Situation and Outlook for Frozen French Fries

United States

 

The 1998/99 U.S. potato crop is forecast at 21.6 million tons, 2 percent above the previous season’s harvest but 4 percent below the record large crop of 1996. Production is down both for the eastern and western states while production is forecast to increase for the Central states to 4.9 million metric tons, a jump of 11 percent from last year. The 1998/99 U.S. potato crop is expected to be the second largest on record.

 

About 28 percent of U.S. production potato is used to produce french fries. With a relatively large U.S. potato crop and a steady domestic demand for french fries, U.S. french fry production in 1998/99 is forecast to rise slightly to 3.4 million tons. From 1990 to 1997, U.S. production of french fries increased over 4 percent annually. Most of the growth in U.S. french fry consumption comes from sales to the food service sector.

 

With the expansion of the U.S. french fry industry, exports of french fries, especially to food service markets, have risen significantly. In 1998/99, U.S. exports of french fries are projected to increase almost 6 percent to a record 450,000 tons (20 percent of domestic production). In 1997/98, exports registered an 9-percent gain over the previous year.

 

The top 5 U.S. french fry markets accounted for nearly 75 percent of 1997/98 shipments. These countries include Japan; with 52 percent of total exports; Hong Kong at 7 percent; South Korea and Canada with 6 percent each; and Taiwan at 5 percent. Latin America is relatively a new market; the largest markets are Mexico, with a 70 percent share, followed by Chile, Argentina, and Brazil. However, export prospects to South America are for the time limited given the lower transportation costs enjoyed both by the Canadians and the Dutch.

 

Expansion of the international fast food industry, product quality, rising incomes in many countries, and ongoing Market Promotion Program activities have all played a role in stimulating demand for U.S. french fries. Export prospects for the next decade are very promising, given the sustained and continued expansion of the international fast food industry.

 

Netherlands

 

In 1998, Dutch fresh potato production is expected to continue upward with the Dutch crop estimated to increase 4 percent, at 5.4 million metric tons. However, the yield is forecast to be lower in 1998, due to heavy rains and pest infestations such as late blight and brown rot.

 

The Dutch are by far the largest exporter of frozen french fries in the world. In 1997/98, Dutch exports totaled 1,088,000 metric tons; for 1998/99 exports are forecast to increase about 5 percent. According to Dutch industry sources, several factors contributed to stronger exports. First, the continued growth of quick service restaurants throughout the EU, particularly in southern Europe, propelled exports, due to the proximity of Dutch plants. Second, Holland’s processors of frozen potatoes have expanded sales to markets outside of Europe, e.g., Middle East and South America. About 90 percent of Dutch exports go to other countries in the European Union (EU).

 

Imports of french fries into the Netherlands have remained small, accounting for about 5 percent of total supply. From a limited base, 1998/99 imports of french fries are forecast to increase about 17 percent with an unchanged Dutch potato harvest.

 

Canada

 

Reacting to strong domestic and foreign demand for french fries, Canadian potato farmers continue to expand planted area, particularly in the provinces of Manitoba, Alberta, and Saskatchewan. In 1998, potato production in these provinces combined increased 10 percent to 1.3 million tons, accounting for 31 percent of Canada’s entire potato crop. The total Canadian harvest for 1998 is estimated to have increased 2.6 percent to 4.2 million tons.

 

Canada’s french fry production rose 13 percent in 1997/98 to 860,000 tons and is forecast to increase by almost 5 percent in 1998/99. The trade anticipates frozen french fry production to exceed one million metric tons by the year 2000 as processors in Canada continue to invest heavily in new potato processing plants in the western provinces.

 

A major U.S. french fry company, which wants to remain fully competitive with its Canadian and U.S. rivals, is building a state-of-the-art potato processing plant in Alberta. Just recently, a Canadian processor announced plans to build another potato processing plant with an annual capacity of 90,000 metric tons of frozen french fries, and will be constructed to allow for a doubling of production for future expansion.

 

Canadian french fry makers increasingly depend on exports for additional sales. Exports in 1997/98 increased 30 percent to a record 447,677 tons, reflecting expansion of french fry capacity in the western provinces and increased production for export at Eastern production points. Canadian exports to the United States accounted for more than 83 percent of total frozen french fry exports in MY 1997/98. Exports of french fries to the United States increased by about 37 percent over MY 1996/97 and are expected to continue at double-digit growth rates for the near future. Construction of new processing facilities, contracts to supply major U.S. fast food companies, and a lower valued Canadian dollar continue to fuel the growth in export demand. Some of the other Canadian markets include Japan, Venezuela, Brazil, Malaysia and Guatemala. An increase in exports to the Pacific Rim countries is expected given the expansion in processing capacity.

 

Canadian imports of U.S. frozen french fries nearly doubled in MY 1997/98, reaching more than 23,500 metric tons. Small increases are projected for the future given Canada’s revisions to package size requirements, albeit tempered by a strong U.S. dollar and increased Canadian production.

 

In December 1998, the Canadian Food Inspection Agency amended the regulations prescribing standard container sizes for frozen french fries by establishing a new standard container sizes between 2 and 20 kilograms. For years, U.S. exports of frozen fries faced onerous packaging size rules, which limited sales of frozen french fries to Canada’s food service sector.

 

Japan

 

Japanese production of frozen potatoes is relatively small and continues to decline as farmers focus on the more profitable fresh market. In 1997/98, less than 3 percent of Japan’s total potato was processed. Hokkaido, in the northern islands of Japan, accounts for over 75 percent of the nation’s fresh potato production.

 

Despite Japan’s sluggish economy, imports of frozen french fries continue to grow at an annual growth rate of 7 o 10 percent. In 1997/98 french fry imports were 250, 786 metric tons, up from the previous years level of 234, 242 metric tons. Industry sources expect fast food sales will continue to grow rapidly into the 21^st century, boosting imports of frozen potatoes. The United States supplied 87 percent of Japan's french fry imports. Canada held a 10-percent market share, while China and Australia accounted for 2 percent and 1 percent, respectively.

 

As elsewhere in the world, most french fries (nearly 90 percent) in Japan are consumed at international fast food hamburger chains, with the balance served at western style family restaurants, snack bars, and food service restaurants. Japan has more than 6,000 hamburger shops, with one international fast food chain of over 2,600 stores, consuming over 40 percent of the nation’s frozen french fries, or 100,000 metric tons annually. Sales of frozen french fries are relatively small, with no significant changes in consumption patterns expected.

 

 

For further information on supply, distribution, trade, and U.S. marketing opportunities, contact Ted Goldammer at 202-720-8498.

 

 

Last modified: Thursday, April 06, 2000