Checkout week potatoes can make a difference

Forward contracts are settled on the final cash settlement (CS), but many physical contracts are also settled on the basis of the CS of week 17. Growers and processors enter into agreements based on the price of week 17 (with any storage fees), but click contracts that have not been clicked and have not yet been delivered are also processed. paid on the basis of the CS of week 17. A rough estimate shows that at least half a million tons of potatoes in the Netherlands are paid for on the basis of that one week. Something that makes it a momentous and important week in a potato season. Both for the purchasing parties and for the selling parties.

Now that the outstanding contracts of the April 17 potato futures contract have been settled in week 2022, the balance can be drawn up. What does the level of the final CS say about returns in potato cultivation? From a purely statistical point of view, we have listed the settlement/CS price of week 17 of the past ten years. In addition, the difference was examined with the CS of two weeks earlier (week 15) and two weeks later (week 19). How volatile is the potato market during this period and how much difference does it make to the financial result if the potatoes are traded two weeks earlier or two weeks later. The outcome shows amazing results.

Practical example
Suppose someone has a contract for 1.000 tons of potatoes suitable for fries that will be paid for at the final CS of week 17. What would he/she have earned or surrendered based on paying for the CS in week 15 over the past ten years? And what are the financial differences when payment is based on the CS of week 19? The diagram below provides insight into these differences in relation to the CS of week 17.

Summarized:

1. The difference between selling based on the CS of week 15 or week 17 costs the seller €79.000
2. The difference between sales based on the CS of week 19 or week 17 earns the seller €133.000
3. The difference between sales based on the CS of week 15 or week 19 earns the seller €212.000

Closing note

• Payment based on week 15 gives a clearly lower financial result for a grower over the past ten years. Of the ten years, only 2013 is lower in week 17 than in week 15. In all other years the market tends to increase every year from week 15 onwards.
• Payment based on week 19 gives a clearly higher financial result for a grower. This increase is also substantially higher than the increase from week 15 to week 17. In addition, in the past ten years, three years have been recorded lower than in week 17 (2019, 2017 and 2013), all of which were bad price years (below €10). .
• In summary, pricing the potatoes two weeks later provides growers with a substantial financial benefit, and in bad price years (market below €10) they will have to say goodbye to their product more quickly.