The futures market for the 2020 harvest, so that concerns the April 2021 contract, is remarkably high with a closing position on the last trading day of the year at €15,70 per 100 kilos. This relatively high score is apparent from a comparison with previous years.
For example, the current quotation for the 2019 harvest year (April 2020 contract) was between €14,50 and €15,00 per 100 kilos around this time of the year. This despite the fact that the quotation of the previous harvest year was around the €30,00 level. The €15,00 level was always a big hurdle to overcome on the futures market.
Where does the high price come from?
Before the futures market moved towards €16,00 there were always significant reasons for this. For example, a lower European acreage or a late spring. Of course, nothing can be said yet about the spring of 2020 (late or early). On the other hand, it can be cautiously said that the area in the EU-5 countries for the 2020 harvest year will not shrink and may increase for the fifth consecutive year.
This means that, with an above-average potato harvest, there are basically more than enough potatoes, meaning that a year such as the 207/2018 season (market price well below the €10,00 level) is looming.
Rising cost, rising contract price
With the above knowledge, it is a striking fact that the April 2021 quotation has already risen towards the €16,00 level. Yet this clearly indicates the trend for next season (2020/2021). The contract prices for storage potatoes in particular are set at a higher price level. This trend is motivated by the fact that the cost price of potato cultivation has risen sharply in recent years and will be higher in the coming harvest year in particular.
It is the costs of crop protection products, haulm killing, but also, in the case of storage potatoes, sprout inhibitors that will cause rising costs. These factors have a price-wise depressing return on the balance of the cultivation. The further increase in cultivation costs, in combination with the enormous worldwide demand for end products, will initially cause the market to start at a higher price level than in recent years.
No illusions
However, there should be no illusion that if the average harvest in the EU-5 countries is large, the average market price can maintain itself above the €15,00 level. In that sense, the cards are really shuffled during the growing season
The graph shows the 4 years (of the last 10 years) in which sufficient potatoes were harvested per hectare in the EU-5 countries.