LATEST POSITION ACROSS NORTH-WESTERN EUROPE

Transcription

1 7 July 2015 AHDB Potatoes business report for Northern Europe The following articles include: 7 July 2015 North-Western European (NEPG) 2015 area estimate, market update and crop update. Potential GB 2015 production scenarios based on the recent GB area estimate. GB 2014/15 season review including latest UK HMR&C trade figures. Key highlights of Dutch and French 2015 seed plantings for the GB market. LATEST POSITION ACROSS NORTH-WESTERN EUROPE 2015 PLANTED AREA ESTIMATE The updated NEPG 2015 area estimate, excluding seed and starch potatoes, is available, with total area now estimated down nearly 4% from last year and production estimated down over 12%. Total NEPG area and production, shown in table 1 below, are not far off the 5-year averages. Table 1: NEPG 2015 crop area and initial production estimate (excluding seed and starch) Areas in all countries are estimated lower than in 2014, principally as a response to the low market prices available during the season. In Belgium, the lower area comes partially from a lower early area, with fewer contracts reported to have been available for early crops due to the level of old crop supplies at the time. Nonetheless, trade data for Belgium shows an unusually large amount of seed imported from the Netherlands in May. This could be an indicator of a late increase in maincrop plantings, or else a sign of the currently tight market there leading to seed supplies being imported for processing. In the Netherlands, the area estimate is unchanged from April, suggesting plantings were as intended. In France, there has been a moderate reduction in area of 2%, but this disguises larger shifts between sectors. The area planted for the fresh market has had the largest decrease, especially for salad varieties, while a greater number of contracts available for the processing market has led to an increase in area for that market. Market update: % Change from last year Production total NEPG, Kt, exc. seed and starch 28,507 24, % Area total NEPG, ha, exc. seed and starch 547, , % - Belgium ha, exc. seed and starch 80,434 79, % - Germany ha, exc. seed and starch 167, , % - France ha, exc. seed and starch 121, , % - Netherlands ha, exc. seed and starch 74,089 71, % - Great Britain ha, exc. seed and starch 104,000 96, % Markets are becoming increasingly uncertain in many parts of the NEPG, for both buyers and sellers. Weather has taken hold of markets in the past month, with the extreme heat in late June/early July driving market movements. All the main European ex-farm pricing series for the old crop began rising in mid-may, with many increasing more than 4 fold since the start of May. This has come on the back of delays to the new crop increasing the reliance on old crop supplies - and with weather extremes coming both earlier and stronger in mainland Europe than in GB, price gains came correspondingly sooner, as shown in table 2 on the following page. Reports from Belgium, for example, suggest that buyers are becoming increasingly prepared to move 12t loads off farm, despite these not filling lorries, due to the present shortage of available supplies.

2 Table 2: NEPG 2014 crop price comparison ( /t) 1 May 8 May 5 Jun 19 Jun 26 Jun May May May Jun Belgium (2014 crop, Bintje. Source Fiwap) Belgium (2014 crop, Bintje. Source Belgapom) France (2014 crop, Bintje. Source RNM) Germany (2014 crop, processing. Source REKA) Netherlands (2014 crop, processing. Source VTA) Great Britain (2014 crop, Weekly Free-Buy price) While overall supply levels are tightening universally across the NEPG due to delays with the new crop, the quality of remaining old crop potatoes is mixed. Similar to GB, there have been quality concerns for what remains of the Belgian old crop (in this case for frying) with buyers quality standards relaxing, although elsewhere, old crop quality remains good. Nonetheless, the current very tight supply situation looks to be a temporary issue, with pressures likely to diminish to a greater or lesser extent once further harvest supplies become available NEPG CROP UPDATE Although signs point towards a relatively average year, there is a lot of uncertainty surrounding crop potential and positions moving into the new season. Following planting delays in most parts, the hot and dry weather from June has impacted crops in all areas, although those that have been irrigated have fared much better. Outside the NEPG, there are reports from Spain that crops have had to be removed from the ground and grown in trays due to soil temperatures being simply too hot. The early crop in Belgium was harvested late this season, symptomatic of delays in both earlies and the maincrop. The longer the extreme heat and dryness from late June continues, the further crops are likely to be held back. Currently, processers are reported to be expecting suitable new crop supplies to be available from mid-july. Crops in the ground have decent (but not spectacular) tuber counts and dry matter content currently, but with fewer growing days than at this point last year, most are simply not ripe enough yet and have shown signs of water stress. There are more fears for later maincrop supplies, as with only 3% of Belgian area irrigated, according to FIWAP many growers harvesting later are unsure whether they will be able to fulfil contracts. On the whole, crops in the Netherlands are in a similar situation, although greater use of irrigation takes the edge off yield fears. For processors, the situation is also less immediately problematic due to the better condition of those remaining old crop supplies, offering slightly more lee-way for the new crop to be delayed. Yields still in general look to return more towards average. The final old crop supplies in Germany are expected to be used in the first days of July, making it essential for early new crop supplies to be available. However, with unusually few delays to earlies there so far this season, this has not tightened the German market any more than others. Exports are expected to Belgium and the Netherlands in the coming weeks of July as harvest progresses. Given the tighter new crop conditions elsewhere, and with yields expected close to average, this leaves German early growers with an essentially economic dilemma - harvest now with lower yields and higher prices to take advantage of others delays or harvest later to improve yields but sell at possibly lower prices. Costs have also been increased with the high level of irrigation, which may also influence some growers decisions. Crops in France faced a slow start with the cold and dry spring, followed by hot and dry weather from June which helped growth, particularly where irrigation is available. The recent extreme heat and dryness may yet harm some crops. From a yield perspective, tuber counts are not especially high, though this is very varied across regions. On the whole, the crop outlook is not dissimilar to that in GB. Crops in Great Britain appear to have been less drastically impacted by the recent hot and dry weather than elsewhere. The 2-3 week delays to growth which emerged in May have persisted on the whole, although conditions were mostly favourable during June. As a result, tuber counts are reported below last year s. Limited information on early crops concurs with yields closer to average.

3 2015 GB PRODUCTION SCENARIOS The first AHDB Potatoes estimate of total potato area in GB showed area for % down at 113.1Kha. With the area in 2014 already the lowest potato area in GB on record, this would set a new record low area planted to potatoes this year. It is worth noting that this estimate is provisional and subject to change, although it is not likely to change drastically. The area cut comes as an unsurprising response to the low prices during this season, however 2014 s supply situation was caused not by area growth but by almost record yields. Page 9 of our annual GB potatoes publication shows the historical relationship between prevailing market prices and impact on planted area, which looks to have been repeated once more this season. However, production in 2015 matters much more for markets this coming season than production (and prices) in the 2014/15 season. It is statistically unlikely that weather and crop conditions will be able to produce a second consecutive year of near record yields by definition yields would be more likely to return to an average level. Crop conditions, and very limited early crop data, so far point towards lower yields than in In order to see how yields could impact on production, the figure below shows potential production scenarios for 2015 given the current area estimate, using a range of yield figures. The yield range of t/ha in the production scenarios shown reflects yields in most of the past 10 seasons. This gives a production range of Mt. The 45.7 t/ha yield scenario is the GB 10-year average yield, excluding The highest and lowest yield scenarios look at the average yield deviation from the 10 year average in the past 10 years (excluding 2012), both positive and negative. This should in no way be taken as a yield prediction; it is simply taking historical data to model potential production scenarios for Even taking the highest yield estimate used here, with yields equal to 2014, GB production in 2015 would be 5.36Mt, the 4th lowest since Only the exceptional 1975, 1976 and 2012 seasons would have lower production. A tighter market may deliver higher prices, but there are risks Any of these scenarios would likely result in a tightening of the market next season, with corresponding price implications. However, with GB yields looking likely to fall back from 2014 levels anyway, given crop development so far this season, production levels may have tightened regardless of any area reduction. This leaves the risk that the estimated 6.6% reduction in area could result in an overcorrection of the supply situation, adding to the season-on-season volatility in potato markets.

4 GB 2014 SEASON REVIEW In summary, the whole planting, growing and harvesting period for the 2014/15 season has generally been benign, at times even ideal. While the GB planted area reduced slightly (-1.1%) strong yields led to an increase in production to an estimated 5.74Mt, up 3% year on year. For 2014/15, the free-buy average price has tracked at the lowest level since 2011/12. Two years of large production has led to larger stocks while demand has remained steady, along with a plentiful European supply putting downward pressure on prices. However, as the season draws to a close prices have started to firm, showing a gradual upward trend influenced by limited availability of best quality supplies. Although average free-buy values were lower than in 2013/14 for much of the season, by the end of June the free-buy average was over 30/t higher year on year, compared to around 70/t lower in January. Free-buy supplies have been adequate for a slow and selective demand which has been mainly for best, bright samples and high baker content lots. The free-buy trend has not been dissimilar to the overall average for much of the season, unlike in 2012 where the low supplies drove the free-buy price up. The HMR&C released the latest UK trade data for the season June 2014-April It shows that total UK imports and exports of potatoes have both decreased this year, to 1.5 million tonnes and 427,000 tonnes, respectively. We have, however, had record exports of seed potatoes from UK this year with 82,000 tonnes being exported to non-eu countries with the bulk of seed exports to Egypt at 59,000 tonnes. This is greater than the total of our seed exports to the EU (42,000 tonnes). Fresh exports to both Spain and Ireland have decreased from last year, with Ireland seeing a downward trend since 2012/13. However, these countries still hold the greatest combined export share of about 70%. For 2014/15, fresh exports to Belgium have increased to around 14,000 tonnes from 6,000 tonnes in 2013/14. The top destination of processed products in 2014/15 still remains Ireland at just under 88,000 tonnes. Processed exports to Spain rose to 7,500 tonnes from 3,800 tonnes, due to the processed product market itself increasing similarly to the UK in the past 12 months, with retail sales increasing 1.7% by volume and 0.4% in value. Table 3: Total potato production in GB, Total potato plantings (ha) 128, , , ,100 Average net yield (t/ha) Total production (Mt) Table 4: HMR&C June to end-april UK trade (in tonnes raw equivalent) 2011/ / / /15 EXPORTS Seed 108, , , ,124 Fresh/raw 165, , , ,463 Processed 146, , , ,735 Total Exports 420, , , ,324 IMPORTS Seed 24,521 33,957 26,082 17,130 Fresh/raw 198, , , ,976 Processed 1,421,151 1,344,767 1,437,243 1,337,514 Total Imports 1,644,106 2,006,270 1,743,965 1,547,621 Source: HMR&C as at 10 June 2015 Imports of seed and processed products are dominated by the Netherlands whereas the main imports of fresh potatoes are France and Israel. However, imports from Israel were lower than in other years due to religious reasons. Every 7th year in Israel is known as Shmita where the land is allowed to rest for a year

5 which is likely to have influenced the amount of land under potatoes. Looking into processed imports and exports in more detail, frozen/chilled products remain the largest proportion of processed exports and imports (39% and 76% respectively). However, over the past two seasons crisp exports have increased, now accounting for 39% of processed exports (in raw equivalent) in the period Jun-14 Apr-15. Despite this, crisp imports account for the smallest proportion at 4%. According to the AHDB Consumer Category Report, fresh potato volumes are continuing to stabilise with consumers benefiting from a grocery price deflation of 2.0% in 12 weeks ending 29 March 15 (Kantar Worldpanel) which has encouraged a 2.8% volume growth in total market. The average price for potatoes per kg has declined by 14% compared to the same period last year with a resulting decline in the value of the market. However, fresh prices of potatoes are still 18% higher than three years ago. Consumer confidence and trust in the industry has improved and discounters are still seeing a strong growth. With this discounter growth a range in the fresh potato variety and pricing may occur. Consumer snacking trends have been altered by more alternative snacks being available on the market. Potato snacks accounted for 5% of the new products on the markets, this is up on last year however is still lower than Mintel estimates the snack popcorn market, which is currently only one tenth of the potato crisp market, to grow 40% year on year between 2013 and DUTCH AND FRENCH SEED PLANTINGS Planting decisions for 2016 are a long way off yet, but seed plantings this year provide early indications about potential availability of seed for next year and seed markets in the coming year. After domestic GB supplies, the Netherlands is the principal source of seed imports into GB, followed by France. On the whole, this consists of newer chipping and crisping varieties for which there is generally insufficient seed grown in GB. Of the chipping varieties shown, Fontane has the largest area in the Netherlands for 2015, followed by Agria and Innovator. However, Agria and Challenger are the only chipping varieties of these to have increased in area. French seed plantings also show an increased area of Challenger as well as Fontane. Lady Claire accounts for the largest area of the crisping varieties displayed, and was also the only crisping variety shown here with a higher area. French plantings of Lady Claire are very similar to last year s. As the largest seed potato producing country in Europe, the Netherlands is also significant as a competitor to GB seed exports in countries such as Egypt. Spunta is an especially popular variety for export, being the largest individual seed variety grown in the Netherlands. Plantings of this have grown by over 9%, potentially posing increased competition to GB seed exports into Egypt in the coming season. In 2014/15, GB overtook the Netherlands as the main source of Egyptian seed imports this year. AHDB Market Intelligence contacts: Arthur Marshall Sara Maslowski Isobel Robinson Arthur.marshall@ahdb.org.uk Sara.maslowski@ahdb.org.uk Isobel.Robinson@ahdb.org.uk Disclaimer: While the Agriculture and Horticulture Development Board seeks to ensure that the information contained within this document is accurate at the time of printing, no warranty is given in respect thereof and, to the maximum extent permitted by law, the Agriculture and Horticulture Development Board accepts no liability for loss, damage or injury howsoever caused (including that caused by negligence) or suffered directly or indirectly in relation to information and opinions contained in or omitted from this document. AHDB Potatoes is a division of the Agriculture and Horticulture Development Board Agriculture and Horticulture Development Board All rights reserved. Further information phone or arthur.marshall@ahdb.org.uk