Dutch based market and consumer data analytics company Annual Insight has released its Quarterly Update Report on the global potato processing sector today, entitled “Overreaction or the right assessment?“.
Highlights of the report:
Global potato scarcity
Given the global developments in potato availability and potato prices, potato processors are struggling to find potatoes. We are looking forward to the new figures to find out what the influence of a unique season like this will be on the financial results.
Challenges finding a new plant site
Clarebout experiences difficulties finding a suitable place for its new plant in Frameries, due to growing resistance at the local municipality of Frameries. Clarebout is now eyeing on a new location in Feluy-Ecaussines. A new facility is important for the company to retain its growth pace.
McCain increases presence in Brazil
McCain is very active in Brazil where it took a share in Forno de Minas last year, and in potato processor Sérya, making it the first international potato processor with physical presence in the country. Furthermore, McCain announced a $60 million dollar investment in potato processing activities in the Araxá.
The Report’s Author and sector lead potato processing at Annual Insight, Xavier Dumas says that the McCain Othello expansion announcement on May 1st caused a major decline in the Lamb Weston Holdings stock price (-5.3% to $66.09). The investment relates to a $300 million investment and 11,000 additional acres of potato sourcing, which comes down to approximately 190,000 tons additional end-product from early 2021 (at the average Washington yield and average conversion rate). This phenomenon repeated (-3.2%) when on 20th of May this year, McCain announced its $60 million USD investments in Brazil.
Report author Xavier Dumas says it is remarkable that investors are reacting so fiercely to McCain investments on the North and South American continent. Especially since European companies (to mention a few; Clarebout, Agristo, Lutosa, McCain GB) have been increasing capacity over the past years significantly, increasing competition for the 50% joint venture of Lamb Weston Holdings, Lamb Weston / Meijer. Not to mention the capacity expansions of small(-er) players in Europe and elsewhere. However, investors seem to attach less importance to these capacity expansions.
According to Xavier Dumas, “if we put McCain investment in the perspective of the expected demand growth in North America, the extra capacity will fill in ~3% of the total North American demand in 2021 (assuming that the plant only produces for the North American market). While the distinction between branded and non-branded products becomes less clear (commoditization), and where low-cost producers are expanding product portfolio’s, local capacity in growth markets is increasing (South America, Asia, Russia). Therefore, we believe that the market needs to be analyzed from a global perspective. “
Anyone who are interested to know more about this Quarterly potato processing report or any of the topics discussed are most welcome to get in touch with Xavier Dumas:
+31 6 [405 777 32]
More information on Annual Insight here: www.annual-insight.nl