Growing demand for Fresh & Processed Potato Products in China

According to a GAIN-report prepared by the USDA office in Beijing, China’s fresh potato production in marketing year 2017-2018 is forecast to reach 97 million metric tonnes, a 5% increase from the estimated 92 million metric tonnes in the previous period. This growth was mainly attributed to an increase in potato growing area.
Processed potato products accounted for approximately 20% of total production and these include products like starch, dehydrated potatoes, chips and frozen french fries. According to industry sources, many potato processing machines in China only run from mid-August to late March due to the limited supply of quality fresh potatoes and inadequate storage facilities. Many potato processing factories are located in China’s Northeast region where potatoes are harvested from September to October. The potatoes produced in other zones are generally not suitable for processing. As a result, China’s processing potato supply is very limited between March and August.
On 16 September 2017, China`s Ministry of Commerce extended the countervailing duties levied on potato starch imported from the EU for another 5 years. Potato starch imports from the EU are subject to countervailing duties ranging from 7.5 to 12.4%. The countervailing duty is imposed in addition to anti-dumping duty ranging from 12.6% to 56.7%. This duty dates as far back as August 2006, and is up for review in February 2018.
China’s potato chip production, on the other hand, continues to grow in response to strong market demand.
Meanwhile, China’s frozen french fries production is forecast at 250,000 metric tonnes, a 10% increase from 230,000 metric tonnes in 2016/17, driven by strong domestic demand. The report forecast China’s 2017/2018 imports of frozen french fries at 120,000 metric tonnes, a 5% decline from the previous period attributed mainly to higher domestic production. The US is the main supplier for frozen french fries to China with 65% share followed by Canada and Belgium.
China also exported its own frozen french fries at only 10,000 metric tonnes annually, with Japan being its largest buyer (68%).
China’s frozen french fries production has been increasing steadily in recent years, driven by increasing domestic demand from fast food restaurants and convenience stores. Demand for frozen french fries in supermarkets also grew rapidly in recent years as more Chinese consumers prefer to fry their own french fries at home, due to growing food safety concerns.
Frozen french fries production has strict fresh potato requirements such as shape, starch content, sugar content and color. Therefore, processors usually contract with farmers to produce potatoes which meet certain quality conditions.
China has plans to make potato the country’s 4th staple grain after rice, wheat and corn. Most of China’s fresh potatoes are used for table (direct) consumption with 60% of Chinese potatoes consumed as fresh in households and restaurants. The animal feed sector consumes about 20% while the processing sector consumes about 10%. The remainding 4% goes to seed potatoes and losses due to storage (5%). account for about 5 percent. Industry sources believe the share of processed potato products will increase in the long term.
The Chinese government does not allow market access for fresh potato imports from any suppliers due to Sanitary and PhytoSanitary concerns. On the other hand, China’s export of fresh potatoes remained steady at around 300,000 to 500,000 metric tonnes annually. This is negligible if compared to the country’s total production of almost 100 million tonnes. Industry experts believe that China’s One Belt, One Road facility will facilitate fresh potato exports to its major exporting countries such as Malaysia, Vietnam and Russia which took 65% share of China’s total fresh potato exports in 2016/2017 period.