Potato and food price inflation

The potato is a highly recommended food security crop that can help shield low-income countries from the risks posed by rising international food prices

Key points

Prices of cereals are rising faster than those of potato and other root crops.

Countries with low levels of dietary diversity and high dependency on cereal imports could benefit greatly from expanded potato cultivation.

Potato flour can be blended easily with wheat flour, providing countries with a means of reducing costly wheat imports.

Potato is increasingly a valuable source of cash income for low-income farm households.

Intense competition for reduced international supplies of cereals and other agricultural commodities is driving worldwide food price inflation, which brings with it the risk of food shortages and social unrest in low-income countries. One strategy that could help reduce the risk is diversification of food production to nutritious and versatile staple crops that are less susceptible to the vagaries of international markets. One such crop is potato.

Unlike rice, wheat and maize, the potato is not a globally traded commodity and its prices are determined usually by local supply and demand. A recent FAO survey in more than 70 of the world's most vulnerable countries found that inflation in potato prices is much lower than that for cereals. The potato is, therefore, a highly recommended food security crop that can help low-income countries ride out turmoil created by food price increases.

Potato for nutrition - and income

In many developing countries, the poorest and most undernourished farm households depend on potatoes as a primary or secondary source of food and nutrition. These households value potato because it produces large quantities of dietary energy and has relatively stable yields under conditions in which other crops might fail.

The potato is highly adaptable to a wide variety of farming systems. With its short vegetative cycle – high yields within 100 days – it fits well into double cropping systems with rice, and is also suitable for intercropping with maize and soybeans. Potatoes can be grown at altitudes of up to 4 300 m and in a variety of climates, from the barren highlands of the Andes to the tropical lowlands of Africa and Asia.

FAO Cereal Price Index

Rising prices of maize, wheat and rice pose a threat to low-income countries

Potato is also rapidly becoming a valuable source of cash income – a primary requisite of food security - for many small scale producers. In many developing countries, growth in urban populations and incomes and the diversification of diets have led to rising demand for potatoes from the fast food, snack and convenience food industries. The structural transformation of agriculture-based economies into more urbanized societies opens up new market opportunities for potato growers and to their trading and processing partners in the value chain.

Investing in potato production

With its adaptability to a wide range of uses, the potato has a potentially important role to play in the food systems of developing countries. However, policy makers have traditionally focused on cash crops for export and on cereals, leaving potato and other root crops at the periphery of agricultural development efforts. Redressing this imbalance is important if potato sectors are to thrive.

Investment in potato production should be considered as insurance against international market turbulence and as a food security safeguard. In the current climate of high food prices, it is often forgotten that until recently international prices for cereals had reached historic lows when adjusted for inflation. A boom followed by bust in cereal prices could easily undermine investments in the potato sector if consumers revert back to purchasing cheap, subsidized imported cereals.

Strengthening the potato "value chain"

In developing countries, potatoes are often sold through fragmented marketing chains with little co-ordination and a lack of market information, giving rise to supply disruptions and high transactions costs. Many small scale farmers are excluded from markets owing their low yields, and inadequate storage and transport. Inefficient and unfair pricing discourages them from making on-farm investments in production.

Enhancing the value chain requires substantial public and private investment, especially in breeding programmes and in infrastructure to support and co-ordinate activities along the chain.

Production initiatives can be strengthened by research focused on specific end uses, rapid multiplication of good quality planting material, and varieties with pest and disease resistance. Producers of potato seed tubers need to offer yield-improving and input-saving technologies that boost yields and reduce costs. The formation of producer groups would help farmers share expertise and strengthen their bargaining power. Production would also benefit from improvements in the supply of irrigation water and chemical fertilizers, and in cold storage and transport infrastructure.

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