Boerenbusiness compares contract prices

This overview focuses on the prices that the 5 major potato processors are negotiating with Boerenbusiness have communicated. Farm Frites and LambWeston/Meijer only communicate the changes. The other processors quote specific prices. In the overview below, the price mentioned for the 2018 harvest is compared with that of the 2017 harvest (for the Fontane and Innovator varieties).

The overview above shows the basic prices, excluding premiums and surcharges.

*Agristo and Farm Frites use a size grading of 35 millimeters upwards. With other processors this is 40 millimeters upwards. The blank spots are the result of missing data. Agristo does not have a fixed price contract for Innovator (delivery at the end of June). At Aviko, a bonus of €40 per 45 kilos applies for deliveries of 0,50 tons per hectare (100 tons at Fontane). The price for McCain's Fontane is split into a price for 40-50 millimeters and 50 millimeters upwards. The stated price refers to the latter.

Consensus reduction due to market forces and seed potato supply
All potato processors are taking advantage of market developments to make a correction to their contracts for the 2018/2019 season. In the ex-farm period, the average reduction is €1,04 per 100 kilos. For delivery week 17 this is €0,80 per 100 kilos and at the end of June the average is €0,64. The 5 processors are united. The largest reductions are noticeable in the off-shore period.

It is not immediately possible to draw a clear line between the mutual differences. In some periods the difference is larger and in other periods it is smaller. For example, the gap between the 1 factories (as regards Fontane and Innovator) became smaller for week 5, but it actually increased for week 17.

Only Farm Frites notes that the contract price is partly decreasing due to falling seed potato prices. The other processors keep the prices of the starting material the same. Agristo is introducing a slight price decrease for seed potatoes.

Potato volumes remain unchanged
Agristo and Aviko expanded processing in 2017; mainly the raw material needs are met. The volume to be contracted will not be reduced across the board. No one dares to gamble on another top harvest.

Agristo does offer growth opportunities to arable farmers in western Belgium and northern France. Their factory in Wielsbeke could use extra potatoes. Due to the current availability of potatoes, the field segment is facing serious production cuts. In any case, the sector will start the new harvest at least 2 weeks later.

The area of ​​potatoes is not shrinking
The contracting process is not seen as difficult this year. That is the mood that can be detected in the market. The main reason for this is a lack of alternatives. The pricing of arable crops is under pressure and does not offer equivalent alternatives. The spokespersons of the processors therefore calculate with a constant area.

The early chip potato cultivation for delivery from the field is the only one that has the prospect of shrinking, due to significantly reduced needs from processors. The question, however, is whether this surface area will be filled with storage varieties.

Processors aim for multi-year agreements
A slight trend towards concluding 2- and 3-year contracts is visible. Farm Frites in particular contributes to this with a plus of €0,35 and €0,75 per 100 kilos. LWM and McCain indicate that they have been offering this option for years. Moreover, there is the idea that there is less enthusiasm for multi-year agreements in a bad market than in a market with high prices. Agristo underlines its 1-year contracts. The Belgian fries producer likes to sit at the negotiating table every year.

Aviko Potato is the only one to choose a different approach
Of the 5 potato processors, 4 are continuing their strategy unchanged. McCain offers a premium on chip potatoes stored in boxes and LWM focuses on potato storage with mechanical cooling. Across the board, it is visible that a high-quality old harvest is being continued for longer, resulting in a significant reduction in the field season.

Aviko Potato replaces their quality surcharge with the bonus-malus system. Those who focus on points, size, body color and underwater weight can receive a significant premium. Depending on the delivery period, the contract price, at the maximum premium, will be equal to or even higher than that of 2017.

Closing note
Now that the contract season has started again, most processors seem to be following the same line. The urge among growers to grow in potato cultivation is great, because alternative crops do not seem to be available. Over a period of 5 years, the factories seem to have shot themselves in the foot last year. This is done by setting the contract prices 'too high' (after an expensive year). The result is an area growth and, given the current daily price, a price for the contract potatoes that is too high.

A correction will be made this year. This is also motivated by the extremely low prices in the current daily market. Contract potatoes of €13 (at a daily price of €25) feel very different than a contract price of €12 (at a daily price of €3). The factories also seem to follow the trends of the season and base their pricing on supply and demand from growers, regarding the need to grow for fixed prices.

It is interesting to see whether many growers will 'shop' in the market or whether they will choose their current buyer. Research shows that in general, about 60% of potato growers never consider switching buyers.

Also read the entire file with all contract prices for the 2018/2019 season.