Fear rules potato futures market

The speed at which the decline is made is striking. Trust comes on foot and goes on horseback, it's an old saying. This also applies to the mood in the current potato market.

Weather has an influence
The decline is motivated by a number of aspects. Firstly, there seems to be a chance in various weather models that a change to a different weather type will occur next week. In addition there is more chance of rain. The second reason is the lack of confidence among buyers, who are often speculators at the higher price levels. In recent years, speculators have often been disappointed in the market and maneuvering in the futures market has been extremely cautious. Short trading and small positions seems to be the trend.

Another trends is that the buyer is absent 'for a while' in a falling market (at a higher price level altogether). The sellers who take cover (sell) do not buy back in a falling market. The result is a rapidly declining market (this happens with the slightest loss of confidence). The sales positions that are taken are mainly hedging positions (hedging of price risks by the grower).

De coverage is also increasingly held until the end of the term (end of April 2019) and until the moment of Cash Settlement. This was clearly visible in the large open position last season, which was settled on the basis of the Cash Settlement. In short: contracts are not always reversed in the regular market.

Fear is the key
The nervous movements that are now being made are the result of the course of the old season. Last year the futures market also had a high of €20,90, but that was in week 25. The slide then started to €10 (less than 6 weeks later). Many growers are this do not forget and have gratefully made use of the level above €20 in recent days, a price well above the contract and cost price. The fear of missing out, which in many cases happened last season, has created a lot of supply (sellers) in recent weeks.

Fear seems to be the key. Fear of growing weather, fear of low prices, fear of a loss on the potato futures market (in the case of the buyers) and fear of what is/is not to come. The statistics indicate that something really needs to be done to reach market prices of €25. In that sense, the starting position for the 2018/2019 season is not positive. The area in the EU-5 countries is not smaller, but has even increased somewhat. The new season also seems to have been somewhat shortened due to the long run of the old harvest.

However, a repeat of last year, in terms of price movements, does not seem to be an option. There certainly will be yield loss due to the drought and when the weather changes (rain), the question is what the crop will do. Growing cracks and overgrowth are lurking. Fear is a bad advisor, but the market is always right.A comparison of the potato futures market between 2017 and 2018.

The potato futures market (April contract) of the past few weeks.