Global potato economy

Developing countries are now the world's biggest potato producers - and importers - and consumer demand is shifting from fresh tubers to processed products

Key points

In 2005, for the first time, the developing world's potato production exceeded that of the developed world.

Subsistence potato growing in developing countries is declining as producers reorient toward domestic and international markets.

Global consumption is shifting from fresh potatoes to value-added processed products.

Internationally, the value and volume of traded processed products far outweigh trade in fresh tubers.

Developing countries are net importers in international potato trade, which in 2005 was estimated to be worth US$6 billion.

Despite its importance as a staple food and in combating hunger and poverty, potato has been neglected in agricultural development policies for food crops.

Potato production in developed countries, especially in Europe and the Commonwealth of Independent States, has declined on average by one percent per annum over the past 20 years. However, output in developing countries has expanded at an average rate of five percent per year. Asian countries, particularly China and India, fuelled this growth.

In 2005, the developing countries' share of global potato output stood at 52 percent, surpassing that of the developed world. This is a remarkable achievement, considering that just 20 years ago the developing countries' share in global production was little more than 20 percent. Even so, world potato production and consumption are currently expanding more slowly than global population.

Fresh potato consumption, once the mainstay of world potato utilization, is decreasing in many countries, especially in developed regions. Currently, more potatoes are processed to meet rising demand from the fast food, snack and convenience food industries. The major drivers behind this development include growing urban populations, rising incomes, the diversification of diets and lifestyles that leave less time for preparing the fresh product for consumption.

Potatoes are commonly regarded as a bulky, perishable commodity with high transport costs and limited export potential, confined mostly to cross-border transactions. These constraints have not hampered the international potato trade, which has doubled in volume and risen almost fourfold in value since the mid-1980s. This growth is due to unprecedented international demand for processed products, particularly frozen and dehydrated potato products. To date, developing countries have not been beneficiaries of this trade expansion. As a group, they have emerged as leading net importers of the commodity.

International trade in potatoes and potato products still remains thin relative to production, as only around 6 percent of output is traded. High transport costs, including the cost of refrigeration, are major obstacles to a wider international marketplace.

Trade policies

Ad valorem import tariffs are used to protect domestic potato markets. Other policies that restrict access to markets include sanitary and phytosanitary measures and technical barriers to trade.

processed value
fresh value
Global potato trade, 1986-2005
(million US$)
developed
countries
developing
countries
Potato net trade (exports-imports)
in tuber equivalent, 1986-2005
(million tonnes)
fresh
processed
Global potato trade volume
in tuber equivalent, 1986-2005
(million tonnes)

Import tariffs on potatoes and potato products are applied by most countries. The binding rates agreed under the aegis of the World Trade Organization vary considerably. Potato provides a classic example of "tariff escalation", where importing countries protect processing industries by levying higher duties on processed products than on raw material. By preventing countries from diversifying their export base into higher-value processed products, tariff escalation can therefore keep them "trapped" as providers of raw material.

Countries wishing to supply potato commodities to the international market - especially to the more lucrative developed country markets - also face considerable hurdles in the form of food health standards and technical regulations. The Doha Development Round of trade negotiations recognizes the negative impacts of tariff escalation and contains important provisions aimed at ensuring that standards and regulations do not become de facto barriers to trade or hidden protectionist policies, while at the same time putting public health concerns foremost. Unfortunately, negotiations pertaining to the Doha agenda have suffered a series of setbacks, and agreement on a final solution has yet to materialize.

Potato potential

Potato's positive attributes - its high nutritional value and potential to boost incomes - have not received the attention they deserve from governments. The lack of established marketing channels, inadequate institutional support and infrastructure, and restrictive trade policies are impediments to commercialization of the sector. National and international stakeholders need to place potato higher on the development agenda.


This factsheet was prepared by Adam Prakash of FAO's Trade and Markets Division