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Unusual market dynamics impact trade patterns

Publication Date: 
9 June 2017

Amber Cottingham, Analyst, amber.cottingham@ahdb.org.uk, 02476 478698

The season so far has been characterised by tight markets, both in GB and more widely across Europe. This is a result of the lower than average yields achieved for most of the main European potato producing countries last year and the subsequent lower production level (read more here). This lower level of available supplies has had an effect on trade. Coupled with currency changes this year, there have been some sizeable shifts in import and exports of potatoes and potato products.

Import situation

The biggest change in the import situation is the substantial decrease in the volume of seed coming into the country, down 57% year on year. This comes as no surprise as the European seed producers were reportedly going to extreme measures, such as cutting and reclassifying seed, in order to meet local demand. In Europe, the tight supply caused some very high seed prices, reaching more than €1,000/t for some varieties. In Scotland, where much of GB’s seed is grown, yields were mostly unaffected and therefore seed availability was not as problematic in comparison.

Although only down 2% year on year, this is the first year in this decade, where there has been a decrease in imports of frozen processed potatoes to the UK. This has been driven by two main factors:

  • Firstly, the tight supply situation in Europe has meant raw European potato prices have increased; and
  • Secondly, since the vote to leave the European Union the pound has been weaker against the euro, making it more expensive to import goods into the UK.

These factors combined may have made this trade flow a less desirable option for many.

Although seed and processing imports may be down, fresh potato imports are up 5% on the year with most of it coming from France, the Netherlands and Belgium.

Export situation

An increase in processed exports from the UK compared to last year (Figure 2) is likely driven also by the tight European supply situation. As the currency shift has made importing to the UK more expensive, it has likewise made exporting to Europe relatively cheaper.

A surprising result of this season’s unusual trade dynamics is that UK seed exports havent increased quite as much as one may have thought. However, with most of the UK’s seed exports going to markets outside of Europe, to countries such as Egypt, it might not be so surprising that there hasn’t been a significant increase in exports.

In overall terms, the UK has been a slight net-importer of fresh potatoes so far this season, of just under 5,000t, with the majority of exports taking place from September through to December. The majority of fresh potato exports have gone to Spain, Ireland and Belgium respectively.

Concluding comments

The season so far has shown some shifts in typical trade patterns, driven both by tight supplies, high prices and currency swings. As an exit from the EU looms, we will be monitoring these patterns going forwards to see if they return to normal or if a more permanent shift in trade is likely.

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