the highest among all the 12 months, with 44.2 million pounds, followed by a constant decrease of 14.76 % from June to December, with 37.68 million pounds, reported to be exported in December.

From 2015-2018, we noticed that the average maximum exports of PEI fries was in the month June, however, the average prices/lb remained the same throughout the period of 2015-2018.

We believe, there would be a further downfall in the average exports of PEI fries in the months to come with the price/lb, almost remaining unaltered.

The high quality US Flake and Granules are made using the top grade sliced, cooked and dried potatoes. It has

always been the economical choice because of the increased bulks density in shipping due to dried granular texture. Looking at the exports volume trended up from 2010 to 2018, the year 2015 hits a record high in terms of the total export volume i.e. 215 million pounds of the dehy products.

Potato Processing Market report has categorized the global potato market by Type (such as Frozen, Chips & Snack Pellets, Dehydrated), Application (Snacks, Ready-to-cook & Prepared Meals), Distribution Channel (Foodservice and Retail), and Region. The global potato processing market was being valued at USD 22.74 Billion in 2016 and has been projected to reach USD 30.85 Billion by 2022, at a CAGR of 5.3% during the forecast period.

PROCESS POTATO MARKETS: DEHY

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Processed Potato Chips: Dehy

The high-quality US Flake and Granules are made using top grade sliced, cooked and dried potatoes. It has always been the economical choice because of the increased bulk density in shipping due to dried granular texture.

Looking at the exports volume trended up from 2010 to 2015, thus making 2015 the record year with the maximum export volume of around 214.8 million pounds of dehy-products. However, an increase of 3.1% has been seen in the total volume exports of 2018 (till October) i.e. 139.8 million pounds which was 135.5 million pounds in 2017.

The average dehy exports that has happened from 2015 to 2018 has been taken into consideration for each month in specific and it has been observed that March has recorded the highest average I.e. 16.73 million pounds, however November has recorded the lowest average with 13.06 million pounds.

In-spite of lots of volatility in the average exports, there has been an increase of 13.96 % in the exports for the month of December, which indicates a healthy exports market growth.

From the graph, we noticed that the maximum exports of Dehy products was in the months of March and June, whereas the average price/lb has depreciated for the above months.

Also, according to the initial reports, the average price/lb was decreased by 6 % from 2010- 2018 (till October).

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Potatoes are the fourth most important food crop in the world and the leading vegetable crop in the USA. Altogether,

Idaho and Washington produce more than half of the annual supply, which totaled 463 million cwt in 2012, up 8 percent from the previous year, and was valued at $3.73 billion. Potatoes remain the top vegetable crop in the United States. They are grown commercially in 30 states, but Idaho grows more potatoes than any other state, followed by Washington.

Nearly 60 percent of potato sales are to processors for French fries, chips, dehydrated potatoes and other potato products. While, the remaining goes to the fresh market, fed to farm animals or re-used as seed tubers for growing the next season’s crop.

FRESH POTATO MARKETSUMMARY

From the graph, we see that for the period 2015-2018, Russet has the highest shipment size with 12,822 shipments with the minimum average price of $ 8.68, which makes Russet the most demanding potato type in the USA, followed by Round Red as the second highest shipment size with 4,105 shipments.

The average price for Long White has been recorded as the highest with $ 18.87 for the period 2015-2018. However, it has the least demand as we can see the total shipments for Long White is just 364, making it the least demanding potato type in USA.

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From the graph, we see that for the period 2015-2018, 2017 has registered the highest shipments with 5614 and also the highest average price 12.785 price/lb.

The year 2017 yet remains to be the highest in terms of both shipment value and the average price.

It’s quite evident from the graph that the year 2017 has the highest number of shipments with sa total of 5614, however the average of the most predicted price is around $ 12.785 for the same year, thus emphasizing the fact that even after having the highest average price, 2017 managed to ship the maximum potatoes across the states, hence making 2017 as the record year.

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NEWS IMPACTING POTATO MARKETS

US dollar to the Canadian dollar exchange rate is one of the key factors that impacts export prices of processed potato products as well as many other commodities in general.

It is worthwhile to keep an eye on the global economy and macro events so that it provides an insight into the future in terms of volume and prices. These observations will also aid in making sound financial decisions and planning.

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As from the graph, we can see that currently, 1 USD is equal to 1.34 CAD and clearly the CAD has appreciated significantly in the first quarter of 2019 as compared to end of the 2018 year and we think USD/CAD is close to a bottom here.

The Bank of Canada has kept its benchmark interest rate unchanged at 1.75 % as per January 2019, despite a few dark clouds appearing on Canada's economic horizon.

The bank has raised its key rate five times since the summer of 2017, attempting to keep inflation in an acceptable range, typically between one and three per cent annually. The bank last raised its rate in October, before deciding to do nothing in December and then again today.

The bank also downgraded its expectations for Canada's economy this year.

A 25 per cent plunge in the price of oil since October has had a "material impact" on the economy, to the point where the bank is now forecasting just 1.7 per cent growth this year. Three months ago, it was expecting 2.1 per cent growth.

Crude oil has both a direct and indirect effect on the potato industry as well as agriculture in general. Oil is critical input in agricultural operations and essential to produce many fertilizers. Canada is a natural resource-

based economy and the value of the Canadian dollar is directly linked to crude oil prices. Therefore, monitoring the crude oil price trends is very important, in order to hedge both the oil prices as well as to forecast USD/CAD exchange rates as well as prices of other commodities such as Corn and Soybeans.

Crude oil price continues to provide sideways and tight trading to settle around $52.36 (from the graph), to keep the bullish trend scenario valid as it is without any change, waiting to breach $54.40 level to confirm rallying towards $57.46 followed by $60.00 that represent our next positive targets, reminding you that the continuation of the expected rise conditions the price stability above $51.46.

CRUDE OIL PRICES

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Corn futures rose in American trade to January 9 highs even as the dollar index scaled January 4 highs, following earlier data from the US, the world's largest corn producer and exporter.

Corn futures prices are stuck in the $3.50 to $4.00 range since the middle of 2014. That is almost 5 years where the price stayed near the cost of production. The actual prices received by farmers as per the current data is $3.35 per bushel range, which is expected to take a peak in the coming years.

CORN & SOYBEAN PRICES

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According to a recent report, USDA estimates the corn prices, at $3.35 per bushel, and CME Futures comes in on the high end of the range, at $3.89 per bushel. Further out, corn price estimates range between $3.45 and $3.96 per

bushel in 2020, and between $3.50 and $3.93 per bushel in 2021. All the forecasts say that the prices of corn are approximately equal to the last 4-year average.

As per the USDA’s Crop Production August 2018 summary, Corn production was forecasted at 14.6 billion bushels, down less than 1 % from last year. Based on the conditions as of August, yields were expected to average 178.4 bushels per acre, up 1.8 bushels from 2017. If realized, this could be the highest yield on record for the United States. Area harvested for grain was forecasted at 81.8 million acres, unchanged from the June forecast, but down 1 % from 2017.

The US Department of Agriculture as per January 2019, reported inspections of 1.01 million tonnes of corn product destined for export in the week ending January 10, compared to 501.6 thousand in the previous week, with total inspected product amounting to 19.5 million tonnes, up from 12.1 million in the same period of last year.

There is a strong demand of Soybeans from Chine for its feeding operations. The chart above shows weekly Soybean prices have increased during the period Oct 2018-Jan 2019 and are stalled at around $8.84 per bushel. 2019 prices could average around this zone and possibly get a significant boost at the coming months of 2019.

Extended forecasts from some of the top economists show that Soybean prices would average between $9.40 to $9.90 for the next 4 years. That would mean a prolonged period of prices in the current range. Growers should take a note of these forecasts and stay ready to take advantage of any temporary price spikes above $10.50 area to lock in prices.

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Technically speaking this chart is showing that the price has begun to appreciate, however, it

has just reached the average as per January 2019. It has moved closer to $9, but a spike to $12 area is possible within 24 months.

According to Farm Progress reports, September-December exports from Brazil to China nearly doubled, while shipments out of the U.S. to the world’s largest customer fell from 735 million bushels in 2017 to just 15 million in 2018.

Nonetheless, seasonal trends show futures knocking on the door of a breakout that would lead them on the pattern of rising prices seen in bullish years. Futures pulled back from that brink today, however. Consolidation may continue unless confirmation of lower production from a dry

December is heard from Brazil when CONAB releases its next crop report. So far it appears production is around 75 million bushels lower than previous estimates, but dry weather likely came too late to cause major losses.

Percent of fall potatoes varieties planted for the years 2017 & 2018 has been taken into consideration and it has been noted that Russet Burbank registered the highest planted acres which is 38.0% in 2017 and 37.4% in 2018.

Figure: Percent of Fall Potatoes Planted to Major Varieties — Seven States total: 2017-2018

POTATO MARKETS: PRODUCTION & STOCKS

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Figure: Fall Potato Production and Stocks — 13 Major States: December 1, 2017-2018

Percent of stocks to production has been indicated for 13 states in the above chart. Montana stands to be the highest in 2017 with 93% and 2018 with 95%. And the least is registered by New York with 57% in 2017 and 50% in 2018.

POTATO GLOBAL

The record-breaking heatwave and the lack of rain across Europe has deeply hurt potato crops, with prices tripling in the U.K. in August from a year earlier that’s forced fish and chip shops to charge more for a portion

of fries that form one half of the traditional British staple. Further price hikes loom, said Andrew Crook, president of the federation representing more than 10,000 fish and chip shops across the country.

In the U.K., a metric ton of fresh potatoes surged to 300 pounds ($390) last month, the third-highest on records going back to the 1950s, according to the Agriculture and Horticulture Development Board. Processing potato futures for delivery in April have doubled this year in Leipzig, Germany.

With Europe accounting for eight of the 10 biggest potato eating nations, there’s likely to be fierce competition for the starchy tubers this season. While the ninth-ranked British can’t match the appetite of Belorussians, they still chomp through more than 100 kilograms (220 pounds) a year of chips, crisps, roast potatoes and mash.

BLAME THE EUROPEAN HEAT WAVE FOR PRICIER FISH AND CHIPS

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Recent expansion of North American French fry capacity has been designed to facilitate export growth. So far, the expected growth has failed to materialize. During calendar year 2017, combined frozen potato product

exports from the U.S. and Canada (excluding trade between the two countries) totaled 2.37 billion pounds. That is 17 million pounds less than 2016 exports, a 0.7 percent decline.

In 2017, major exporters shipped 6.21 billion pounds of French fries and other frozen potato products to customers outside of their local trading zones. Local trade zones include North America (the U.S. and Canada) and EU-28 internal trade. The exports exceeded year-earlier shipments by 192 million pounds, a 3.2 percent increase. Last year was one of the slowest growth years that the industry has experienced in the past 15 years. Average growth during that time has been 8.1 percent per year. Nevertheless, the 2017 experience highlights some of the challenges facing North American fryers.

GROWING PAINS FOR THE FRENCH FRY INDUSTRY

China’s MY 2017/18 fresh potato production has been forecasted at 97 million metric tons, which is approximately a 5 % increase from the estimated 92 MMT in MY 2016/17, due to a continued expansion of potato

area.

China’s exports of fresh potatoes have held stable at 300,000-500,000 MT annually since MY 2010/11, a negligible amount considering China annual production of about 100 million MT. China’s MY 2017/18 fresh potato exports have been forecasted at 550,000 MT, about 10 % increase from 497,829 MT in MY 2016/17.

Processing potatoes account for about 15 to 20 % of the total production that includes products such as starch, dehydrated potatoes, chips, and frozen French fries.

China’s potato chip production has continued to grow in response to strong market demand. Industry sources estimate China’s MY 2017/18 sliced potato chip and fabricated potato chip production at 450,000 MT and 350,000 MT, a 7 % and 13 % year on year increase, respectively.

China’s Frozen French Fries production is forecast at 250,000 MT, a 10 % increase from 230,000 MT in MY 2016/17, driven by strong local demand.

CHINESE POTATO PRODUCTION FORECAST TO REBOUND, FRENCH FRY IMPORTS TO FALL

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1. https://www.marketnews.usda.gov/mnp/fv-home

2. USDA- September 2018 Edition

3. USDA- December 2018 Edition

4. https://www.mordorintelligence.com/industry-reports/canada-frozen-food-packaging-market?opinion=on

5. https://www.marketsandmarkets.com

6.https://www.cbc.ca/news/business/bank-of-canada-interest-rate-announcement-1.4933075

7. https://potatonewstoday.com/2018/09/14/

8. https://potatocountry.com/2018/05/16/

9. https://www.freshplaza.com/article/186936/

CITATION

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table of contents · the global frozen french fries’ market was worth around usd 19bn in 2016...

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