What do factories do with potato contracts?

Fewer potatoes are required for the coming season. That is clear as day. Processors still have a lot of old harvest potatoes and have already replenished their stocks as much as possible. They all fulfill their contractual obligations. However, changes are also required for next season. There is considerably less need for potatoes in the field segment. Processors have cut costs here where possible in the Netherlands. The factories each have their own plan for the main harvest. Boerenbusiness asked the 5 processors active in the Netherlands about their plans.

LWM: Not growing yields 250 euros per hectare
Lamb Weston/Meijer responded quickly to the crisis situation. To start with, growers were encouraged to grow fewer potatoes off the field. Those who surrendered their fixed-price contract received compensation of €250 per hectare. The seed potatoes were collected or not delivered by LWM, free of charge.

This scheme was also offered to growers of storage potatoes at the beginning of April. This is evident from a proposal that the processor sent to its growers, and that Boerenbusiness saw. LWM chose not to respond itself. An urgent request is made to plant less. Growers who already had seed potatoes on their property can return them free of charge.

Farm Frites: Balance sheet redone
By expanding its processing capacity, Farm Frites focused on a larger potato volume for the 2020-21 season. Due to the loss of demand on the sales side, it has taken stock again. When the crisis hit the sector, contracting with the processor had not yet ended, so changes could be made to meet needs. It also allows fewer early potatoes to be planted in the designated areas. The company complies as much as possible with existing agreements regarding current contracts. The company makes a free standing offer of €0 for the free kilos, after which they are purchased.

Aviko: Equal playing field for regular growers
Aviko Potato is honoring the agreements made for the 2019 harvest year. This means that all contract potatoes are collected and paid for. Free kilos are often in the potato pool for Aviko growers. These will be settled at the end of the season.

When the corona crisis broke out, contracting with the processor had not yet been completed. “All our regular growers have been given the opportunity to still conclude contracts,” explains Aviko director Dick Zelhorst. “In this way we create a level playing field for everyone. However, we have discouraged early harvest contracts and ex-field contracts, which means that significantly less volume has been contracted. Growers decided for themselves whether they wanted to cut back. No financial compensation has been offered.”

McCain: Agreements per grower
McCain indicated that he did not want to provide any explanation on how the company is handling the contracts for the current and next season. Inquiries with McCain growers show that the processor deals with the situation differently. Existing contracts are respected. Growers assume that the potatoes will be collected as agreed. The agreements for the coming season vary per grower. Companies that had not yet signed contracts can no longer do so. Growers who have already reached this stage have been asked to contract fewer (storage) potatoes, in consultation.

Agristo: Grower decides individually
The cards are still open at the Belgian-Dutch potato processor Agristo, says Agro Director Steven de Cuyper. “The situation is changing so quickly at this stage of the crisis that it is difficult to take action now.” The company has not offered growers any arrangement for reducing the area for next season. “We see growers making decisions individually. Some slow down, while others see opportunities.”

Belgian and French industries
Some other Belgian potato processors do opt for financial encouragement to cut back. This also applies to processors located in France, where cuts are also being made, insiders report. The amounts offered vary between €1.000 and €2.000 or even more. These are tailor-made deals with large growers. It is important to know that companies are obliged to purchase the seed potatoes. For 3.500 kg of seed potatoes at 45 cents, this means a cost of €1.575 per hectare.

Conclusion: What does the area do?
What does this mean for the area in the EU-4 countries? At this point it is impossible to predict. Processors often aim for a reduction in the contracted surface area. Some growers see opportunities and plant more, but at the same time, many larger professional potato companies in particular do lose a significant area.

In the corridors, a decline of 7-8% is most often mentioned, such as Boerenbusiness earlier wrote. Due to the persistently dry weather, planting continues smoothly throughout Europe, meaning that a significant portion of the consumption potatoes are now in the ground. This makes steering within the area increasingly difficult. Subsequent planting of remaining plots - which often happened in other years - is hardly an issue this year.