The potato futures market in particular was busy last week with finding the bottom in the market. Buyers were hard to find and sales were low. The sale came mainly from speculators who took their losses because they believed the futures market would rise above $25.
The negative sentiment that arose when the war in Ukraine broke out could not be taken into account. Now that the 'pain' has disappeared, the futures market is cautiously recovering and a bottom is forming around €18 for the third time this year.{{dataviewSnapshot(2_1647592118)}}
Processors are still fully operational and do not notice much of the war in sales. However, enormous challenges remain for getting other supplies available in time to produce fries. In addition, the transport costs increase sharply for the supply of potatoes to the factory. According to analysts, these extra costs can amount to €1 million per week. Nevertheless, it remains important to remain alert about developments in the potato market, now that the negative sentiment has prevailed recently. The war puts a black blanket on the mood in the market. But numerically it remains a major challenge for several processors to reach the finish line this season.
The stock of potatoes is below the level of multi-year averages (VTA figures) in both the Netherlands and Belgium. France still has the largest stocks, as new French figures showed this week. But if the processors continue to process at this pace, there will be a shortage at the end of the season. The Belgapom quote on Friday, March 18, was striking, which published €17,50 as the most current price for Fontane. A number of Belgian growers tell us that yesterday and today they sold for €18 to Belgian traders and processors and that demand is picking up somewhat. In any case, Belgapom's reduction ensured that the futures market did not rise above €18 today, but fell back to the previous bottom level of €17,50.{{dataviewSnapshot(2_1647602512)}}
New season even bigger challenge
The connection between old and new harvest will therefore become very important. An empty start to the new season immediately presents the sector with a new challenge. The acreage of early potatoes is expected to be smaller. Growers were only moderately enthusiastic to sign contracts for early cultivation and many German and Belgian growers have recently made a switch to growing grain. This means that availability will be limited at the start of the new season.
The main harvest for the 2022 growing season is also heading for a smaller area and may well end up being the smallest European area of the past fifteen years. While the processing capacity has never been as large as it is now. Growers are dropping out due to high cultivation costs, disappointing financial results in recent years, uncertainty in the market and good alternative crops with lower input costs and good balances that can already be achieved.
Seed potatoes in the ramsj
The shrinkage of the acreage is especially visible in the availability of seed potatoes. Belgium already announced last week that they expect to cancel 10% of the seed potatoes ordered. But there is also ample supply of the popular varieties, Fontane and Innovator, in the Dutch market, where business can sometimes be done for very attractive prices.
The trend break from last year therefore seems to be continuing (more processing capacity and less acreage/volume of potatoes). Mainly caused by external factors. Nevertheless, in the coming years there is even more to consider which could allow the fall in the potato area to continue, and that is, in addition to the high grain prices, the CAP policy. Livestock farmers in particular are less likely to rent out land for potatoes due to legislation. Land-based livestock farming, the granting of payment rights, the legal obligation not to tear grassland for CO2 sequestration and the cultivation of own fodder due to the high raw material prices will ensure that the availability of land will become a challenge.
Applying the compass method by processors (purchasing potatoes from a larger circle around the factory – from 300 to 600 kilometers) is a solution, but with the increased transport costs it becomes an expensive activity to drive potatoes from Poland or Bordeaux to the Netherlands or Belgium, for example. The fact that the futures market for April 2023 also set itself firmly above €20 this week can therefore be clearly explained.