The Covid-19 outbreak in 2020 had a large impact on the worldwide consumption of frozen potato products (FPP), such as fries, and consequently on the production of FPP in Belgium, France, Germany and the Netherlands. However, governmental Covid-19 support measures for potato growers did not affect frozen potato prices.
Support to farmers from the Common Agricultural Policy (CAP) has never been given for ware potato growing, also not in or after the Covid-outbreak period. Concluding, no governmental support from the European Union or national governments has been observed that led to FPP market distortion. Wageningen University and Research concluded this in a study commissioned by the European Potato Processors’ Association (EUPPA).
Effects of Covid-19 measures on prices were absent
Only the governments in two main processing countries, i.e. Belgium and the Netherlands, took specific measures to support affected growers of processing potatoes, while the governments in the countries with the largest potato production (Germany and France) did not take support measures for potato farmers.
The temporary governmental Covid-19 support for potato growers in Belgium and the Netherlands compensated only a part of the growers’ potato production costs and covered a limited part of the total potato market (only free, non-contracted potatoes in storage that could not be sold to processors). Because these measures were announced afterwards, the direct effect of governmental support on market and price formation of potatoes was nil. This also means that the national Covid-19 support did not affect potato prices nor frozen potato product prices, since the support only targeted potatoes that were not sold for processing.
No CAP support for ware potatoes
Besides, it was demonstrated that CAP has never been used to support ware potato growing or ware potato prices. The CAP has evolved from a general support system for agricultural production in the European Union after World War II towards a set of regulations for a sustainable, climate- and environment-friendly agriculture and to ensure a liveable countryside throughout Europe.
With the start of the CAP, a number of crops were included in the Common Market Organisation (CMO), and received coupled support during a number of decades. Ware potatoes (unlike starch potatoes) have never been part of the CMO and therefore never received such support. Currently, for all crops all support is de-coupled from production (apart from some cases of voluntary coupled support in certain member states, but never for ware potatoes). CAP-support has nowadays the form of a flat rate, which is a fixed payment for each hectare of agricultural land that complies with certain sustainability criteria.
No FPP market distortion was observed
European potato processors were excluded from the temporary government Covid-19 support on potatoes. Furthermore, they hardly benefited from the lower spot market prices of free potatoes, because of their contractual obligations with potato growers for a large majority of their resource needs. Thus, they were dependent on purchasing more expensive contract potatoes. Instead, some processors, affected badly by the Covid-19 crisis, could potentially use general Covid-19 support measures (like tax and other temporary emergency bridging measures applicable to companies in all sectors) or other temporary unemployment schemes. These measures helped them to survive the crisis, but did not have an effect on FPP-prices.
Context of the research
The main question of this research was what the impact has been of Covid-19 support measures by national governments and support from the CAP to ware potato growers in Belgium, France, Germany and the Netherlands on the prices of processing potatoes and, consequently, on FPP prices. Some European governments responded to the Covid-19 outbreak with short term plans to support affected potato growers.
This raised the question whether potato prices and frozen potato product prices were influenced by governmental support. This question was extended for the European Union measures to support agriculture from CAP. This study focused on Belgium, France, Germany and the Netherlands, the main countries in Europe that produce (processing) potatoes and FPP. While Germany and France produce the largest volumes of potatoes annually, Belgium and the Netherlands are leaders in frozen potato production and FPP-export all over the world.