An ordinary year seems out of the question for potato cultivation. The extremes follow each other in rapid succession and as a potato grower you have to have a great deal of resilience to continue growing.
To sum things up: firstly, cultivation costs have increased extremely. This was already taken into account in the winter, but due to the further increase in costs, it turned out to be even higher than estimated in advance. In retrospect, the contract price increases therefore appear to be on the meager side. Diesel and fertilizer continued to rise in price throughout the growing season.
Secondly, the increasing energy costs for both the grower and the manufacturer present many challenges and large liquidity needs. Something that raises many questions about the storage of 'free' potatoes.
Thirdly, we are also dealing with an extremely dry growing season, in which a yield equal to the long-term average will not be achieved for many growers. This also ensures that the costs per kilo of potatoes increase sharply. Moreover, few free potatoes remain to take advantage of possibly better prices.
To calculate
And there is something to be said about that price. Many growers who farm with the calculator are faced with a number of decisions just before the harvest, but also before next year's growing season. Because today (Friday 9 September) €25 is being offered for potatoes from the land. Given the conditions of low yields and compared to other dry years in history, a normal price. But the futures market is trading at €28.
This means that there is only a €3 price difference between ex-land and delivery dry from the shed on April. With current custody costs, retention is a loss-making activity. Calculations by various organizations show that storing potatoes for six months for a fee of €2 is not possible. The high electricity prices mean that storage costs have at least tripled compared to previous years. This means that the price for potatoes dry out of the barn on April should move towards €31.
Risk
In addition, there is an enormous risk factor in storage, because the price of potatoes can also fall if, for example, processors run out of gas or if, due to increased inflation, people no longer eat out and start adopting a different food pattern. In fact, the futures market indicates a negative expectation about the price development of potatoes, while in a normal year all signals are green. The yield in Europe will be below that of 2018, the processing capacity has never been greater and there are plenty of export opportunities for potatoes to Southern Europe. All ingredients are available for record prices and yet the futures market is not showing this and processors are hesitant to buy potatoes.
Is the free market completely sidelined? At least for farmers with a calculator in hand, it is clear that if you are not into speculating, it is best to sell all your potatoes off the land and start orienting yourself on a combine next winter.