Potato growers are on the eve of the main harvest, which starts after a week or two. It was clear for a long time that it was going to be a challenging storage season. An impossible task is now added: Predicting sales in 2.
The potato futures market has been stable over the last 2 weeks with a rate around or slightly above €7 per 100 kilos for the April 2021 contract. Far below cost price, but for now the bottom. The market was also in these price regions in 2011, 2014 and 2017. Can we learn something from the past?
Higher price level in sight?
Such low potato prices all had a simple cause. Too much area, too many kilos and often a combination of both. In the above years, the price no longer improved, which in week 17 ended a few euros below the pre-harvest level. In 2007 and 2009 the price was also at a relatively low level, but higher. In those years the price ended up just under €10.
The area and yield obviously play a role - corona or not. However, it is the uncertain sales that causes the most question marks. The area is known. Current trial harvest figures in Europe indicate an average harvest, which may be slightly below average in dry regions. The sorting is coarse and the underwater weight is good. No figures that currently offer opportunities for a rising market.
An expected EU-5 yield of 27,9 million tons is more than sufficient to provide processors with sufficient potatoes. Even if the final yield is lower, it will remain above the 2019 level (26,9 million tons). In addition, processors have continued to use old potatoes for a long time this year.
Increasing processing and sales
Potato processors in the Netherlands and Belgium are now performing better and better. A sunny late summer will hopefully help to fill the terraces and thus also the consumption of chips. Only the major events now leave a mark on chip sales. Globally, there are even several major destinations that are significantly consuming French fries supplies, allowing processors not only to accommodate accumulated stocks, but also to continue operating. The fact remains that three quarters of production is consumed in Europe. Simply because consumption per capita is very high here. An advantage is that more fries are sold in retail.
What does all this mean for the potato grower, who is about to start harvesting the main harvest? It is impossible to estimate the further development of sales. After all, it is highly dependent on the freedom of the consumer. Do new lockdowns throw a spanner in the works or not? If there are any opportunities, they are expected at the very end of the season. Everything must go well for the grower. A disappointing potato yield, sales that are going well and a late spring and/or late new harvest. Looking at the predictive value of the futures market, the question is whether a significantly higher price can be expected. That inspiration is not there now.
Increased holding costs
What is extra important are the increased storage costs. The foliage killing with Quickdown or Spotlight/Affinity has been remarkably successful this year, growers and advisors conclude. Favorable weather conditions ensured better and, above all, faster operation than was observed last year. Then there are 2 strategies for storage. Or spray with MH and choose to deliver before January 1, or store for a long time and start with 1,4 Sight. The use of Biox-M and Restrain Ethylene is expected to be used to a much lesser extent. All these resources result in an increase in cost price. One we haven't seen in years.
The Belgian Farmers' Association estimates the fixed costs for storing potatoes this year on average at €1.900 per hectare. However, the variable costs have increased significantly, to a maximum of more than €5.000 per hectare. The crop protection item alone - including preservatives - amounts to more than €1.600 compared to €800 last year. It is possible that the costs of land rental and especially seed potatoes will be lower this season. However, this does not compensate for the additional costs of crop protection products.
Just like last week, PotatoNL quotes €2 to €3 per 100 kilos for category I French fries potatoes. Belgapom also quotes €3 for Fontane, Challenger and Bintje. The difference between the physical price and the futures market is due to the high price mentioned storage costs Given the demand from the feed sector and other markets, the current level can be seen as a bottom in the physical market. Hedging on the futures market can therefore be worthwhile for those who do not want to incur high custody costs or doubt the suitability of their custody. The alternative is to store it until New Year's with lower costs and hope for a slightly stronger market.