What is hurting the market and will it still be okay?

Then Friday, August 25, Belgapom not a listing could arrive, a clear signal was sent. The comment in the Belgapom publication was that there were still some obligations that were settled for €3 per 100 kilos. The drama for the coming period therefore seems complete in the potato market.

However, the current catastrophic development in the market was somewhat predictable. The urge for growers to increase scale, and the unbridled expansion of the acreage in almost all EU-5 countries, ensures that there is (too) ample availability of raw materials during an average growing season. It has been said that the increase in processing capacity will keep up with this growth, which ensures that the market at least has a floor that is 'slightly' below cost. However, this year it looks like these assumptions are being overtaken by the truth.

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Development of the April contract for the 2017 harvest year.

Season started late
The large quantity of contract potatoes means that the market is flat on its back. It should be noted that this is partly caused by the late start of the new season. In Belgium in particular, the market seemed to become demanding. The early harvest has partly failed and with very low kilo yields there would be a need for raw material.

Potato price implodes
However, it now appears that the solution to the intended shortage lay in processing the old potatoes. A great achievement considering last year's low yields and high prices. At the end of the journey there were still enough old potatoes available, which meant that the start of the early potatoes could be postponed.

This development caused something of a pile-up. The postponement of the contract obligations, for the early potatoes by 3 weeks, postponed the start of the entire season. The backlog in contract obligations means that the catch-up that is now being made does not leave any room for the free potatoes. The result: an implosion of the potato price in the new season. 

Alternatives are being explored
A second, and not unimportant, element is that, despite the increase in processing capacity, not all processors can process fully. Chip sales are considered quiet. In fact, there is not enough room in terms of processing technology for the additional planted areas of often not even the desired chip varieties. The field market is therefore going through a very difficult period, and it appears that there is not room for all potatoes. The Belgapom is already showing a signal for this this week. Alternatives such as starch processing are already being fully utilized.

Abundant year
This presents potato growers and processors with quite a challenge to get everything done logistically. The optimism, after last season's price movements, is fading. Some hope can be found in the export market and the fact that the harvest is not yet behind the shelves. Given the trial harvest figures and the increased acreage, this looks to be an abundant year in terms of the amount of potatoes available.

Comparison between the pricing of the April contract between 2011 and 2017.

Development of the PCA and Belgapom listing in 2011.

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