For the 2018 potato harvest, Lamb Weston/Meijer (LWM) largely reverses the price increases from last season. “It's not just about the bare prices. We look at the total package”, says head of purchasing Pieter Jan Georgius.
For the ex-field period, the price is reduced by €1 per 100 kilos. Until week 17 this is €0,90 per 100 kilos and from week 17 until the end of the storage season the reduction is €0,80 per 100 kilos. Pieter Jan Georgius: "This price structure fits within LWM's strategy."
Last year elevated LWM prices increase by €0,80 to €1,20 per 100 kilos. This year that increase will be corrected downwards. This applies to both the Fontane and Innovator groups. The Fontane group, with standard potatoes, includes Challenger. The Innovator Group, with long chip potatoes, includes Russet Burbank and Ivory Russet.
Mechanical cooling
"There is less need for potatoes in the off-field period," says Georgius. "We want to achieve a better balance between the volume from land and from storage. This is a long-term vision. In this way we encourage storage in mechanical cooling. It is possible to supply potatoes in this way until well into July. As a processor, we have need for a constant, high-quality flow of raw materials throughout the season. The start of the field season will not be significantly adjusted for the coming harvest. However, there will be a general shift towards August 1, instead of mid-July."
Contract conditions
The company adjusted a number of contract conditions for the 2017 harvest. These worked out well, meaning that the conditions for 2018 remain largely unchanged. An important change is that the basic price is based on 40 millimeters upwards, instead of 45 millimeters upwards (without deduction of potato tare). "It is one of the points that ties in with our ambition to achieve stability," says Georgius. "The quality premiums were also changed last season. These will be maintained." This means that a number of varieties are more likely to qualify for a premium based on size.
Is offering multi-year contracts also part of the search for stability? Georgius: "This is not new for us. We have been making multi-year agreements with our growers and customers for years. The needs change every year. We did not promote it extra in 2017. This year a little more. A 2-year contract provides a plus of €0,50 per 100 kilos. For 3 years that is €0,75 per 100 kilos. That plus applies to all contract years."
The option to secure open tons on a hectare contract for delivery will be maintained. According to Georgius, the potato company is distinctive in this regard. "There are various 'fixing rounds'. Moreover, we always offer a price when a grower requests it. The fixed price contract is only 1 contract form. We have a contract for every grower that suits his risk profile."
Raw material requirement
LWM took over the potato branch of Oerlemans Foods in Broekhuizenvorst (Limburg) in April 2017. This does not mean that significantly more volume is required, because Oerlemans also had its own suppliers. "There are minor changes within the portfolio, but growth in growers and acreage is not a goal in itself. We do have growth ambitions for the long term. That is why we make agreements with growers who share this vision. That is the message for this year."
The availability of seed potatoes was a hot item last season. No problems are expected this year, Georgius thinks. "LWM makes multi-year agreements for the availability of seed potatoes. This way we have been able to keep prices stable, including last year."
Future vision
The buyer cites the supply and demand situation on the chip potato market as the main reason for the changes in the consumption potato contracts. He emphasizes that the whole picture must be looked at. "The 'call price' is one thing. Supply security, in combination with various contract forms, no potato tare, good quality premiums, storage fees and the relationship between grower and manufacturer is equally important. Which growers do we want to continue with and which companies want to continue with us. There the focus is on."