The physical potato market has moderated somewhat this week. The driving demand from the German trade and Belgian processors clearly decreased around the turn of February/March. The demand for chips potatoes, especially in Belgium, seemed to have completely disappeared in the last 10 days.
That impression was not reflected in the PCA/Fiwap quotation of Tuesday, March 9. Although it recorded 'quietly', the market price remained unchanged (€7,50 per 100 kilos for Fontane and Challenger). The Dutch, German and also French quotations cautiously showed some price decline (REKA quoted €12 per 7,50 kg for Fontane on Friday, March 100, € 0,50 lower than a week earlier), but that was all.
Unrest in the futures market
However, the futures market for the 2020 harvest has been much more restless in recent days. The premium that normally exists between the forward market price and the cash settlement had virtually disappeared. The futures market always gives a crystal clear signal about what is actually going on in the market. That signal was not (yet) reflected in the various quotes of the past week. For example, the cash settlement (CS) fell only €11 to €0,10 on Thursday, March 7,80, while the April 2021 futures market quotation already fell to €7,50 that day. So there was a negative expected value at that time.
Belgapom's quotation committee caused a significant (negative) shift in the market on Friday, March 12, by reducing prices by no less than €2,50 per 100 kg to €5, thus confirming the gut feeling that could be seen on the futures market. The Belgapom quotation therefore cuts a leg under the market in one go and is now relatively far removed from the German Fontane quotation (€7,50 per 100 kg) on the same day.
Will more follow?
The question that can now be asked: will the other quotations in Europe decline in the coming weeks or will there be a correction of the Belgapom quotation. If Belgapom anticipates what the other European listings will do, the CS will quickly drop back to the market price of a few weeks ago (€5,50/€6,00). The futures market is then back to square one. The upward trend that started in December has therefore been completely reversed. That doesn't produce many happy faces, but 'the market' usually doesn't care about that.
The Belgian processing industry is reportedly having difficulty with the sales of fries. The destinations Japan and China in particular would be difficult. The Chinese want 100% 'corona-free fries' and are therefore taking a wait-and-see attitude. The end product processed from potatoes treated with 1,4Sight is also reportedly banned. Furthermore, container prices worldwide have risen sharply, which has increased the challenge (read: costs) in transport.
However, it remains unusual, to say the least, that Belgapom is so rigorously lowering its rating, with perhaps a chain reaction towards other European listings. Jnow that €5,50 has been paid for flakes this week. Perhaps Belgapom's non-listing due to a lack of transactions would have been better. The listing committee decided differently.