Heat in the futures market, chill in the physical market

Trial harvests have shown several times that despite the extremely good growing weather in July, yields are barely above the 5-year average. The mid-early varieties in particular seem to be getting the final blow this and next week (read: Innovator). Other varieties such as Fontane, Markies and Challenger are still fresh, but it remains to be seen how they will survive the warm and dry period.

Below average yield
With the persistent dry and warm weather, the harvest appears to be heading for a below-average yield, with Northern France appearing to be hit hardest. Relatively the smallest amount of water fell there this season, especially in the spring, which made the start of the growing season difficult.

Local sources report that there is a crop failure there. The futures market has lived under the yoke of corona for a long time and therefore showed a very low price extremely early. Something that falls quickly can also rise quickly is an old stock market wisdom. And that became clear again this week. The futures market recovered quickly and even briefly climbed towards €9, a recovery of more than 30% in a few trading days.

Seen the bottom?
Participants in the futures market reason that with the current growth conditions, the downside has been seen (for the time being) and that the upward potential is higher than the downward potential in a futures market of €6. Next week it will become clear whether the futures market can rise above €10 again if the weather continues.

The physical market is not shrinking under the current weather conditions. The market is struggling with virtually no demand. Prices are reported from €1 to €2 without trading. Processors are canceling their contract obligations and showing no interest in free potatoes. The alternative is to just let them sit and wait for better times. 

Selling freshly grubbed product for animal feed is also not an option with the current temperature. Most growers therefore choose to postpone the harvest of free potatoes. Reports about deliveries to digesters appear to be fabricated and indicate fraud. The premium between the physical market and the futures market is increasing, something that is closely monitored by market participants.