The contracting of the chips potatoes for the 2018/2019 season is being kicked off by potato processor Farm Frites. The price of the potatoes for ex-land delivery has been adjusted downwards. The company also promotes the possibility of concluding multi-year contracts.
Farm Frites corrects prices downwards for the 2018 harvest. For ex-land delivery, €1,25 less is paid per 100 kilos. For delivery dry from the shed this is €0,75 per 100 kilos. Last year the contract price, partly due to the high seed potato prices. Since seed potato prices are now at a lower level, the contract price is also falling again.
Multi-year agreement
From this year onwards, Farm Frites also offers multi-year contracts, both for delivery from the field and dry from the shed. It is a new concept and Farm Frites expects that it is a trend that we will probably see more of in the coming years. Processors are looking for raw material security in order to meet demand. They look for regular suppliers.
The volatile pricing makes it difficult to compete in the international chip market, multi-year agreements can help with this. Farm Frites focuses on 2-year and 3-year contracts. "We assume that this financial incentive will result in more multi-year contracts. This is in line with the wishes of our customers," says Walter van Stee, purchasing manager at Farm Frites.
A 2-year contract results in an additional price of €0,35 per 100 kilos. With the 3-year contract this is €0,75 per 100 kilos. "By entering into a 3-year contract, the price for storage potatoes remains the same as last year," says Van Stee. "For the ex-land price (with a 3-year contract) it means a reduction of €0,50 per 100 kilos."
Less off land
"This year, the field delivery will start later. This is due to the large availability of potatoes from storage from last season. Normally the field delivery period starts in week 27, for 2018 this is week 30," Van Stee explains. . "This means that the share of potatoes to be delivered from the field is decreasing."
Aother contract forms
Farm Frites also tries to meet the need of growers to move with prices. To this end, in addition to the click contract, they introduced the F4 contract last year. "The unique thing about this contract is that the payout price, at a floor price, is determined on the basis of the average closing prices of the futures market."
The feedback from growers is positive and that is why Farm Frites will offer this contract again next season. "The people who participated in this system, as it now appears, will receive their guaranteed price (€9 for Fontane and €10 for Innovator in week 17). In an expensive year this may be considered insufficient, but in an "In a year like this, people are happy with it. If it had been an expensive year, people would join in with the positive price trend," Van Stee continues.
Supply and demand in balance
While the availability of seed potatoes was a discussion last year, this does not seem to be a problem for the new season. At Farm Frites it has been ensured that there is sufficient seed material available for the desired and contractable varieties. Moreover, the seed potatoes are cheaper this year than in the previous year.
Growth
In addition, Farm Frites will grow its processing capacity in the coming year, in order to meet the worldwide growing demand for pre-fried products. "You make an area plan based on the needs of the factory, including the expansions and investments that we plan between July 2018 and July 2019."