Potatoes NZ wants emergency measures to ban imports from Europe to avoid a food security threat.
The industry is asking the Government to urgently consider imposing short-term measures limiting the importation of heavily discounted frozen chips.
Australian growers have also asked for protection.
NZ growers supply about 85% of the domestic market, a large proportion for potato chips in hospitality businesses.
There has been a significant flattening of sales for both NZ processed and fresh potatoes with hospitality venues closed for two months during covid-19.
Up to 25% of smaller businesses will now likely close permanently.
Covid-19 has seen the disruption of supply chains globally, particularly sales to hospitality, leading to the complete collapse of potato prices in major production centres such as the European Union.
That will shortly lead to extraordinary price reductions in frozen potato chips from the EU, Potatoes NZ chief executive Chris Claridge said.
It is expected a similar collapse will be seen in other parts of the northern hemisphere, in particular North America.
The EU has about 2.6 million tonnes of surplus frozen fries.
“If urgent steps are not put in place NZ is likely to be swamped by imports of frozen potato chips at extraordinarily low prices,” Claridge said
Together with the existing impact of the pandemic the NZ potato-growing and potato-processing industries will suffer severe and prolonged damage.
“This may lead to potato growers planting alternate crops and in turn lead to a shortage of NZ-grown potatoes, which given NZ’s reliance on potatoes as a source of food, will represent a serious risk to food security.”
Claridge cited Dutch government intervention in formulating a funding programme earmarking €50m to support potato growers confronted with a surplus of potatoes because of the decline in demand.
Growers with a surplus will be able to offer the potatoes to a scheme that will then absorb them and pay the growers about €50-€60 a tonne.
Without that intervention the open market price would likely have been no more than €10 a tonne as opposed to the usual price of €150 a tonne.
“We have concerns about how this scheme can be effectively policed and accordingly fear that many of the potatoes captured by this scheme may be procured by European processors at almost no value, converted into finished product and dumped into the Australasian market,” Claridge said.
NZ producers of frozen potato chips have built significant stock levels and are already having to deal with an oversupply of raw potatoes.
As a result contracts with farmers for future potato production will be for reduced volumes and at lower prices.
Local processors might also have to make decisions on temporary closures of production facilities to deal with the increasing stock levels and vastly reduced demand.
Significant redundancies could result.
“As we exit the nationwide NZ lockdown the local market for frozen potato chips will be extremely competitive, even without the added pressure of below-cost imports landing here.”
Like other sectors of the economy every opportunity should be provided for the potato industry to recover from the financial devastation caused by the covid-19 pandemic, Claridge said.
Companies must be able to clear their inventories built up during the lockdown and increase production to reduce their daily overhead recovery losses.
Neither of those will happen if there is a huge surge in imports of frozen potato chips.
“That can happen only if local demand is first and foremost met through the supply of locally produced potato chips.
“Achieving that outcome will require some level of Government intervention to dampen imports for a limited period,” Claridge said.