Eliminate overproduction
Can the potato market be regulated?
Three representatives in Belgium and France are investigating the possibility of launching an instrument with which potatoes can be taken off the market. This should eliminate overproduction. This is not the first time such an initiative has been launched. What can we learn from the past?
The General Farmers' Syndicate (ABS), Fédération Wallonne d'Agriculture (FWA) and the French potato growers' organization UNPT are a project started to find alternative sales channels for potato cultivation. For this project, which bears the name GEPOS, €30.000 is available to investigate the feasibility. This money comes from the European Regional Development Fund.
Area and demand are increasing
Flanders, Wallonia and Northern France are experiencing an enormous potato production this season. Due to an increasing demand from the processing industry, the acreage is expanding every year. For the 2018 harvest year, PCA and Fiwap expect a extension of 6% in Wallonia. Arable farmers say goodbye to Bintje and opt for high-yielding varieties. Cultivation risks are increasing due to climate change, according to the organizations.
“In highly productive years, there is a huge surplus, resulting in extremely low prices”. That's what ABS says. “In the last 10 years we have been confronted with a surplus year every 3 years. Extremely cheap potatoes offer the opportunity to find alternative sales channels.” The organizations want to make agreements and collaborate prior to the sales season. Options are the animal feed industry, fermentation, composting and starch industry.
Financing unknown
The project will develop a decision support system to estimate whether there are extreme surpluses. Subsequently, it is examined which volumes can be included outside food production and under which conditions. The project will run until July 2019. There are no details about the financial settlement.
In the past 15 years, the Netherlands has seen 3 initiatives for onions and potatoes. In the spring of 2005, Promotion Afzet Quality Onions (BAK) was founded. In 2008 Jan Bakker's Onion Collective followed. A year later, VTA, NAV and LTO tried it with SPA: Stichting Poolfonds Aardappelen. We look back on the initiatives with Jaap Haanstra, former LTO Akkerbouw chairman.
- Promotion of sales of quality onions (BAK)
In March 2005, the BAK foundation was founded, partly by a group of onion growers. The aim was to collect and sell 250.000 to 300.000 tons of onions as animal feed or to fermentation installations. “At that time, growers had to pay 1 to 1,5 cents to get rid of their onions,” Haanstra explains. “The promise was to dispose of bad onions at no cost. We managed to get our hands on 50% of all onions, while the goal was to get our hands on 75%. Then it broke. They deliberately focused on the poor quality onions. The Netherlands Competition Authority (NMA) would not allow it otherwise. They were involved in the establishment.” - Onioncollective.nl
Three years later, April 2008, it happened again. Now it was entrepreneur and arable farmer Jan Bakker who took up the challenge by establishing an 'onion collective'. Bakker offered to buy 40.000 tons of onions. A quarter of this volume would then disappear into the digester. The market was expected to respond positively to this, after which the remaining three quarters could be sold. DCA took care of the registration and processing. Participants were paid a floor price of €7 per 100 kilos. Depending on the delivery date, this amounted to €10. On top of this floor, a participation was paid out, after deduction of costs and commission. In the end, the plan fell through. The market rose without artificial intervention. - Pool Fund Potatoes Foundation (SPA)
A year later, arable farmers VTA, NAV and 3 regional organizations of LTO tried it with SPA. The aim was to get three quarters of the free potatoes registered in the Netherlands. In addition to the freely grown potatoes, also all over kilos. By bundling all parties and offering only the good quality, SPA hoped to achieve a better price. Participants received a sales guarantee. All customers could bid on the collected lots. To cover the costs, SPA charged a 5% commission. This also removed bad batches from the market. However, it was not possible to get hold of the required share.
Why it keeps failing
Haanstra has changed his mind since the 3 initiatives, he admits. “Financing is an important point. Do farmers have to contribute to market regulation themselves, or do other parties guarantee? Their support stands or falls with this. What if a group decides not to participate. How do you deal with that? It kept breaking down there.”
What really changed Haanstra's insight is a comment about the consequences for the acreage. “By removing the surplus, there is no longer a penalty for growth. Growers can abuse this if they know that a surplus is being collected. Removing the surplus in 1 year is possible, but how do you deal with it next season? Regulation is only possible with a quota system, in which the number of hectares is limited. That may start with a hectare contract for potatoes and not a contract based on fixed tons.”
Nevertheless, the former arable farming spokesperson does not turn his back on market regulation definitively. “I welcome any initiative that aims to improve the position of the arable farmer. I want to go along with it, as far as possible. Don't be arrogant by immediately saying no to everything.”
Reply Belgapom
Belgapom secretary Romain Cools says he understands the idea, but the state of affairs does surprise him. He cites 4 reasons for this:
- History has shown that the growth in contracts has led to a shrinking volume of free potatoes, on which a limited surplus or deficit can have a major impact on the volatility of free market pricing. The question is whether this exercise can lead to better balance, which I doubt.
- If France and Belgium opt for this approach, I will see nothing but smiling faces in the neighboring countries. They take full advantage of this exercise. We are active in a European market. Although with characteristics in each Member State and region, the daily trade in raw materials confirms that there are no longer any borders in this growing area.
- The sector is being beaten around the ears from all sides, including from Europe, with themes such as 'circular economy' and combating food losses. We now see that the same EU is supporting a project that investigates whether food products can be used as animal feed, or even as a raw material for biogas or composting. This is at odds with the policy pursued.
- Over the past decades, the potato sector has always ensured balance and market corrections, without any interference from the government. Market forces themselves played a crucial role in this. I think this should also be the case in the future. Dialogue within the link can certainly contribute to this. Hence the initiative in Belgium to start up a sector organization for potatoes with the Agrofront (ABS, BB, FWA) and Belgapom. The fact that this initiative is being launched just now, without any dialogue within the chain, therefore seems an unfortunate timing.
Niels van der Boom
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