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25 September 2013 | Marino Donati
Supply chains will have to be “rebalanced” to combat volatile prices in the European potato market, a report has warned.
Potato prices will rise gradually and be more volatile over the next five years in reaction to unstable supply in north west Europe, according to the latest research from Rabobank.
Potato supply chain operators should rebalance their risks and returns by either adjusting control over the overall supply chain or by reconsidering their business model to insulate against price and supply issues, the report said.
“North west European potato prices have already been much more volatile than other food commodities,” said Rabobank analyst Cindy van Rijswick. “In north west Europe, there is a sensitive balance between supply and demand. If production exceeds demand, prices drop sharply and vice versa.”
The yield of crops, which is highly dependent on weather and disease, is the biggest factor determining price. But demand for potatoes produced in north west Europe, and their market value, is expected to increase in the next five years as consumers shift towards higher value products such as premium crisps.
Emerging markets have also shown strong demand growth for frozen processed potatoes, mainly driven by an increase in fast food outlets. Rising farming costs will also contribute to an increase in prices.