Last week the potato market again had to deal with quite a bit of bad news, yet the futures market is slowly climbing further upwards. The physical market can still be experienced as calm and, due to its low price level, has a special dynamic on which processors in particular have little impact.
The various quotes remained unchanged this week, with the general observation that there is little trading and the market feels calm. Many of the Belgian, German and Dutch processors seem to be approaching December to close for a longer period of time. Sales of fries are still not 100% and stocks are such that production can easily be shut down for 3 weeks. This happens en masse.
Dark clouds
The start of vaccination against the coronavirus gives the market hope, but in the short term the clouds seem to be getting darker. The number of people testing positive continues to increase every day and many countries fear a further lockdown. Germany is even talking about an absolute lockdown for 3 weeks and the Netherlands also has to fear because of the increasing infections.
It's that Christmas is coming, otherwise it would probably have happened already in many countries. Catering, festivals and concerts seem further away than ever. When the vaccination program starts, some relaxation will not be possible until the spring at the earliest. This means that sales of fries will certainly not reach 100% in the coming period.
Ban on sprout inhibitors
The second piece of bad news this week was the banning of a number of sprout inhibitors in Germany. As a result of incorrect application, two storage sheds burned down in Germany, causing the authority to intervene by (temporarily) applying, among other things, 1,4Sight to ban. According to insiders, it will certainly take another 6 to 8 weeks before this can be used again.
The result of this is that batches that need to be treated against germination inhibition in the short term are far behind and have to be brought onto the market early. It is therefore expected that additional supply will arise from Germany in January and/or February. Other countries are also still struggling with the high costs and difficult to administer sprout inhibitors and expect to have additional supply during this period. Yet the physical market and the futures market do not seem to want to anticipate this.
The physical market may be quiet, but the supply remains manageable. The prices that factories pay for the co-delivery potatoes are the lowest in the market. Alternative sales to starch growers, flake and granulate lines yield more. That creates a huge alternative circuit. It is important that you have the right connections to achieve sales. If you don't have one, you are at the mercy of the chip factories or feed market. It is clear that the Belgian and French markets have no starch industry or flake factories, which means they dangle at the bottom of the price range.
Compelling offer
The futures market also does not want to anticipate possible compelling offers in January and February. The futures market climbed back to €6,50 this week, but due to a lack of sellers and persistent demand, it closed at around €6. The demand mainly comes from hedgers who want to close positions. For the June contract, the demand comes partly from speculation and partly from professional coverage. The hope is that the chip sales market can be reasonably normal again after April. Due to the spillage of potatoes, there could be a shortage during that period, which would cause the price to rise in June.
New harvest seems to have reached its ceiling at €14,50. This week there was some more hedging on April 2022 due to rumors that chip factories are aiming not to have an area reduction for the new season. And they also want to lower their fixed price contracts in both volume and price.