Surplus Marks Turnaround After Two-Year Trade Deficit

U.S. net imports of frozen french fries are projected to be cut by more than half – from $155 million in 2004 to $69 million in 2005, according to USDA’s latest Vegetable and Melons Outlook, released Oct. 20. Also, exports of potato chips are expected to exceed imports by about $91 million this year, an increase from $87 million last year.

Together, these and trade balances of other potato products will likely turn 2004’s U.S. potato trade deficit of $50 million into a surplus of around $60 million in 2005.

This turnaround is the result of higher export unit values, lower potato production in Canada – which reduced exports to the United States – and higher export volumes for fresh and frozen potatoes. For total U.S. potato trade in 2005, net imports from Canada are projected to decline by $56 million, while U.S. net exports to the rest of the world are expected to increase by $55 million. The difference between these net trade balances is the $60 million U.S. trade surplus forecast for potatoes in 2005. Canadian exports of frozen french fries to the United States are running 15 percent behind 2004’s pace, based on January-July data. Only 8.9 million cwt. have been shipped through July, compared with 10.5 million cwt. in 2004.

Further, the average import unit value of frozen fries from Canada is running 7 percent higher than last year. On the other hand, Canada’s exports of fresh or chilled potatoes to the United States through July are 9 percent higher than last year.

After frozen fries, the United States’ next largest potato import is now chips, worth $96 million in 2004, most of which came from Canada as recently as 2002. However, starting in 2003, imported chips from Mexico surged so much that in 2004, Canada’s share of U.S. chip import value was reduced to only 38 percent. At the same time, Mexico’s share ballooned to 61 percent from near zero in 2002.

The largest foreign markets for U.S. potatoes are Japan, Canada and Mexico, which together will account for about $540 million in export value in 2005, or 65 percent of total U.S. potato exports. While the bulk of U.S. exports to Japan consist of frozen fries, the biggest shipments to Canada are fresh and seed potatoes. Mexico is a fast-growing market for U.S. frozen fries, dehydrated potatoes and potato chips. China is an emerging market for U.S. frozen fries. At the same time, Canada and Mexico are the leading sources of U.S. potato imports. Canada still dominates the U.S. import market, accounting for 82 percent of total import value in 2005, followed by Mexico with an 8-percent share and the Netherlands with 3 percent.