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'Increase contract price potato not enough'

23 December 2022 - Niels van der Boom - 4 comments

The contract prices for French fries potatoes shown so far are not sufficient to meet the cost price increase. The NAV calculates this based on their own cost calculation. Especially when the costs for irrigation are included in that calculation.

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So far, potato processors in Belgium, including the Belgian-Dutch company Agristo, and companies in Germany have presented contract prices for next season. A 35% to 40% price increase is visible in these prices. This is insufficient according to a calculation by the Working Group on Potatoes for Consumption (WCA) of the NAV.

Cost above €27
The WCA prepares its own annual report cost calculation which growers can also complete themselves for their own business situation. On sandy soil, the ex-land price is €18,40 per 100 kilos and the price for delivery from the shed in April is €25. For clay soil this is €20,7 from the field and €27,40 when dry from the shed. This includes a margin of 15% for the grower, but without taking into account the costs for any irrigation. According to the WCA, irrigation twice costs 1 cent per kilo extra (€270 per hectare at 25mm).

On land, the cost price for growers on sandy soil has increased by 20% and 24% in the calculation example. On clay this is 13% and 15%. Twelve years ago the cost was about €15 for April delivery on the clay. That price level has now almost doubled.

Price increase insufficient
The WCA concludes in its press release that the relatively significant price increases are not or hardly sufficient to enable cost-covering cultivation. The average contract prices for Fontane are now €17,25 ex land. At Innovator it is €19,25. For April this is €25,18 and €27,50. Each grower must determine for himself which price ultimately covers costs. As a rule, the contract prices of the four major Dutch processors are at a slightly lower level than those of their Belgian competitors.

Almost all cost items will increase in 2023, in addition to the significant inflation rate. In the calculation example, the largest percentage increase is due to energy. This also explains why the increase in the contract price for delivery from storage is increasing the fastest. In the example of the cost price calculation, the energy item is 250% compared to 2022. The costs of fertilizers and interest are also rising sharply. The largest absolute increase is due to fertilizer.

The calculation example assumes 50 net tons of potatoes on clay and 55 tons on sandy soil. Dry from the shed that is 47,5 and 52,25 tons.

The cost of table potatoes is even higher
The WCA also looked at the cost price of table potatoes. The conclusion is that – for the same yield – this is between €2,5 and €3 higher. An average is difficult to determine because of the many variables in yields and quality requirements. According to the organization, the attractiveness of growing potatoes under contract must mainly depend on the conditions in the (french fries) potato contracts.

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