According to the USDA Korean potato update report, Korea’s 2022 fresh potato production decreased by 9.5% YoY to 510 thousand mt due to a significant drop in spring potato production in open fields. The decrease was caused mainly by reduced precipitation from May to June, which affected the yearly crop. Furthermore, domestic potato production is expected to continue gradually declining in the coming years, as a planted area for potatoes is projected to keep reducing. According to the USDA report, Korea’s potato-grown area in 2022 has reduced by 2.9% YoY to 21.1 thousand hectares and is expected to continue decreasing gradually in the near future as many farmers are shifting to more profitable crops, except for greenhouse production.
The decreasing production trend parallels an increasing demand for potatoes in South Korea. According to the USDA report, Korea’s potato consumption is expected to rise by 2.5% in 2023, driven by demand for prepared potato products. The increased consumption of processed or prepared frozen potatoes, mainly french fries, drives the increase in Korea’s import volume. In 2022, Korea’s potato and potato product imports increased by 17% to 266 thousand mt, mainly due to an 18% or 33.4 thousand mt increase in prepared frozen potato (frozen french fries) imports. As a result, Korea’s frozen french fry imports went from 119.5 thousand mt in 2021 to 141.4 thousand mt in 2022.
Source: ITC, Tridge
Besides low domestic fresh potato production in South Korea, there is also a decreasing trend of what goes into 2023 of imported fresh potato volumes driven by potato shortage production in the US. As a result, South Korean potato prices have taken a significant upward trend. According to Tridge Price Index, March monthly average wholesale price for fresh potatoes in South Korea reached USD 3.20/kg, a 26% increase from the previous month. Furthermore, According to the Korea Rural Economic Institute, potatoes are expected to maintain an upward trend during April, with an estimated 27 to 36% MoM increase as less domestic production is expected by then.
Strong demand for frozen french fries in the food service sector has driven potato imports in South Korea while fresh or non-frozen products have maintained minimal. However, in 2022, imports of fresh potatoes increased by 43% YoY, reaching 40 thousand mt as a clear sign of the upward trend in fresh imports. Although the US and Australia are the only authorized suppliers of fresh potatoes to Korea, more fresh potato suppliers could be allowed into the market after prices have gone up. Also, according to the USDA report, the shortage in Korea represents excellent opportunities for imported US fresh potatoes, despite the annual tariff rate quota of 4 thousand mt.
As for frozen prepared potatoes or frozen french fries, Korean importers have diversified their import sources and created trade opportunities for the benefit of some European suppliers. The Netherlands, Belgium, and Germany have all increased their exports to Korea due to increased unit prices and supply issues facing the two largest suppliers, the US and Canada. Notably, Belgium and China saw large export volume increases to Korea in 2022, rising by 97.1% to 40.8 thousand MT and 235% to 9 thousand MT, respectively. While imports from the US, Korea’s top supplier, were reduced by 0.5% to 79 thousand MT.