When Economy Grows, Potato Market Will Grow Too

According to “U.S. Potatoes,” a new Rabobank report, the U.S. potato sector is expected to experience a slight slowdown in demand, before it recovers in 2010 — when economic growth is expected again.
 
Once the economy recovers, the volume of potato consumption is expected to rise. Income growth in countries such as China and India, has led to an increase in consumption of Western-type products — such as French fries, which continue to be most important potato export product of the U.S. However, in the short term, the economic downturn is expected to slow demand, and investments in the potato sector are expected to be reduced.
 
“While the short-term outlook for the U.S potato sector is at best neutral, the long-term outlook for the U.S. potato sector is positive — once the economy improves,” said Assistant Vice President Marieke de Rijke of Rabobank’s Food & Agribusiness and Advisory department. 
 
The U.S. has a strong position in frozen French fry exports due to a high-quality infrastructure, which is strongly desirable for exporting quality potatoes and potato products around the world. Exports have increased because of rising demand from developing regions — particularly Asia. In addition, exports had surged due to the low value of the U.S. dollar. However, as the U.S. dollar has appreciated, and depending on how the exchange rate develops, the U.S. could lose some of its competitive export position.
 
“In order to maintain current export levels, it will be key for the potato sector to stand out in quality and customer relationships,” said de Rijke.
 
In the U.S., consumption levels reached a peak about a decade ago. At that time, potatoes became known as calorie-loaded and some fad diets gave the potato a bad reputation, and levels of both fresh and processed potatoes started to decrease. Consumer desire for healthier lifestyles and a desire for change meant consumers started to favor rice over potatoes as a source of carbohydrates.
 
“Since then, marketing activities have helped reverse the trend of decreasing potato consumption,” said de Rijke. “However, further product innovation will be key for consumers to increasingly appreciate the potato again.”