A tour of the fields shows that the expectation is that the next step of the Fontane market price may be towards € 20. In Belgium, €17 is now quoted for this variety (Belgapom January 21), but there would not be much supply at this price.
In order to get some supply, Belgian parties in the south of the Netherlands are currently offering up to €18 per 100 kilos, to be delivered this month. You often see that markets generate more supply at certain levels, especially with an upward trend. For the coming period, this could be €20 in the case of Fontane and Challenger. At that price level, there could be more supply in terms of volume - or so the idea is - which is indeed a proven strategy in a market that feels fixed.
Belgians and Dutch are each other's competitors
Such a shake-the-tree strategy to loosen supply and then be off the market for a few weeks is a typical Belgian strategy given the purchasing method. What the effect will be this season remains to be seen as the Belgian and Dutch industries seem to be getting in each other's way when it comes to the Fontane segment. Belgians seem to be more active in purchasing potatoes on Dutch soil, while Dutch processors indicate that they can buy Fontane in Belgium for the desired price.
What is striking, but also not, is the market price development of Fontane in the Netherlands, which is lagging behind compared to the Belgian one. Just last week, the PAT list transactions of €15,50 per 100 kilos were reported for Fontane, but also for Challenger. This makes an important difference with the purchasing structure between Belgium and the Netherlands visible. In Belgium, contracts are generally concluded with growers on the basis of pre-agreed tonnes to be delivered. The remainder is purchased in the market. If there is a demanding market, as is the case this season, this is immediately reflected in the market prices and therefore the quotations. In the Netherlands, on the other hand, in many cases the barrels are supplied outside the fixed price contract. The settlement of the potatoes supplied is then done on the basis of, for example, the PotatoNL quotation. However, due to the largely abolished free market, especially in the Fontane segment, it is difficult to obtain a market-based quotation on which to pay for the co-supplied potatoes. In short, a bit of a dog chasing its own tail.
Premium varieties show flexibility
While the Fontane market is developing in the Netherlands with difficulty, it is going so smoothly with varieties such as Agria and Innovator. In contrast to the Fontane segment, these varieties are more in demand outside of processors. For example, there is demand from outside the Netherlands for both Agria and Innovator and market prices have risen above the level of €20 per 100 kilos. Currently, bids for Agria with the desired quality are up to €22, for Innovator this would be €21. Due to the contribution of potatoes of other varieties to PotatoNL, the average contribution of the cash settlement (currently €3 in week 18,49) is considerably higher than the contribution from France and Belgium (€16,50). However, with a jump towards or to €20 per 100 kilos from Fontane in Belgium, usually followed by France, the cash settlement can easily exceed €20, which also explains the current forward market rate (€22) in April 2022. After all, there are still three months to go towards settlement of the contract.