Potato Trade Deficit
In 2003, the U.S. trade balance in potatoes and potato products was in deficit for the first time ever. Total U.S. exports were valued at $646 million in 2003 down 11 percent from 2002, while imports were valued at $682 million up 19 percent. The $36 million deficit came after a decades-long surplus, which peaked in 1995 at $437 million.
The ever-increasing surpluses had been led primarily by the growth of frozen french fry exports, which were spurred on by the boom of quick service restaurants around the world. However, over the past 10 to 15 years, Canadian production of frozen potato products has expanded tremendously, and imports of Canadian fries to the United States have grown an average of 23 percent annually in volume since 1989, totaling 1,525 million pounds in 2003 valued at $435 million. Total U.S. exports of frozen fries, conversely, have grown at an average of 9 percent annually since 1989. However, frozen fry exports have actually declined for the past two years, totaling 936 million pounds in 2003, with an export value of $313 million.
This is also the third consecutive year total frozen potato product exports have declined. While overall weaker economies and increased competition from other major frozen potato-producing countries such as Canada and the Netherlands can explain part of the decline, it appears that overall demand for frozen potato products may be in decline. U.S. exports of frozen potato products to Asia have led the decline since 2000, with the largest drop coming in exports to Japan, the leading single-country U.S. frozen potato export market. Export volume to Japan declined between 2 and 4 percent annually from 1999 to 2002, and declined by 13 percent in 2003. However, several Asian countries, particularly China and India, still show vast potential for increased demand for frozen potato products in the coming years, and could help to spur growth in U.S. exports once again.
Exports for most other potato categories in 2003 were also down from year-previous levels, perhaps most notably for fresh potatoes volume down 16 percent, value down 29 percent, and potato chips volume down 21 percent, value down 13 percent. Fresh exports to Canada, the largest U.S. fresh export market, fell 25 percent below 2002 levels, while the largest declines in chip exports in 2003 were to Canada, Taiwan, Japan, Korea and Hong Kong.
The only potato categories to exhibit increased export value in 2003 were seed volume down 2 percent, value up 10 percent; other frozen volume up 10 percent, value up 7 percent; other preserved potatoes volume up 2 percent, value up 5 percent; and flakes and granules volume up 54 percent, value up 19 percent. Much of the increased exports of flakes and granules were destined for Mexico where they were used to manufacture a new potato chip product which was then exported back to the United States. Exports of flakes and granules to Mexico rose from 9 million pounds in 2002 to 46 million pounds in 2003, while imports of potato chips from Mexico rose from just 103,491 pounds in 2002 to 23 million pounds in 2003.
