Analysis Potatoes
On the eve of a historic season
The potato market seems to be ending up in a unique situation more and more. It will take at least eight weeks before the potato industry has processed the old harvest. Nevertheless, the new crop is already in the spotlight. Are growers already making plans for the 2023 season and if so, are they going to reduce acreage? You will read it in this analysis.
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Choose the subscription that suits youFirst there was already the discussion about the contract prices and the skyrocketed cost price of potato cultivation. Subsequently, the fear arose of a sharply shrinking area and now the drought comes into play at an extremely early date.
Everyone agrees that the cost price has increased. Fertilizer costs are rising towards €600 per hectare and the price of diesel has also more than doubled. In addition, the price of crop protection products has risen sharply and some products are even only available to a limited extent. However, a reduction in area appears to have been averted or limited.
Earning power
The highest indications in the EU-4 (the Netherlands, Belgium, Germany and France) appear to be an unchanged area for French fries potatoes. This is presented as good news, but in the context of last year's contraction and an increase in processing capacity, this is actually a contraction. Under normal circumstances, a 15% increase in area would have been desirable to get the market back into balance. The increase in contract prices should have been a huge incentive, but was quickly canceled out by the cost price increases at the grower. Looking at current costs, the earning capacity of a potato grower has fallen rather than increased with the increase in contract prices.
The persistent drought then adds to the situation. Many growers complain about the extremely dry soil, which means that the plants are dry and cannot be tilled. Irrigation is often the only solution. Due to the increased diesel costs, the cost of irrigation has also increased considerably. With an average of 50 liters of diesel per hectare, the cost of irrigation increases to €300 per hectare. In the event of a persistent drought and possibly six or more irrigations, you are looking at a cost increase of €1.800 per hectare.
Term market charges costs
It is becoming increasingly clear that the new harvest also takes into account the drought and area development. Today the futures market is hovering around €24 and €25 does not seem far away. A historically high price for the time of year (see graph) that is €4 to €6 above last winter's contract prices. If drought persists, it could become a very special season.
