Worse than running out of potatoes on supermarket shelves, potato processing factories can't afford a stock-out. Yassen Abdelhay, export advisor at Arafa Group, reports on the crucial period for European factories from February to May 2023, and how Egyptian producers played a key role during this phase.
Abdelhay says: "Potato supply has become the main concern for all potato processors. If a factory runs out of potatoes, it can cost millions of dollars in lost market share, and it can also affect the viability of the business. Over the last two years, we've learned that potato production in the EU is not sufficiently sustainable to enable processors to adequately cover year-round demand for raw materials, for a number of reasons; European growers are faced with a number of factors that can no longer be denied, and which imply a sharp break with the past. Abdelhay lists these factors.
- Quality: The NEPG (North-Western European Potato Growers) has reported considerable concerns about potato quality, with growers dumping lower-quality potatoes on the market, while higher-quality potatoes are stockpiled. The current free-buy price is therefore misleading and is expected to peak by April and May 2024.
- Climate change has led to a much higher frequency of long, hot, dry summers, resulting in a considerable loss of yield per hectare over the last ten years.
- Environmental regulations and the presence of nitrates in soils limit or eliminate the use of fertilizers and pesticides. The new nitrogen rules are jeopardizing the quality of processing potato production in some EU countries. Harvesting after October 1 (which has been extended to October 15 this year) is subject to penalties on the amount of nitrogen fertilizer and manure that can be used next season, thus affecting production and quality.
- EU growers are suffering from high energy and other costs, making investment to increase existing acreage a difficult option for years to come. In a press release issued last September, the Northwest European Potato Growers (NEPG) expressed its concern at falling prices, which it believes no longer cover production costs.
- The shortage of cereals, mainly wheat and corn, due to the situation in Ukraine, is prompting flour mills to significantly increase the prices offered to farmers, creating serious competition with potato cultivation, which involves far more risks and costs (growing, disease prevention, storage in temperature-controlled barns).
- Traditional anti-sprouting agents have their limitations, and the alternatives are nowhere near as effective as chlorpropham-containing products, leading to increased storage efficiency problems.
- Access to irrigation water has become a bottleneck, as governments consider societal problems to be more important than agricultural needs; water has become a cost factor.
While facing all these concerns on the production front, EU potato processors continue to have a good global market share, and demand for fried products is increasing every year with the recent rise in prices, according to Abdelhay. "Exports of French fries and potato chips covered by customs code HS200520 increased by 4.0% over the past year. The three main suppliers - the Netherlands, Belgium and the USA - saw their exports increase over the year. This means that for any processor, success depends on obtaining good quality, sustainable potato raw materials."
It is in this context that Egypt has stood out as a reliable source of high-volume, high-quality supply, says Abdelhay. He explains: "Many EU processors have recently begun partially sourcing potatoes from outside the EU zone to cover the February to May period, in order to ensure sustainability and avoid potato stock-outs. Countries whose harvest calendar runs from February to May include Egypt, Morocco, Saudi Arabia, Israel and certain early varieties from Spain. Egypt is considered the best option among all these origins with many comparative advantages.
Abdelhay praises the strengths of the Egyptian origin: "Egypt dominated supply to Europe between February and May, a critical period for processors. There are several reasons for this. Firstly, the quality of Egyptian potatoes is excellent compared with European origins, especially as factories prefer Egyptian potatoes on sandy soil because of ease of washing and reduced waste. Secondly, huge quantities are available for export, with the harvest season running from January 1 to the end of June, and expansion plans are in place for the coming years. Egypt and the EU have trade agreements which are strictly enforced by the Egyptian government to ensure the best possible quality. Exports from Egypt to EU countries are subject to special rules: potatoes must be grown in pest-free areas, have been handled in certified packing stations and be exported by an officially registered exporter. Finally, all these advantages for Egyptian production are accompanied by very good prices for many varieties".
For its part, Arafa Group is one of Egypt's leading producers of processing potatoes, with planned production of 200,000 tons in 2024, according to Abdelhay. "In addition, we are an approved supplier to Pepsico Egypt, Saudi Arabia and Iraq, and we are one of the Egyptian companies approved to export potatoes to EU countries. Many of our varieties will be available for export by January 1, 2024. We have already signed export contracts with EU factories and are negotiating with others.
For more information:
Yassen Abdelhay
Arafa for export and agriculture development
Tel/WhatsApp: +201007244471
Email: [email protected]
www.arafatrade.com