US Sweet Potatoes: Industry Challenges and How to Overcome Them

Sweet potatoes are one of the favorite Thanksgiving dinner foods and are often considered one of the top ten superfoods. Thanks to their health benefits and product attributes such as color, texture, versatility, and year-round availability, their per capita consumption grew at a 2% CAGR over the last two decades – the second-fastest rate after romaine lettuce. Also, due to overseas promotional campaigns by the US government and by nonprofit organizations, and thanks to the proximity of southern ports to their production region, sweet potatoes became the fastest-growing fresh vegetable export from the US, achieving an impressive 14% CAGR over the same period. Finally, relatively good margins and little to no import competition allowed US growers to expand their acreage and production relatively quickly to satisfy this growing demand.

However, this episode of impressive growth came to a halt in 2018. Since then, exports have begun to falter and per capita consumption has stalled. A decline in 2019 exports was initially triggered by Hurricane Florence, which occurred in the fall of 2018 and caused significant crop damage, leading to a poor harvest. Yield and production dropped to 186 cwt/acre and 23.3m cwt, their lowest levels in 13 and five years, respectively (see Figure 1).

As a result, export prices increased swiftly and sharply, forcing the UK and the Netherlands (the two largest importers) to replace US imports with cheaper imports from Egypt and China (see Figure 2). By the end of 2019, US exports had dropped by a whopping 13% YOY (see Figure 3).

US sweet potato exports have since failed to return to their pre-hurricane levels, and the loss of market share to other exporting countries has not yet fully recovered. In addition to the price effect, there is another more structural factor that is likely to prevent US exports to Europe from returning to pre-hurricane levels. An increasing number of European countries are becoming more successful in planting sweet potatoes using new varieties. Warmer weather due to climate change has also opened up new regions where growing sweet potatoes has become possible.

Further complicating the situation and adding more downward pressure on US exports were pandemic-driven logistical issues and weak global demand as well as a temporary 25% levy imposed by the EU from November 2020 through March 2021. In the current year, exports to the EU, hampered by the strong dollar and high sea freight rates, continue to lag behind last year’s, and the end of this multiyear export trough is not yet in sight. In September 2022, US sweet potato exports were about 13% lower YOY and projected to be 10% lower YOY by the end of 2022 (see Figure 3).

Domestic demand has also disappointed in recent years. Noticeable is a one-third drop in foodservice per capita consumption after 2018 – a sizable drop that was not offset by the improvement in retail per capita consumption (see Figure 4).

The fact that foodservice demand for sweet potatoes weakened before the pandemic is particularly troublesome for the industry. It perhaps points to other inherent factors that make consumers less inclined to consume sweet potato products when eating out. Sweet potato fries and chips, the two main products offered, have often been described by consumers as lacking the desirable crispy character they seek in salty snacks. In addition, their price remains two to three times higher than that of regular potatoes – their main substitute – discouraging many food chains and QSRs from offering sweet potato products and forcing others to take them off their menus altogether.

In the 2020/21 marketing year, North Carolina, Mississippi, and California made up 68%, 19%, and 13% of US sweet potato acreage, respectively. Over the last two decades, North Carolina increased its share by 10 percentage points at the expense of the other two states. However, the state’s yields have been stagnant for many years and have actually worsened in recent years. The sluggish improvement in yield can partially be attributed to the lack of newer and high-yielding varieties. Also, the availability of good quality and productive land is an issue. This can be inferred from the negative relationship between yield and acreage (see Figure 5). As can be seen, yield seems to decline whenever acreage increases, with the exception of 2018, the year Hurricane Florence battered the region. This suggests area expansion likely brings into production marginal, less productive, and more pest-prone land, all other factors being equal.

Another compelling observation about sweet potatoes from a supply perspective is a multiyear boom-bust cycle, in which acreage expands and then decreases over a four- to five-year period (see Figure 6). A cycle typically begins after a year of high margins and collapses after several years of declining margins. Given this cyclical relationship between acreage and margins, we project sweet potato acreage to increase over the next two years, whereas grower margins are expected to drop to their lowest level since 2007.

As can be seen, the US sweet potato industry faces three major challenges: first, the decline in exports and loss of market share in European markets to competitors such as Egypt and China; second, the decline in foodservice per capita demand and what this implies about consumer preference and the suitability of current varieties to satisfy these preferences; third, the stagnant land productivity, which leaves the industry more vulnerable to a price-driven boom-bust cyclical pattern. Collectively, these challenges are likely to negatively impact grower margins over the next two years.

These challenges may well stem from not having as many new and improved varieties as markets and consumers optimally need. The introduction of improved varieties and innovative products as well as revamped promotional campaigns could spice up consumption in both the US as well as in export markets. New varieties are also a very viable solution to improve yields.