Bruce Huffaker, Publisher, North American Potato Market News
Summer heat and limited rainfall have eaten into expected potato production in Maine, New Brunswick and Prince Edward Island (PEI). The region’s 2020 potato crop could be down 25 percent from 2019 production. Growers planted 3.9 percent fewer potatoes this year than they did in 2019, but yield losses are the major driver of this year’s expected production downturn.
Acreage cuts in other parts of North America, particularly in the Pacific Northwest, already had created a tight supply outlook for the 2020-21 marketing season. The losses in eastern growing areas complicate that outlook. The French fry industry faces the largest supply shortfall, but that deficit is likely to spill over to russet table potato markets and could eat into raw product supplies intended for potato chip production.
Potato crops in Maine, New Brunswick and PEI experienced extreme heat throughout the growing season. Temperatures in Caribou, Maine, are representative of the situation throughout the region. They averaged 3.2 degrees Fahrenheit above normal from June through September, peaking at 4.3 degrees Fahrenheit above normal during July. Scattered showers created variable crop conditions, but in general crops received about 50 percent of normal rainfall from June through August. The combination of heat and the rainfall deficit is likely to reduce potato yields in the region by as much as 25 percent, relative to the five-year average.
Production cuts may be more severe in Maine and New Brunswick than on PEI. About 15 percent of Maine’s crop is irrigated, but this year’s severe drought will take a toll on the remaining fields. New Brunswick has no irrigation for its potato crop. The situation is bad in the northern half of the growing area – and much worse in the southern half. PEI growers have not been able to dig new irrigation wells since 2001. PEI’s government shut down the use of surface water for irrigation before the end of the growing season due to low stream flows. However, the remnants of Hurricane Teddy brought PEI general rainfall in excess of 2 inches on Sept. 22-23. The rains came too late for most potatoes, but some Russet Burbank fields still had enough green left to benefit.
Already Tight Supply
Crop losses in the Atlantic growing region will exacerbate an already tight potato supply situation. At the behest of processors, growers across North America cut back on 2020 potato acreage. The biggest cuts took place in the Columbia Basin, which produces the largest potato yields in the world. Fryers reduced contract volumes at the peak of the COVID-19 scare, as processors expected the pandemic to result in a major reduction in demand for French fries. Though the pandemic continues to have a major impact on economies around the world, the downturn in demand for French fries has been much less than processors had anticipated at planting time.
North America’s harvested potato area may only be down 1.5 percent to 2 percent in 2020. However, the limited decline is misleading. The industry experienced major harvesttime crop losses in North Dakota and the Canadian Prairies in 2019. This year, crops have been harvested in record time with few problems during the harvest. That increases the harvested area in places with relatively low potato yields. Final yield data were not available at press time, but we have not been picking up reports of spectacular yields for any growing areas. The harvested area in the Columbia Basin is down 13 percent to 15 percent or more.
Processing Potato Supply Shortfall
The focus of the 2020 crop potato shortage is the frozen processing sector. Growers responded to contract volume reductions by cutting acreage accordingly or by shifting to varieties not generally used in French fry production. Growers in some areas may have reduced their table potato acreage, but any cuts in that category were limited in scope. Processing contract volumes dropped 15 percent to 20 percent on average, though the largest cuts were in the Columbia Basin.
Fryers offset some of the contract reductions with extended usage of storage potatoes from the 2019 crop. However, those potatoes did not last as long as had been expected. The industry planned to be using storage potatoes through September and possibly into October. The last of the 2019 crop had been cleaned up by the end of August. The combination of acreage cuts, crop losses in eastern growing areas and stronger than expected demand for finished product has left fryers and dehydrators with a raw product supply deficit.
Processors are working to minimize the impact of this year’s raw product shortfall. Their actions are likely to impact other industry sectors. They are exercising their rights of first refusal on any contract overages. We expect them to expand early-season production in 2021 and to encourage that harvest get under way as early as possible. Beyond those measures, the most logical way to expand the raw product supply is to purchase Russet Burbank potatoes that are intended to be marketed as table potatoes. The supply of those potatoes is limited primarily to Idaho and PEI. Fryers may experiment with other russet table potato varieties in hopes of finding some that will make acceptable product. In addition, they may be interested in purchasing open chip potatoes for use in products where length is not an issue.
The impact of this year’s processing potato supply shortfall will extend beyond the market for finished products. Supplies of russet table potatoes are likely to tighten as fryers pull Russet Burbank potatoes away from that sector. That is likely to boost russet prices and to create an umbrella for prices for other table potatoes. It also might eat into supplies of storage potatoes for the potato chip industry.
The shortfall is likely to encourage further expansion in the import of European French fries. In recent years, North American fryers have been unable to commit to supplying several small and mid-sized customers with frozen potato products needed to enter or expand their menu offerings. That has encouraged some of those businesses to import European product. Recent capacity expansion efforts were supposed to arrest that trend. This year, the capacity issue has been replaced by the raw product supply shortfall.
The EU’s exports of frozen potato products to the U.S. have tripled during the last two years. They totaled 331 million pounds during the year ending June 30, 2020. Further expansion is likely this year. Unlike their North American counterparts, EU fryers have a surplus of raw potatoes to draw from and plenty of capacity to expand their output.
Huffaker’s Highlights:
- Processing contract volume reductions anticipated a larger drop in French fry sales than the industry is experiencing.
- Crop losses resulting from a drought in Maine, New Brunswick and PEI will exacerbate an already short processing potato supply situation.
- The impact of the processing potato shortfall is likely to spill over into other segments of the potato industry.
- The raw product shortfall opens a window for further expansion of French fry imports from Europe.
