News Potato analysis 2019
Potato grower has evolved with the market
DCA Group had a survey carried out among farmers in 2012 to find out how they sell products and what experience they had at the market. Almost 8 years later Boerenbusiness repeated this study. What seems? The potato grower has evolved along with the market.
There are 3 factors that have a significant influence on the potato market: economies of scale, climate and the demand for (end) product. This means that companies have acquired a different risk profile, find themselves in a volatile free market and that the focus is on growth. What immediately catches the eye is the share of Belgian potato growers that participated in this survey.
In 2012, 4% of the respondents came from abroad, but this year that is almost 20% of the total of 250 participants. From a provincial point of view, the shifts are smaller. Fewer responses came from Zeeland, but it is still in second place (after Flevoland). North Brabant is in third place, followed by South Holland at 4.
Grower has changed strategy
The conclusions from 2012 were not tender. "Growers often make decisions rationally, but those decisions are difficult to substantiate," he said. How is the average grower doing in 2019? This average grower does not exist, but according to our survey it would look like this: an age above 50 years and from Flevoland, Zeeland or Belgium. The company comprises less than 25 hectares of potatoes (on clay soil), on which onions are also grown.
Free sales are used as a sales method in more than 75% of cases, followed by permanent contracts (55%). That is remarkable, but understandable. These participants refer to selling the excess kilos as free sales. Average is kept short and long. In 37% of cases, the permanent contract fits the risk profile, while 28% mentions guaranteed sales. Half are very firm when contracting and only switch because of financial returns.
On the psychological level, opinions differ more. The grower determines a sales moment by relying on market reports. Information from colleagues is also an important source. The grower does not consider himself risk averse, but he is not a gambler either. But, if the price rises, a majority say to wait before selling. A contract price at 10% to 15% above the cost price is in most cases not preferred.
Larger surface area, more contract
Compared to this profile sketch, the completely independent growers are slightly younger and mainly come from the west of the Netherlands, with 25 to 50 hectares of potatoes on clay soil. They believe they can achieve a higher return with this sales method and have always done so. Current developments in the market are also reviewed every day. And they dare to take risks, while advice from a colleague is usually not something to rely on. They believe they are selling their product at the top end of the market. If this does not work, they take their loss.
If we look at the growers with more than 50 hectares of potatoes, it is also evident here that the entrepreneurs are usually slightly younger. They are spread throughout the country and almost always grow potatoes on a permanent contract. It is also kept throughout the season. The extra kilos are not always sold at the daily price, but sometimes also go to a trader. They are deeply divided about selling at a price level of $25 in January. They almost always strive for more. They are not easily satisfied, which is hard to reconcile with the high percentage of contracted potatoes.
Of all participants, 34% indicate that they sell potatoes via a pool. The percentage of potatoes in the pool varies enormously: from 10% to 100%. The previous study showed that pool growers are homebound. This also confirms the current picture, because few growers indicate that they are switching. The entrepreneurs therefore say that they are often good at cultivation, but less so at trade. The further choices also fit well with a passive policy, based on the known.
Knowledge of the futures market is often lacking
Of the total number of respondents, 24% indicate that they trade on the futures market or use it as a sales tool. This is usually combined with the free sale of the physical kilos. This group also makes extensive use of permanent contracts. The futures market is mainly used to hedge the risks, according to various participants. This is done in steps, which depend on all weather forecasts and market reports.
There is a considerable spread in terms of age and origin. More than 40% of all participants see the futures market as an alternative to contracts. It is striking that 35% of the participants indicate that they do not trade on the futures market because they do not know how it works. Other participants indicate that they do not trust the futures market, as speculators from outside the sector can also participate.
Need for information
The results of all grower groups are sometimes difficult to reconcile, especially on a psychological level. Growers who are defensive in their sales strategy (who do a lot on contract) say they strive for even more, are not easily satisfied and are therefore willing to take risks. Changes in policy rarely happen, which brings up an important conclusion from 2012: these growers are in a negative vicious circle and it is difficult to get out of it.
Just like in 2012, the futures market remains a major barrier for many growers. This is mainly due to the unknown. What has changed is the need for (market) information. Where 8 years ago only the major managers were looking for (market) information, smaller companies now also indicate that they follow the news daily in order to determine the sales moments insofar as possible. If this does not work, however, hardly any entrepreneur will lose sleep over this.
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Niels van der Boom
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