The physical potato market has clearly become more positive in the past week. Traders are again looking for potatoes and factories are also showing an appetite to buy again. The market's recovery is due to growing confidence after a significant dip due to the war in Ukraine. And as the saying goes, trust comes on foot and goes on horseback.
The shock of a war in our backyard caused reluctance among buyers. It is striking that potato growers have remained relatively calm and that there has been no panic supply in recent weeks. This may mean that growers retain confidence in the market, but it can also make it clear that there are actually few potatoes available to panic about. After all, stocks in the Netherlands in particular are limited compared to previous years, while the factories have so far shown no dip in their processing speed. Sales of fries are also reported to be continuing well, despite all the challenges in the world (such as energy prices).
Dutch traders who anticipate the current and average market price now pay up to €24 per 100 kg for Innovator. At the end of this week (13), a tender was issued in the South-West of the Netherlands for Fontane at €19,50 and Agria for €21 for delivery week 17. There was therefore a great surprise among market participants that this morning (Friday, April 1) Belgapom was listed unchanged (€17,50) compared to the week before. Many growers reported last week that business was done for €18 collected. Moreover, Belgian processors buy potatoes outside the country's borders for €18, which means that the transport costs are higher than when they are shipped from growers in the region.
Exporters report that demand from Southern Europe is increasing further. It has been cold and wet in Southern Europe, which affects the time of harvesting the new potatoes and the final hectare yield. This increases export opportunities to Southern Europe, despite the high transport costs. Export prices are around €25 collected in big bags.
Long-term perspective
What can cause a rabbit out of a hat is the reluctance of many processors to reserve potatoes for delivery later in the storage season (that is today for the period May/June). A lack of confidence and the constant dip in the market from the corona pandemic until the war are to blame for this. This means that a large number of potatoes still have to be purchased until the transition to the new harvest can be made.
The transition to a new harvest could also become a thing, now that the weather for the coming weeks seems 'slightly' different than the past month. The possibly delayed arrival of early potatoes, in combination with a smaller acreage, may mean that the factories have to continue with the old harvest for longer. In short, the combination of the low available stock of free potatoes and the uncertainty when and what with the new harvest can cause a hit (read: €25 +) at the end of the season. The futures market also partly shows this, by again recording expected values for the April and June months.{{dataviewSnapshot(2_1648823211)}}
The new harvest is now also maintaining good to very good prices. The April '23 quotation shows a price level of €22 that is historic for the time of year. {{dataviewSnapshot(2_1648823064)}}
The persistent rumors that the area will not expand as previously expected but may even shrink, in combination with processors who have been able to contract fewer potatoes than desired, ensure a very strong futures market quotation for this time of year. When you tour the European potato market, you hear a lot of unrest among potato growers. Growers complain about the high input costs. For example, in a number of cases it is difficult to obtain animal manure, so that fertilizer has to be used, which has increased significantly in price. Growers are also dropping out due to disappointment with the market price development in the current season. Processors show little evidence of the reality that growers have and will have to deal with. In that sense, the previously indicated price development in Belgium is a thorn in the side for many growers.
All raw materials worldwide are hitting new highs, while the potato price itself shows a decline, only to climb excruciatingly slowly out of the valley. Processors seem to be shooting themselves in the foot for the long term. Growers are less motivated to carry out this expensive cultivation, which involves many risks. In short, the motivation to choose crops with lower input costs, lower risk and improved returns at the eleventh hour is high. The alternative is to grow or supply more potatoes freely, pending actual market forces, in which, as this week (look at Belgapom), it appears that buyers have a major say in the pie.