Western Canadian spud appeal has lured the world’s largest french fry processor north to flirt with the potential of finding the right spot to build a plant.
Now each province is putting forth its particular charms to try to land the big date with Lamb Weston.
Officials at the ConAgra-owned company, which has annual sales of more than $24 billion, did not return calls last week. But industry officials didn’t deny the rumor that Lamb Weston has come a-callin’.
“A rumor?” chuckled Kevin Engel, manager of marketing and development with Spudco in Moose Jaw, Saskatchewan.
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“I thought everybody knew that.”
Engel said the company has not decided whether it will build in Canada, let alone what location it might choose.
But down in Idaho, “the rumbling has been Saskatchewan,” said industry analyst Bruce Huffaker.
And there are signs the rumbling could turn to grumbling if the United States giant joins its competitors in choosing to reap the benefits of Canadian cheap land and currency, rather than stick with American spuds and farmers.
Americans upset
U.S. growers are feeling a bit slighted these days, said Huffaker, publisher of the North American Potato Market News.
Last year, a bumper crop pushed prices in the U.S. to 30-year lows. This year supplies are less burdensome, but growers are still having a tough time making money.
In Idaho, french fry makers are offering $3.50 (U.S.) per hundredweight. Huffaker said a profitable level for farmers is $4.50 to $5 per cwt. To add insult to injury, Canadian imports more than doubled in the past year.
While markets are growing, especially in Asian countries, capacity is expanding quickly.
“There’s a glut of capacity in the industry,” said Huffaker, adding that one new production line per year can be absorbed in North America. In Canada, plants have added two or three lines in the past 18 months, he said.
“With all of the recent increases in capacity … particularly in Canada, the industry needs to wait for a couple of years to be building any new plants, or they’re just adding to the overcapacity situation.”
Huffaker said more than 80 percent of new Canadian production moves south, rather than to Asian countries, and displaces American fries. So processors in Oregon and Washington will be the ones shipping fries across the ocean, while Americans eat Canadian potatoes.
May become issue
“Anybody that wants to get really logical doesn’t have any problems with that, but when it comes to nationalism and waving the flag and everything, it’s going to be a big target,” Huffaker warned.
These sentiments drove farmers and processors, including Lamb Weston, to make an official complaint, spurring a recent International Trade Commission report on potatoes.
While Canadian players saw the report as a vindication of their industry, Huffaker said U.S. players see it as just the first step, and have trade lawyers poring over the document looking for irritants.
But political pressure and harsh market realities may not be enough to stop Lamb Weston from starting a plant in Canada, he said. The company won’t want to lose market share to its three largest competitors: McCain, Simplot and NestlŽ.
Huffaker said if Lamb Weston can’t beat the competition through trade rules, it will join them making money in Canada.
“I think part of this is Lamb covering their bets, and making sure that they win however the thing comes out.”
