Frozen Potatoes Market Overview
This report provides insights on recent challenges, disruptions, and events in the frozen potato industry in Canada and North America. The research team found that crop shortages combined with high demand are stressing the supply of frozen potatoes for processing, which is increasing prices. In addition, production capacity of frozen potatoes is now higher than ever. Full details are included below.
Insights on Crop Shortages in the Canadian and North American Potato Industry
- The price of potatoes could increase in 2020 based on 2019 seeing the highest number of unharvested potatoes in Canadian history. While the planted crop of 360,000 acres was 3.7 percent higher than in 2018, 20,000 of those acres went unharvested due to climate issues. The harvest was well below what the industry planned for.
- The price of French fries in particular could increase as the Canadian harvest was hoped to offset the American harvest, which produced smaller potatoes than normal. Larger potatoes are needed for French fries.
- With potato production down in the U.S., prices are significantly higher for processing plants that produce frozen potato products. Potato growers are able to make $12.23 per hundred pounds in February 2020, compared to $6 in February 2019. Most of the profit comes from the fresh market.
- 2019 was the second year in a row that the Canadian potato harvest was affected by a difficult climate, contributing to an ongoing shortage.
Insights on Challenges with High Demand for Frozen Potatoes
- U.S. potato imports and exports have increased by 53 percent in the past 10 years. Processors are importing more potatoes from Canada due to being unable to keep up with demand through domestic supply.
- In the last 20 years, U.S. potato exports have increased by 121 percent, largely as a result of increased frozen potato demand.
- The price of frozen potatoes in Canada increased by 17 percent from December 2018 to December 2019 as a result of shortage and demand.
- North American production capacity expanded by 8 percent between October 2018 and December 2019. Most of the result of this expansion will be seen in 2020, at which time demand for potatoes to process will be increased.
- While the shortage is significant and demand is high, producers are widely reporting that there are enough potatoes to process to meet demand once imports and existing inventory are taken into account.
- Any negative effects from the crop shortage and high demand from 2019 will affect the supply of frozen potatoes for processing more than any other potato market, according to Rachel Atkinson-Leach, category and brand manager with the Bancroft, Wis.-based Russet Potato Exchange Inc.
Insights on Additional Disruptions and Events in the Frozen Potato Market
- There has been a recent movement amongst industry leaders to motivate the Philippines to remove a 10 percent tariff on frozen potatoes established in 2019. If removed, industry leaders estimate fry imports from the U.S. would increase from $5 million to $10 million in 2020. The Philippines is the fifth-largest market for U.S. fries. If the tariff isn't removed, prices could go up for consumers.
- Kraft-Heinz is considering the sale of Ore-Ida, a frozen potato product line, to pay down its debt. The brand is estimated to be worth $1.5 billion to $2 billion. Potential buyers are Conagra and Lamb Weston.
- McCain Foods Canada is increasing its French fry production in New Brunswick, Canada. In 2019, it invested $12 million to expand its facility in two phases, with the second phase completing in early 2020.
- The McCain expansion, combined with its $65 million expansion in New Brunswick in 2017, is the largest capacity expansion investment in Canada in nearly 10 years.
- U.S. potato farmers are celebrating the signing of the USMCA under President Trump. The bill is anticipated to ease restrictions on the amount of agricultural products, including potatoes, that can be sold in Canada. It isn't yet known how much an impact the bill will have on the potato markets.