The potato futures market got off to a strong start in the first week of the new year. While April's contracts went out at $6,30 the old year, that month's quote is on the second trading day of the new year by the…
The increase in the potato futures market is based on the demand for free potatoes. The Belgian industries in particular (which have lower coverage for their fries needs) are buyers of potatoes suitable for fries. This became clear on Tuesday, January 5, when the PCA quotation changed color and showed an increase from €2 to €5 for Fontane and Challenger.
Lack of supply
It's not so much that there is a shortage of potatoes. It's more that there is a lack of supply at the low price level. Many buyers have kept the herbs dry in recent months, because there would be compelling offers from germinative parties that become germinous, do not have the qualities or do not want to invest money in preservatives. However, this has not happened so far.
For a price of €3, potato growers can also easily find sales to alternative channels, or they prefer to just wait. The potatoes that are available are often linked to contracts. If that is not the case, then there is no willingness to sell the truly free potatoes.
Short squeeze
With the above in mind, it's game on. A limited supply of free potatoes at a low level and a limited supply of sales contracts on the futures market causes the price to rise quickly. On the futures market we even speak of a so-called 'short squeeze'. This means that the sellers want out, but can't find an offer and the buyer doesn't want to take a profit.
Where the scope is and whether the price level can be much higher will depend on the willingness to sell the free potatoes and what buyers in the market are willing to pay.