The physical market price of chips potatoes has made a big jump in recent weeks. This is shown by the various quotations in Northwestern Europe. This is music to the ears of growers, but buyers undoubtedly have a different reasoning.
For example, Belgapom recorded €13 per 100 kg for Fontane and Challenger until the end of last year. Currently (February 11) that is €20, an increase of no less than €7 in just two months. If this significant increase continues, Belgapom and also PCA/Fiwap will quote above the €2022 level by mid-April - i.e. towards the settlement of the April 25 contract. Only time will tell whether such a market price (€25 per 100 kg or higher) will be achieved.
The growers are of course pleased with this upward trend, but the buyers are scratching their heads. The cost price of the end product to be produced has risen considerably due to the rising prices of, for example, palm oil, paper (cardboard), energy, etc. The potato raw material component (not unimportant) also follows, putting further pressure on profit margins.
Growers are reluctant to offer
The question that arises is: does increasing the purchase price in a short period of time have a sufficient shock effect for the grower? In other words: are there enough apples (read: potatoes) falling from the tree, especially in the Fontane segment, now that €20 per 100 kilos is paid? Or growers expect that business can be done at higher market prices in the coming weeks. Despite the price jump, growers are reluctant to make offers. Much will depend on the physical positions of the buyers. Is there sufficient coverage or do they have to go further into the market? If the latter is the case, the season is still long and further price increases are a logical consequence. It remains to be seen when the next steps will be taken. Insiders believe that the market will stabilize somewhat in February. Time will tell.
Implementing price increases
At the top of the market, Agria and Innovator, in particular, are of above-average quality, trading at €25 per 100 kg. These potatoes are sold to Southern Europe, but also to Switzerland. The continued outflow of Agria in particular to further destinations makes it difficult for the shell companies. Consider the limited supply of the desired quality, in combination with the further increasing market price. Implementing a price increase for the end product is necessary to be able to pay more for the potatoes. The latter should also be the case for fries sales. It is reported that a price increase in the higher segment (think of fast food) is easier than in the 'bulk' segment.