Potato growers are increasingly having trouble with imbalance between the cost price of potato chip cultivation and the contract prices offered. Prices for many inputs have risen sharply, especially in the past 3 years. There is hardly any windfall. Arable farming organization NAV annually lists the cost price. What matters stand out?
A week ago wrote we discuss the contract prices for 2022 and 2023. With ever-increasing cost prices for potato cultivation, it is extremely difficult to decide now about cultivation in 2 years' time. Plant protection products can suddenly disappear, or legislation can be amended. The annual cost price comparison of the NAV shows that this entails a huge increase in costs.
For the 2010 harvest year, the arable farming union established a cost price for the first time for chip potatoes grown on sandy and clay soil. The cost price for delivery from the country is calculated and that for delivery at the beginning of April. The NAV no longer has all the figures in the archives, but made those from 8 years available. If you put them in a row, considerable increases are visible.
Source: NAV
Cost price increased 30% to 40%
For the 2010 harvest year, the net cost price on clay soil was €0,10 per kilo for ex-field delivery and €0,13 for April delivery. On sandy soil the ex-land price was a cent lower. In 2021, this has risen to €0,14 ex land (clay) or €0,11 (sand). For April delivery, this has increased to €0,18 (clay) and €0,15 (sand). This means that the cost of growing from the field has increased by more than 11% in 30 years and that of delivery in April has increased by almost 40%. In his calculation example NAV takes into account a 15% margin for the grower. If you add this on top of the cost price, the price per kilo has been above 20 cents since last year on clay soil when delivered in April.
Since 2010, NAV has assumed the same kilo yield per hectare of 50 tons on clay soil and 55 tons for sandy soil. If we look at the list of all cost items, almost only increases are visible. The calculated interest decreased as one of the few items. NAV charged €2010 per hectare for this in 140, which has been reduced to €119 for this year. The energy costs for storage were significantly reduced. From €11 to €895 in 200 years. When loading the potatoes we also see a sharp decrease, from €190 to €90. The total storage costs have therefore decreased by 10% in this example.
Costs of germination inhibition increased fivefold
This cost price drop is special. The largest price increase is also under this chapter. In 2010, NAV still charged €140 for germination inhibition. For this year that is no less than €775. An increase of 454%! Due to CIPC residues, many storage areas had to be thoroughly cleaned last season. The cost item (€550) was included in 2020. This means that the storage costs for delivery in April decrease from €2.110 to €1.615.
The costs of crop and product protection products are an important factor in the cost price. Looking at this cost item for cultivation, an increase of 50% in 11 years is visible. Total allocated costs increased by 30% during this period. That is very average. Processing costs and general costs also increased by a similar percentage.
Expensive land
An even higher increase of 35% is visible for land and buildings. Especially because the land has become more expensive. This concerns lease, rent and charges. NAV estimated €2010 for a hectare in 875, but this has now increased to €1.250. An increase of 43%.
Source: NAV. Costs for cultivation on clay soil
The above figures refer to the cost price calculation for growers on clay soil. If we look at sandy soil, the allocated costs have increased slightly further: 37%. The other items for these growers have increased approximately in proportion to clay cultivation. They do have the advantage of slurry supply, which reduces costs slightly due to an amount to be received. This has been halved. Since 2019, NAV has also calculated the cost price for storage on sandy soil. Storage costs increased by over 3% in 50 years, which is entirely due to the expensive germination inhibition.
Irrigation hidden cost item
An important item is not included in the cost price calculation: that for irrigation. Not everyone can or wants to irrigate. Over the last 3 years of cultivation it has increasingly proven to be a must. As a rule of thumb, NAV uses an amount of €225 per hectare for a donation of 25 mm. If you irrigate twice, this already causes a 1 cent increase in cost price. In practice, the cost price increase can be much higher.
An increase in most items is also essential over the next 10 years. We can conclude that the ex-land cost price increases annually by an average of 3% and that on April by 3,5%. Some stability is sometimes noticeable every year, but always for a short period. This makes even better cost price management and covering risks even more important. Costs rise, revenue stagnates. It's the sales price that can make the biggest difference.