Canada Mounts Strong Challenge to U.S. Frozen Potato Fry Producers/Exporters
Summary
U.S. frozen potato fry exports in marketing year 1998/99 totaled over 472,000 metric tons, valued at $345 million, with both figures representing record highs. Japan alone accounted for half of the shipments with sales at $180 million. Canada's frozen potato fry exports have registered double-digit growth rates for the past several years, with sales increasing 230 percent compared to just four years ago. While the U.S. market accounted for over 80 percent of Canadian exports in 1998/99, Canada is expected to increasingly train its sights on key third country markets. Canada's potato processing industry continues to build state-of-the-art plants and its potato farmers continue to expand planted area. The acreage planted to genetically engineered seed has been on the decline in both Canada and the United States because of the prevailing business environment.
U.S. Frozen Potato Fry Exports Finish Decade with Record High Trends
Both the quantity and value of U.S. frozen
potato fry exports attained records of 472,394 metric tons and
$345 million in marketing year 1998/99. Over the past 10 years,
U.S. exports have steadily increased, particularly to East Asia
where the number of quick service restaurants has expanded
sharply. In 1998/99, East Asian countries accounted for over 80
percent of U.S. exports. Japan alone accounted for half of U.S.
fry shipments in that year, with sales increasing to $180 million
from $155 million following a year of sluggish exports due to the
Asian financial crisis. Frozen potato fries represented one of
only a few commodities that registered increases in sales, both
in value and quantity terms, during the crisis. Exports to Latin
American markets represented less than 8 percent of total U.S.
shipments, with Mexico accounting for well-over two-thirds of the
totals sales to the region.
Expansion of the global fast food industry, product quality, rising incomes in many countries, and ongoing promotion activities, including MAP-funded initiatives, have all played a role in stimulating demand for U.S. frozen potato fries. Export prospects remain promising, with shipments forecast to increase 10 percent in 1999/2000.
Canadian Potato Processing Plant Expansion and Increasing Exports of Frozen Potato Fries
The production of frozen potato fries in Canada continues expand at a rapid rate. Production rose 6 percent in 1998/99 to 910,000 metric tons and is forecast to increase more than 8 percent during the current marketing year (1999/2000). Much of the increase reflects the startup of state-of-the-art processing facilities in Alberta. The outlook for 2000/2001 is for a further increase in Canadian frozen potato fry production as heavy investment in new plants continues. Reacting to strong foreign demand for frozen potato fries, Canadian potato farmers continue to expand planted area.
Canada's frozen potato fry processors are becoming increasingly dependent on the export market. Exports in 1998/99 increased 17 percent to a record 460,000 metric tons, reflecting an expansion of production capacity in the western provinces and increased market penetration in the U.S. food service segment. While Canada has been the world's third largest exporter of frozen potato fries after the Netherlands and the United States, it is expected this year to supplant the United States as the number two supplier. The Netherlands remains by far the largest exporter, accounting for about 55 percent of total fry exports, with most of this product consumed by other European Union nations.
Canada's exports to the United States accounted for more than 82 percent of its total frozen potato fry exports in marketing year 1998/99. During this period, fry exports to the United States grew approximately 15 percent to 367,365 metric tons, valued at $230 million. Canadian fries are primarily shipped to the Eastern United States given the proximity of Canadian processors to these markets. This has resulted in the displacement of U.S. fries which had traditionally supplied these markets. Consequently, the U.S. potato industry has further focused its attention on developing and expanding new exports markets for its products.
Canada also exports frozen potato fries to a number of third country markets. The Canadian industry has been very successful in developing markets in Latin American markets given its freight advantage and lower priced product. Canada's exports to Japan have been steadily increasing over the years, but continue to pale in comparison to U.S. export volumes. However, with expanding production capacity and a lower valued Canadian dollar, Canada is expected to occupy an increasingly prominent position in a number of global markets
Demand for Genetically Engineered Potato Seed Declines
Both U.S. and Canadian processors are reportedly no longer buying genetically modified potatoes in response to growing objections from key fast food franchises and perceived concerns among segments of the consumer base. As a result, the acreage planted to genetically engineered seed in both countries has been on the decline and could well fall to zero in the near term given the market uncertainties surrounding genetically engineered products.
This development is considered to be driven by the prevailing business environment, as opposed to a shift in industry attitudes towards genetic engineered seed. Planting trends could be expected to reverse in favor of genetic engineered seed potatoes with improved consumer acceptance and a renewed willingness among key institutional end users to accept the product.
For more information, contact Ted Goldammer at (202) 720-8498.
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