The harvest of early chips potatoes for next summer is already causing tension in the potato market. The enthusiasm to deliver from land is particularly low among potato growers. Instead, they have sown wheat or are using a different strategy. Can a last-minute decision turn the tide?
Potato processors and trading houses are unanimous this year. The largest reductions in contracts have been implemented during the early delivery periods on land. The first premiere weeks are not too bad, but as August progresses the prices drop. For example, potato trading house Wilhelm Weuthen from Schwalmtal, Germany, has also reduced its ex-field contracts, depending on delivery time and variety, by €0,75 to €1,00 per 100 kilos. That happened at a sensitive time in the market. Other buyers have also reduced their prices in the early segment.
Other crops
With a price increase that has just started on the grain market, and many excess kilos going into animal feed or starch, potato growers have decided to cut back considerably on early potatoes. This mainly concerns Germany and Belgium, but also parts of North Brabant and Limburg. In many cases wheat has been sown, or arable farmers opt for maize. A small number in both the Netherlands and Germany choose to try their luck in onion cultivation.
Arable farmers who want to grow potatoes are more likely to choose a main crop variety such as Fontane or Challenger, and then deliver them from the field at the end of September. A big advantage is that the seed potatoes are €100 to €200 cheaper per hectare. Contract prices drop - in the case of Weuthen - in the main harvest by €0,50 for 1-year contracts. They remain the same for 3-year contracts. This is also visible among other customers. Another advantage is that you can always spray these varieties to death and store them, while this flexibility is lacking with a variety such as Première or Amora. What is also striking is that the enthusiasm for the better-paid Innovator variety is disappointing. The reason for this is that the yields of the variety have been disappointing in the past 3 dry years.
Tenacity
Until now, potato processors thought that the connection between the old and new harvest would not cause any problems. More than enough free and contract potatoes to bridge that gap. Particularly in Belgium and Germany, factories are no longer so sure about this. In the months following the harvest, an enormous volume has already been cleared towards the aforementioned destinations. Growers who still have a (modest) free volume are not prepared to just say goodbye. High holding costs ensure that current bids are still below cost price. For example, for Innovator on week 17, the bid is currently €10,00.
If we get a late spring or drought at the beginning of summer, this position could be further stretched. "As a sector, we have actually supplied potatoes to the forage and starch industry for a month too long," notes an insider. Anyone looking at the stock figures gets the impression that more than enough free potatoes are still in storage. It is becoming increasingly clear that this largely concerns a 'paper stock'. Tons that aren't physically there. How is that possible?
No excess kilos
Growers in Belgium, Germany and France only enter into tonnage contracts. In reality, they planted fewer potatoes last season than was perhaps strictly necessary. The yield - especially in Belgium - was not that bad. The delivery obligation can usually be met just barely, but there are hardly any free potatoes left. Growers have purchased additional potatoes on the open market. This results in no supply being made and the market price rising. Those who do have free product to sell will see the profit at the end of the season, with the above in mind.
Potato processors only need potatoes if sales of the end product are also going well. Despite the fact that almost all of Europe has been in lockdown for 6 weeks, sales are continuing well. The Dutch processing figures show again for December recovery. Belgian factories – which are traditionally strong in export and retail – also to spin expected better.
The foodservice segment is the only channel that still shows little demand. Company canteens remain closed and events are not in the pipeline. At the same time, more is being consumed at home and economies outside Europe are doing well. This is the case in Asia, South, Central and North America. This is clearly visible in the European French fries export figures. The price component is an important sales factor.
In North America, the area has shrunk, making availability smaller than normal. The good demand ensures that factories can also reduce their accumulated inventories.
Growing season determines
At the moment, there is still room for growers to decide, for those who see opportunities in early cultivation. Information from the seed potato trading houses shows that sales of the early varieties (Première, Amora, Sinora, Zorba) are disappointing. The strategy can be changed until early March. The start of the planting season and the weather in June and July ultimately determine how the 2 seasons connect. With a bottom set in concrete, good demand for free potatoes and a destination for second-variety potatoes, insiders think that the most negative period is behind us.