The Polish chip factory Fritar has halved its current contract prices for the 2020 harvest, growers have said. A drastic decision, which is taken with a negative expectation for the coming marketing season in mind.
Fritar claims to be the largest Polish producer of potato products, mainly frozen fries, but also frozen fruit and vegetables. The factory is located east of Krakow and was founded in 1972. After the fall of the Wall, the company was privatized and sold in 2001. Today, the Krakow company Iglokrak is the largest shareholder.
After an increase, a halving follows
Growers were presented with a new contract at the end of July in which the contract price for the 2020 harvest year only applies to half of the contracted tonnage. These are fixed price contracts of 40 tons per hectare with an upward slope of 40 mm. Fritar pays the original contract price for 50% of the volume. The other half will be paid out at 60% of the original price. The Polish company also indicates that it has no interest in any excess kilos.
The grower who Boerenbusiness spoke indicated that he accepted the new conditions. Over the past two years, Fritar has increased the contract price mid-season to compensate growers for a significantly lower yield due to drought. The size selection was also reduced from 2 mm to 40 mm. Still, insiders think that lawsuits may be filed against the company.
It is not known exactly why the company is taking this step, but it is certain that it has to do with the consequences of the corona crisis. Fritar sells a relatively large amount of product in its own country to supermarkets. Unlike the Netherlands, for example, it is not common in Poland to deep fry at home. Home consumption has not received a boost during the lockdown. Because it is a relatively small factory, insiders think it is a pure survival strategy for the player from Krakow.
Other factories are not included
The 2 major players in Poland; McCain (southwest) and Farm Frites/Aviko (north) do not tinker with their contracts during the season. However, Farm Frites has implemented a discouragement policy prior to the season to encourage growers to grow fewer potatoes. As in the Netherlands, compensation was offered for this, but to a greater extent. The other manufacturers have also already indicated that they have no interest in free potatoes that fall outside the contract. Growers report this. This also applies to the chips sector, which is relatively large in Poland.
It is difficult to judge how effective the discouragement policy has been for the total area. The area figure for Poland, which is somewhere between 300.000 and 330.000 hectares, shows growth this year after 2 very dry seasons. This is mainly due to a larger area of table potatoes. After the very high price level of 2019-2020, which lasted for almost a season in Poland, arable farmers planted early potatoes en masse. Large chip potato growers have also started to focus more on table potatoes.
Table market overcrowded
At the moment the market in Poland is overcrowded. Early potatoes are widely available. An additional problem is that potatoes that are not suitable for laundry must find a place and that is not available. Good yields give buyers plenty of choice. Top quality potatoes of the right variety can currently fetch prices of €9 per 100 kilos. Pricing is strongly negative. In 2 weeks the price dropped by €2 to €3. Where there was plenty of imports last season, there is no need for this this year. Export is also difficult.
Despite a special growing season, expectations for the coming harvest are positive yield. Poland is also dealing with a heat wave. At the end of July the barometer was already hitting 35 degrees. Growers are hesitant to take up irrigation, now that market sentiment for the coming season is heavily negative in their own country. However, irrigation is necessary for a sufficiently high underwater weight and low sugar content. The early parties are already facing problems.
Sector reset
Insiders do not want to put the 2020-2021 season to the grave just yet, but indicate that it will be a difficult situation. On average, the crops are in good condition and there are certainly no shortages. Not even when drought still inhibits growth. Quality remains an issue and there is also concern about germination inhibition. MH spraying is known (known in Poland as Fazor), but there is hardly any experience with 1,4 Sight. Problems may arise in the second half of the storage season. Insiders are convinced that the consequences will also be noticeable in the 2021-2022 season, especially when a new wave of infections emerges. This could force the potato sector in the country to reset, resulting in a decline in the acreage.