After weeks of downturn in the potato futures market, the market recovered at the end of this week. Not so much that the physical market has now entered an upward flow, but more because the futures market had slumped too far in recent weeks and recorded a negative expectation value.
The physical markets had actually shown less of a decline and there was no compelling or fear-based supply on the physical market. Belgpom's quotation last Friday (March 18) was therefore on the low side compared to the Dutch market. Today (March 25), Belgapom's mood is significantly friendlier and the price of Challenger has risen slightly and Fontane remains unchanged at €17,50. This week, business was done for €18 and €19 for Fontane and €20 for Innovator. Processors were simply well covered for the period at the end of February and throughout March. It was therefore not really necessary to purchase additional potatoes, which made the potato market feel extremely calm.{{dataviewSnapshot(2_1648211403)}}
Fast recovery of the futures market
The futures market recovered quickly with relatively little turnover, with the €20 level coming back into view. With five weeks to go before the April 2022 contract settles, a lot can still happen in the market. The cards on the physical market are different for the period May and June. Due to the cautious attitude of the processors, relatively little additional purchases were made for the period May, June and July.{{dataviewSnapshot(2_1648211491)}}
The Russian invasion of Ukraine made processors cautious about long-term purchasing. This could create additional demand in the last months of the season, assuming that the world continues to turn and fries sales remain at the level of recent months. Processors will want to continue with old harvest potatoes for longer. Due to the expected shrinkage of the area of early potatoes, processors will want to start the new harvest as late as possible so as not to run out of early potatoes too quickly. This does pose challenges, as the stock of potatoes still in storage is not much higher than in the expensive crop failure of 2018.
Record level new harvest
The new harvest on the futures market this week showed a new record for the time of year. The nervousness radiates from this contract and thus shows (relatively) high prices. This week, the April 2023 contract touched the €22 level, a price that indicates that expectations for price formation are very high in the market. This is of course prompted by the possible shrinkage of the European potato area and the expectation that farmers will be economical with the input of their crops. Less fertilizer and less irrigation due to the high diesel price will result in lower average yields worldwide, which may lead to more export opportunities, but also to (even) less availability of potatoes for the Northwest European potato industries.
Growers who have not signed a contract with the various processors in the past period feel encouraged by this and are not yet very willing to hedge on the futures market, despite the fact that it is substantially above the level of the contract prices.{{dataviewSnapshot( 2_1648211576)}}