Processors buy under 100.000 tons in the free market

The PAT system has existed since 2011 and the 4 major processors (Aviko, Lamb Weston/Meijer, McCain and Farm Frites) have committed to entering all their purchase transactions (from grower) on a central platform. This platform is monitored by the Arable Farming Trade Organization. The transactions made through brokers and pools are not recorded on the platform. This public platform attempts to provide transparency in the potato market.

Within 24 hours of creation, the price, purchase dates, delivery dates and volume are entered into the platform by the relevant chip industry. This allows you to collect data that says something about the development of price formation, but also about the behavior of the 4 processing industries.

The volume
The Dutch potato industry processes approximately 4 million tons per year and contracts a large portion in advance at a fixed price. To date, it has been assumed that approximately 80% of the volume is purchased at a fixed price, which amounts to 3,2 million tons of potatoes. That leaves approximately 800.000 tons for purchase from growers, traders and pools.

However, the data analysis of the PAT system shows that the volume purchased directly from the grower is much lower than expected so far. For example, in the 'tight' season of 2018/2019, only 94.000 additional tons were purchased from growers. Last year, when there was a very large potato harvest, a total of 150.000 additional tons were purchased from potato growers.

The remaining 700.000 tons of potatoes would then have to come from imports, pools and traders. However, this is not registered in the PAT system. This is also a (relatively speaking) larger volume than previously assumed.

Prices
It is also interesting to see what the average purchase price is that potato processors pay for the 'free part' of their raw material needs. This data can be extracted from the PAT (by means of data analysis) and compared with the average stock exchange listing. This makes it clear that in expensive years the processors pay clearly less than the average stock exchange listing. However, in the cheap years they pay significantly more.

In 2012 and 2016 (2 expensive years), potato processors paid an average of €2,71, which resulted in a benefit of €2012 million on the volumes of those years (in 220.504 this was 2016 tons and in 77.703 this was 8,9 tons). However, in the cheap years (2011, 2014 and 2017), a combined volume of 474.775 tons was purchased, at a higher price than the stock exchange listing. This meant an additional expenditure of €5,5 million.

2 trends visible
It can be concluded from the data that the volume purchased annually continues to decrease. While this volume was above 2011 in 2014 to 150.000, the volume now seems to have difficulty exceeding 120.000 tonnes. This could mean that the volume contracted at a fixed price will increase further. It could also mean that more is purchased from foreign parties or that the potato trade is brought in.

The above is not confirmed in a tour among the various Dutch potato traders. They indicate that the volume of potatoes traded has actually decreased in recent years, as a result of which a number of traders are increasingly focusing on the Belgian industry (in terms of sales).

Another trend is that Dutch processors create the bottom of the market in years of surplus. When potato prices are low, more is paid to the grower than can be purchased on the open market. The growers with a contractual relationship then benefit from their relationship.