If a sector is in dire straits, rigorous plans are put on the table. In an attempt to smooth the price formation of free ware potatoes, there is talk of taking the product off the market before it has been harvested. Does the plan have a chance of success?
Wanting to regulate the market is a wish that always comes up in years with extremely low prices. This happened several times in the recent past for ware potatoes and onions. In the end, no initiative made it. There are various reasons for this. In 2018 we have the History has already been listed. The corona crisis is a unique situation. Does this require a unique solution? We vet the ideas.
What's the plan?
The consumption potato market is in an unprecedented situation. Not on the production side, but on the sales side, things are faltering due to the corona crisis. Processors of chip potatoes now have no need for free potatoes, which has a disastrous effect on prices. New potatoes go straight to the cows. Some potato growers, supported by LTO Arable Farming, NAV and the Producers' Organization for Consumption Potatoes (POC), are looking at the plan to remove 25% of the available potatoes from the market. Contract potatoes remain undisturbed. The plan must be implemented throughout Western Europe.
Are there that many free potatoes?
In 2019 did Boerenbusiness research into the sales behavior of potato growers. That also happened in 2012. Of the growers surveyed from the Netherlands and Belgium, 55% indicated that they sell their product under a fixed price contract. Excess kilos are delivered to these growers at the daily price in almost half of the cases. 30% sell these freely. They sell about 15% in a pool.
Fixed price contracts are used slightly less in Belgium. It is difficult to say exactly how many free potatoes there are. Parties often have a buyer, but no price yet. Growers refer to this as free kilos. In the Netherlands the share is freely estimated at 10% to 15%. Particularly in recent years, processors have further expanded their coverage through contracts. This percentage is lower in Belgium and France. Including the excess kilos, it is possible to raise a significant volume, although that will be exciting.
What will happen to these potatoes?
The idea is to sell the potatoes to the animal feed industry, which was also the main buyer of potatoes that qualified for the compensation scheme. Avebe previously clearly indicated that it has no interest in processing French fries potatoes. Selling potatoes for biogas production is seen as food waste and is therefore undesirable.
Does it have a chance of success?
Past experiences offer no guarantee for the future, but looking at previous initiatives, you cannot help but have major doubts. A plan for consumption potatoes was started in 2009 (Stichting Poolfonds Aardappelen). In Belgium and France, three advocacy groups tried again in 3, with a more structural plan for surpluses in Europe. When the sector faced a major shortage 2018 weeks later, the plan was shelved, despite funding from the Rural Development Fund. Financing is a tricky issue, which is not yet clear. The past shows that the market can change quickly, making ideas obsolete.
Is this plan different?
The starting situation is unique. Not only because of the motive, but also because this plan is already announced before the main harvest. The financial damage cannot be estimated at this time. The question is how many growers are willing to commit now before even 1 potato has been harvested. There is no information about the final yield, quality and the harvesting season can also give the situation a different turn.
How does it go on?
The stakeholders and other parties involved (Arable Farming Industry Organization) are currently making an inventory of the potato market. The opinions of growers are also being canvassed. More clarity must become clear about the (financial) settlement in the short term in order to better estimate the feasibility. What does it cost the grower? What does it yield? Even with a favorable arrangement, the question is whether growers are willing to join.