Can we compare 2018 with 1976?

It was on the EEX futures market last year (Monday June 19, 2017) 'ax day'. The closing price reached €20,40 for the April contract, only to lose €2,50 the next day. At the end of week 25 there was still €15,90 left and at the beginning of July it was still €14,60.

Choose direction
We have now passed this point, because on Tuesday, June 19, the April contract was quoted at €16,90. Week 26 starts higher again at €17,40. It is 100% a weather market, that one mid-July chooses direction. In 2017 it was rain that threw a spanner in the works, but it doesn't look like that yet this season. Until mid-July, weather with hardly any precipitation is expected.

(Text continues below the chart)In mid-July, the futures market historically chooses a direction above or below €15.

With a dry and sunny week In the forecast, in which it can be 30 degrees or warmer locally, the graph of the precipitation deficit will intersect the line of the 5% driest years for the first time this season. It therefore runs parallel to the record year 1976. Can a comparison be made with that year? This year is not only etched in the collective agricultural memory because of the lack of precipitation, but the associated sky-high product prices also appeal to the imagination. Arable farmers could use a boost.

Comparisons between 1976 and 2018:
1. Futures market developments
1976: An extremely wet autumn in 1975 was followed by a late spring. 1976 didn't start off so dry. Parliamentary questions were asked in response to the price on the futures market in Amsterdam and the wholesale exchange in Rotterdam. The Amsterdam Agricultural Term Market quoted 85,50 guilders per 100 kilos for the April Bintje contract in March, equivalent to €38,80. In Rotterdam, €38 was paid per 100 kilos of Bintjes. At its peak (May 4), the contract had risen to 185 guilders (€83,50). On March 31, Minister Lubbers (Economic Affairs) introduced a 'Price Order for Potatoes' that fixed the maximum price.

2018: The futures market, settlement April 2018, fluctuated in March this year around €5 after a record harvest last year. Only after the start of the April contract for 2019 and a difficult spring did things really start to pick up for the new harvest.

2. Yield comparison
1976: The 1976 harvest was estimated by Statistics Netherlands at 2,158 million kilos. The area for consumption potatoes amounted to 89.000 hectares. The hectare yield was estimated at 26 tons per hectare, a decrease of 13% from 1975 and 20% below the 5-year average. Even more important is the proportion of old harvest. The market was one of great tightness.

2018: The most recent NEPGNumbers arrive at a harvest forecast of 3,862 million tons. This includes an area of ​​75.000 hectares. The higher yield results from the average yield. The 5-year average is 51,4 tons per hectare. However, in a dry year (such as 2016) this is quickly reduced to 42 tons per hectare. The biggest disadvantage of the market now is the 'heritage' from last year. A record harvest that will continue to resonate in the market for a long time and that factories will try to make maximum use of.

3. Difference in sales
1976: Not only is the total consumption potato volume today 1,7 million tons higher, sales also show a world of difference. In 1976, 50% of all potatoes were sold on the open market (using the futures market), the wholesale market or other sales channels. Participation agreements and potato pools accounted for 40% of the volume sold. Only 10% was sold on the basis of a fixed-price contract.

2018: The current sales balance has been completely redesigned. The current figures are missing. Research by DCA in 2014 showed that 86% of 700 consumer potato growers surveyed worked with fixed-price contracts and 14% opted for other forms of sales. More than 80% of this group choose a pool year after year. Only 8% opt for completely free sales. In 42 years from 50% free cultivation to only 8%!

Conclusion
In many ways, 1976 was nothing special. In terms of precipitation, it ranks 4th among the driest years and in terms of hours of sunshine and temperature it is not in the top 10. The spring of 1976 in particular was sunny, dry and hot, just like in 2018. July and August were also warm with 10 tropical to dawn. Whether this year will also have a dry and hot summer remains to be seen.

What caused the potato market to move so dramatically in 1975 and 1976 was mainly the situation abroad. Nothing has changed in 4 decades. The situation in Northwestern Europe is essential. It is also very dry in Belgium. The precipitation deficit in Flanders varies from 110 to 190 millimeters, comparable to the Netherlands. It is also dry in the United Kingdom, Germany and Poland. If there is a persistent drought in France, things could become very tense.