Flexible processors can profit from ultra-low fries prices

The EU-4 potato quotations have seen a start-stop situation, with very little actual free-buy potatoes changing hands. With the available quotations it is possible to calculate the DCA Frozen Fries Index. This shows the lowest cost price level for French fries since the start of the Index. There is however a catch to this story. The DCA Frozen Fries Index hit its lowest level ever – in between week 35 and week 39. Cost price levels barely reached €100 per tonne, which makes it possible for potato processors to produce French fries at very cost-efficient levels. This is something that is needed for European processors to once again gain a foothold on the world market. Contract arrangements The reality of the situation is altogether different. Processors rely heavily on contract arrangements with growers and trading companies. In the Netherlands for example, at least 80% of the total potato requirement is covered by contracts. In Belgium this was traditionally 60%, but levels have increased during the last decade. When sales of fries and other potato products are not meeting expected levels, this coverage and percentage automatically increases. This is the reality that the processing companies are currently facing. The hands of most EU-4 processors are tied with high levels of contract potatoes. This situation is also shown by the quotations, that remain at extremely low levels. The Netherlands is the only country that doesn’t have a quotation for processing potatoes. PotatoNL is only publishing a price for the Innovator variety, which does find a home at processing companies. Fontane, the most used variety, is not quoted as the limited quantities that change hands are usually pre-bought. Price level x20 EU-4 potato processors and exporters are facing stiff competition on the world market. Mainly from China, India and Egypt in selected markets. In order to become competitive again, the price of their end produce has to significantly decrease. Not an easy feat considering the high cost of production in the EU. If a processor can secure free-buy potatoes at the current price level, this gives him the edge over contracted potatoes, which are currently being bought for €18-€20 per 100 kg. That is in stark contrast to the current €1.5 being paid for free buy potatoes. Other factors, such as sunflower oil and natural gas, show little movement and thus have no impact on the final fry prices. Of course there are plenty of other factors that play a role in the total cost price. Increasing labour costs are one of the most important that European processors are struggling with. For 2026 the wages levels will increase to a lesser extent compared to this year, but they remain at all-time high levels. Ultimately this puts EU-4 companies in a difficult situation when it comes to their attractiveness on the world market.