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By Dale Lathim, Potato Growers of Washington
A few years ago, the frozen processing sector of the potato industry was all up in arms about the discovery that frozen potato products from Europe were being imported into the United States. What started as a trickle of product mainly servicing the cruise ship industry and some minor retail accounts has grown into a firehose of product that accounted for more than 500 million pounds of product this past year. It now entails multiple new major retail accounts and is starting to get into some minor restaurant chains. The European foothold has gained so much momentum that Agristo (the major importer from Europe) is about to break ground on a plant in North Dakota to better serve its customers and cut down on freight costs. This will also help account for the growing region it sources from in Europe being nearly maxed out due to regulatory and rotation constraints.
The building of a plant in the U.S. is actually a good thing for growers as now they will at least get to supply some of the potatoes that have found their way into this market. As other new processors consider building plants in other parts of North America, I stand by the concept that this is a good thing for growers. Part of the reason I feel this way is that the companies we think of as North American processors also have facilities in these other countries that are looking to expand here. So if it is OK for us to “invade” their growing region, they should have the right to do the same here.
What we don’t need is for a country that used to buy a large amount of North American product to begin processing enough of its own potatoes to meet its domestic needs and then become competition to us in our export markets. This is what is happening with the three fastest growing countries for potato processing: China, India and Egypt.
Given the fact that China and India combined grow more than 40% of the world’s potatoes, it makes sense that they would become involved in processing some of those potatoes at some point. But what has happened is what I described here and what were once significant markets for our potatoes are now extremely minor, and China and India have become our major competitors in export markets.
Again, I am a firm believer in a free marketplace, and if they can produce an equal or better product at a comparable or lower price, more power to them. However, we as an industry must find a way to compete with them. Whenever this comes up, I am reminded of our mission statement at the Potato Growers of Washington, which is to “provide our customers, the potato processing companies, with the most competitively priced preseason potato contracts in the world.” I believe we have done that over the years as we have met the call from our processing customers to help them be more competitive. However, there is nothing we can do about the strength of the U.S. dollar, the cost of freight or any artificial cost like tariffs. I believe that we need to embrace the world competition and find our niche in this ever-changing marketplace.
The heydays of yesteryear are over and will most likely never return. There will always be a robust market for frozen potato products domestically. But our share of the world market will continue to decline as those areas that have natural advantages will continue to exploit them. I see the industry heading toward the exact opposite of what we saw during the 1990s and early 2000s when the only growth we saw in North America was through exports. Domestic use was nearly flat for more than a decade. Going forward, I see North America processing transitioning to supplying our domestic markets and their forecasted low single-digit increases for the next decade. I believe the current volume of exports will hold steady, but there will be no growth over that timeframe.