Since 2018, the joint Dutch potato processors have published the prices they have paid for chips potatoes. The DCA PAT Index is calculated daily. Despite the sizeable potato industry, the volume is meager. Do processors have little need for free potatoes or are they covered as much as possible through permanent contracts?
De DCA PAT Index (Platform Potato Transactions) has been operational since November 2018. Dutch potato processors, who are affiliated with trade organization Vavi, are obliged to report all transactions from 50 tons electronically to BO Akkerbouw. The PAT Index is calculated daily by DCA and published on Boerenbusiness.NL. Every batch of potatoes over 50 tons and purchased in the past seven days is included.
Weighted average
The PAT Index is a weighted average that also takes into account the sorting and volume. The breed is also taken into account. The reported potatoes must be delivered within one month. If delivery is later, €15 per tonne per week will be deducted for storage costs.
If we look at the results of the PAT Index, 23 contracts emerge for this year (reference date January 24). Transactions were reported, especially in the second half of January. Fifteen in total, compared to eight in the first period of January. This brings the PAT Index to €17,41 per 100 kilos.
Bought more than 6.000 tons
What is striking is the relatively small total volume registered by the participating parties. This concerns a total of 6.175 tons of potatoes. Most transactions are for immediate delivery. Part for delivery in April and May. What is also striking is that these usually involve relatively small volumes between 80 and 200 tons. There are some outliers of 800 and 1.000 tons. Almost all transactions involve potatoes grown on clay/loess soil. Only one transaction concerns potatoes grown on sand.
Over the last five years, Dutch factories processed an average of 320.720 tons in January. That's over 10.000 tons per day. The processing figure also includes potatoes from imports. That was 95.680 tons over the last five years, bringing the share of Dutch potatoes to 225.040 tons. The total volume entered on the PAT Index therefore amounts to 2,7% of the total processed volume of Dutch potatoes.
Figures in line with previous years
Do these figures differ from previous years? When we look at the results of the PAT Index, this cannot be concluded. Also a year ago, exactly 23 contracts were registered in the first 24 days of the year (5.585 tons). In 2020, this volume was slightly larger with 44 contracts. Good for 8.885 tons. That is more than in the current year, but still relatively little on the total of 225.000 tons.
If the potato processors enter all large transactions, we must conclude that the open positions are extremely small. These are then filled with potatoes from abroad or, for example, from Poland. If we look at the volume size per contract, it is logical that it often concerns the so-called 'delivery kilos' that are sold at the daily price when the contract potatoes are collected. Outliers of 800 or 1.000 tons are probably free transactions.
How extensive the factories are covered with fixed price contracts is the blacksmith's secret. In the Netherlands, the average hectare yield in 2021 was 45 tons. Most processors use a maximum fixed volume of 40 to 50 tons per hectare, depending on the variety and the possibility of irrigation. Sometimes they also work with multi-ton contracts. Especially last season (2021-22), fewer tonnes per hectare were sometimes contractually committed due to the uncertain situation at the time. So you would expect more purchases.
Task for growers
"Criticism about quotations has always existed," says André Hoogendijk, director of BO Akkerbouw and chairman of PotatoNL. "When the market starts to move, criticism increases. When the market goes up, growers comment that this should not be included in the quotation. If the market is declining, the same comments come from the industry. A realistic representation depends on the input of transactions. For the PAT Index, the affiliated processors have entered into the obligation to report their transactions to BO Akkerbouw. If a If a buyer or seller suspects that a transaction is not included in the PAT Index, or that it is incorrect, this must be reported to us. Only when that happens can we investigate whether something is indeed wrong."
Hoogendijk continues: "The PAT Index highlights the input from the processing industry. The grower has little influence on this. The PotatoNL listing does include the input from growers. In practice we see that little use is made of this. is made. Growers are very reluctant to report transactions. The more transactions are reported, the stronger the listing becomes. There is still a task for the growers. In an ideal world, once the sales contract for free potatoes has been signed, the grower immediately send a copy to PotatoNL. This will only benefit the listing and therefore the transparency of the market."
Former PotatoNL chairman Mark Brantjes previously concluded in a interview with Boerenbusiness something similar: "Growers are selling themselves short. When the barn is empty it seems as if the urgency has disappeared. They would rather not let the neighbor know what has been paid."
Potatoes through intermediaries
Based on the PAT Index, we can therefore conclude that almost 3% is freely purchased among Dutch growers. That is not true. The unmeasured 'potato flow' to the factories comes from the intermediary. Transactions between processor and trader (both at home and abroad) are not reported in the PAT Index. The total size of this volume is a matter of guesswork, but with the processing figures and the PAT Index in mind, this must be significant.
The trade association for potato processors (Vavi) has also been asked for a response. Due to a change in management, she was unable to comment at this time.
This article is a co-production by Jurphaas Lugtenburg and Niels van der Boom.