EEUU: Frozen potato market important too
Attendees to the 2018 Southern Rocky Mountain Agricultural Conference had the opportunity to hear an overview of the frozen potato market.
With Colorado and the San Luis Valley trading in the fresh potato market the presentation was opened with the question, “why should you care?”
“The fresh potato market which you all have here trades in about one million weight of potatoes. We (frozen potatoes) have about two million weight. We are twice as big. If we ever have a surplus we could crash your markets in a heartbeat. We hope that never happens but it is a reality. Of course, on the other hand, there could also be a situation where we have to eat your produce,” said Dale Lathim, executive director of the Washington Potato Growers for United Potato Growers of Colorado.
Lathim explained that the frozen potato market is comprised of around 70 growers, with over 200,000 acres for four major different processing companies. In his over 20 years of experience in the industry Lathim explained he has seen a roller coaster of change. “We had a big boom when restaurants started the super-size French fries. We were worried how were we going to grow enough potatoes and produce all of those fries. Then of course there was the health issues that were brought up and then that changed. The Canadian dollar went down in value at one point and everyone thought a new processing plant was going to be put on that side of the border. It’s been one roller coaster after another,” he said. In comparison the fresh side hasn’t seen a lot of change and simply has experienced new varieties being introduced.
A difference between the markets is that on the frozen side contracts are pre-negotiated a year in advance. “Our market is very stable and everything is negotiated a year in advance. You don’t have that. One year prices are good and another they’re down for the fresh side,” said Lathim. In the last few years the frozen market has started to have multi-year contracts due to the reliable stability.
Lathim stated that a concern is that the frozen potato market profit margin has been going down. “They are still making money but there are some issues contributing to it... growers are still making money, just not as much as they’d like... but they’re still staying in business, growing and buying new equipment.”
Lathim said that supply and demand does not affect the frozen potato market the way it may others. “Quick serve restaurants is what drives our market. When you think of frozen potatoes automatically you think of French fries. These restaurants are our bread and butter. We have to have them functioning. There’s also the industrial part of it which are things like schools, cafeterias and the military. Finally, retail such as supermarkets. The retail is a minor segment for us, less than 20 percent,” said Lathim.
The potato industry overall is expanding throughout the world. The North American market has remained pretty much flat. Lathim stated that the biggest current growth occurring is in Latin America. However, the greatest growth potential is in Asia. “In the U.S. we consume about 28.2 pounds of potato products and we have 320 million people. In Asia their annual consumption is only point six pounds and they have 3.9 billion people. It’s an unbelievably ripe market for someone to get in there... we are looking into new ways to get into the market such as new recipes, working with the restaurants and exports.”
Lathim said that the frozen potato market is not stagnate. It is growing exponentially with the United States and the EU being the biggest competitors. “We’re seeing growth and continuing to go forward. We were counting on one percent growth and if that was correct the market would be at 30 billion pounds by 2020. However, for the past 18 months in North America we’ve seen more than two percent annual growth. At the rate the world market would be 31.2 billion pounds by 2020,” said Lathim.