After a sharp decline in the potato futures market, the quotation may return to profit in the second half of the week. Nevertheless, the market is fragile. However, writing off the season already is too early.
After last week's sharp decline (low €8,80), the futures market showed a strong recovery on Thursday and Friday (opening Thursday €9,50 closing Friday €11,10). The decline, which accelerated this week, was prompted by good growing conditions in the main growing areas of the Netherlands and Germany, but also in parts of Belgium and France.
Enough potatoes on paper.
Confidence quickly drained from the market, a situation that is not unusual for the futures market. The fear factor regarding the pricing of potatoes has increased in recent years due to changes in the potato market. Many contract potatoes, few buyers of free potatoes and no competition in export demand make the market fragile. If there is a change in growing conditions, above average in the current situation, a 'sell-off' will quickly occur. The futures market should be supported by professional buyers. However, these remain out of the market because on paper, as it currently appears, there are sufficient potatoes in the books.
Reality is back in the market
However, it is still too early to write off the season price-wise. There are still a number of reasons to expect a recovery and a reasonable price from the 2017-2018 season for this season. The persistent rainfall shortages in Flanders and Northern France could always play a role. Another element that brought back reality this week was the heavy rainfall, especially in central Germany. More than 200 millimeters of rain fell in some regions. It is not yet clear whether and how extensive the damage is. More should be known next week.
Capacity Expansion
The further increasing processing capacity may provide a slightly higher bottom in the market. Next year, there appears to be a capacity expansion of 750.000 tons of potatoes in Western Europe due to all the investments.
Nothing is sure
Ultimately, the growth of the potato crops in August, and certainly also in September, will ultimately determine the harvest. Subsequently, the progress of the harvest (how do the potatoes get behind the shelves) will bring with it the necessary tension. Harvesting is certainly not a certainty. Just think of the 2012-2013 season and the loss of 30% of the potato harvest due to excessive rain in October and November.