Is grain price a game changer for potatoes?

Especially the clay areas and the coastal areas of Belgium and France had fallen behind in the potato harvest due to excessive rainfall. Belgium and France in particular had record lows in the quantity of harvested potatoes for this time period. Belgian factories have therefore purchased large quantities of potatoes from, among others, Germany to keep the chips lines up and running.

Difficult resume
At the beginning of this week, the potato harvest could be resumed, difficult and slow, but it went well. We are now receiving signals from the field that the pace is slightly higher every day and that harvesting is taking place day and night to get the harvest in. It is estimated that today (October 16) 65% has been harvested in the Netherlands and Belgium is also catching up and is expected to go towards 50%.

As a result, the potato market also cooled down somewhat. Belgium recorded unchanged, Germany reduced half a euro and the Netherlands, just like Belgium, did unchanged. The futures market also seems dry with more potatoes to be over his top and fell back below €7,00 this week. Remarkable was the good turnover this week and the continued growth of the open position in the futures market. Apparently, buyer and seller find each other well and hedging positions on both sides of the market are further expanded.

Price explosion grains
Striking this week was the enormous rise in the grain futures market. For a long time, it shot through the magical €200 limit again. There is considerable panic in the grain market due to persistent drought in the main grain-producing countries such as Russia and Ukraine. This persistent drought will cause a significant shrinkage of the acreage in these countries. The total harvest in Europe also seems to be disappointing. Previous forecasts have been revised downwards. For example, Strategy Grains in the EU expects a total wheat harvest for 2020 of 129,5 million tons, compared to 146,7 million tons last year and 128 million tons in 2018 (the driest year in the past 25 years).

The drought in the southern American plains also strengthens the upward movement, for the time being the harvest there also seems to be smaller due to the weather influences. The grain futures market in Paris will touch €208,50 on Friday afternoon for the December 2020 month. But September 2021 also climbs towards €193.

Influence on acreage
This development in the grains may have an impact on the acreage of potatoes in Northwest Europe. In recent years, there was not really an alternative to potato cultivation. Grain prices were low, which meant we mainly saw a growth in the acreage in France. Partly stimulated by the increasing contract prices offered by potato processors. With the blow that corona has made in the sale of fries, the stock of fries and the continuation of the lockdown around the world, the ball seems to be rolling in the other direction. A smaller acreage and lower contract prices seem to be the trend there.

This also puts pressure on the potato growers' balance. The increasing costs in cultivation (and storage) and especially the increasing risks of potato cultivation (extreme weather, quality risks and liability risk (CIPC remainder)) will make many potato growers reconsider their strategy. And with higher grain prices, a more risk-free alternative seems to present itself.