Can Egypt Close the European Potato Shortage Caused by Extreme Weather?

2023 has been marked by global climate changes that have disrupted potato production and altered caused procurement channels and global trade. While global demand for potatoes is rising, the weather is diminishing European farmers' prospects for potato profitability. Extreme weather events, rising input costs, and regulatory changes all have contributed to a sharp decline in potato harvest, particularly in Europe. The decrease in potato production has affected the processed potatoes sector in Europe particularly, with producers desperately searching for new sources outside the European Union.

The demand for processed potatoes and French fries keeps increasing year after year, and while European factories generally cover their demand locally, potato production in these countries is not sufficient anymore. As a result, the potato shortage has directly affected potato by-products, and the prices are reaching record levels in 2023. Europe is particularly more affected than others because it is a net exporter of potato by-products, specifically of the popular french fries.

Estimates show that harvests in Northern Europe, the UK, and Ireland were about two million tons smaller than usual, resulting in a reduced supply of potatoes for the processing sector. Last year was the second warmest on record in Europe, with drought conditions being the main reason for the decrease.

For the second year in a row, Spain faced a severe heat wave and drought towards the end of April, substantially impacting potato production at an estimated 30% decrease in production. Early potato production was affected in Andalusia, and the output reduction in 2023 is estimated to be between 25% to 35% YoY lower, according to the Association of Producers and Exporters of Fruit and Vegetables of Andalusia. Similarly, in the Netherlands, the potato sector is grappling with the impact of adverse weather, rising input costs, and regulatory changes, all of which pose significant challenges for farmers and affect the industry's profitability.

In Germany, although the region of Bavaria has traditionally been one of the most important potato-growing regions, the cultivation of table potatoes has lost importance in recent years.

The lack of farm succession, small-scale agriculture, and the attractiveness of alternative crops have made potato farmers switch to other, more profitable crops, which has decreased the planted area.

In Italy and Greece, recent heavy rainfall and floods have prevented potato growers in these regions from continuing their usual planting. While in Ireland, a cold, wet spring has severely delayed potato planting in many farms, which has caused a drop in potato yields this year. It has been predicted that Ireland's potato production shortfall in 2023 will match that of other countries. The decrease in Ireland is significant because earlier this year, a large number of potatoes were exported from Ireland and the UK to European countries, and this trend has been growing exponentially in recent months. As a result, potato stocks in Ireland and the UK have never been as low as they are now, and a reduction in production will affect the industry severely.

Extreme climate has also impacted Egyptian production but to a lesser extent than in Europe. From mid-January, Egypt was impacted by a prolonged cold snap that caused phytosanitary problems and affected volumes and sizes, with yields dropping from 22 tons per hectare to 12 to 13 tons. However, the Egyptian desert regions have not experienced this problem, and the fact that the land there has recently been reclaimed and used for production for the first time has resulted in good yields. As a result, Egyptian potato suppliers strengthened their position in Europe.

Besides the cold snap in February, Egyptian potato farmers have not had any concerns about the production and marketing conditions this year. Furthermore, logistics seemed to be back on track after several constraints last year. This year, there have been great improvements in the logistics supply chain, particularly in Eastern Europe and Russia.

The European potato shortage has opened new markets for Egyptian potato exporters. With the drought that hit France this year, Spain and France have already turned to Egypt for potato supply, and it is expected that the Netherlands, Germany, and the UK will follow. The shortage will likely continue throughout 2024, so we will see two consecutive years of challenging market conditions for the potato industry in which Egypt will benefit and expand markets and export volumes.

Potato production in Egypt, however, is still needed to satisfy the demand in Europe and Russia, its leading destinations, at the same time. So prices in the processed potatoes market are expected to remain at very high levels throughout the next couple of years.