Free potatoes, there is a lot to do at the moment. Last week we wrote an article about how the Dutch potato quotation is established. The necessary comments were received by the editors. It is true that the potato quotation is compiled on the basis of relatively few transactions, but what is and what is not included and how buyers exert their influence there differs between theory and practice.
There is no discussion about the fact that the share of truly free potatoes in the total Dutch harvest is small and that the PotatoNL Dutch potato quotation is only based on a few percent of the total market volume. The PotatoNL protocol and regulations are clear and visible to everyone. However, the step before that, what is contributed for the listing, is a lot more obscure. Theory and practice are quite out of step. Price information is sensitive in every market and the potato market is no different. Well-established sources are willing to provide information about the state of affairs in the potato market, but only anonymously.
The most important bottleneck in a Dutch potato market is the role of the co-delivery kilos. The Arable Farming Trade Organization (BO) states that co-delivery potatoes that can only be sold to the buyer of the share under contract are in principle not included in the Pat list and therefore in the transactions on which the quotation is based. The quotation protocol also assumes free potatoes as the basis for the quotation. It literally says: "The purchase agreements contain prices that are determined through consultation on the day of conclusion (free potatoes)."
Delivery obligation
Now the four members of the Vavi who contribute to the Pat and PotatoNL all use different contract conditions and it is not unusual for a processor to have different types of contracts with different conditions. However, in a significant part of the contracts there is a delivery obligation on the part that is delivered at the daily price. There you cannot actually speak of free potatoes, because in practice the price is not always negotiated. These are only included on the Pat list. Now these are of course potatoes that are sold during the season, so there is certainly something to be said for these being included. But according to sources, interested parties should take a closer look at how exactly you include those potatoes in the quotation. For the record: it is not the case that the co-supplied potatoes are always the lowest input.
Price and incentives
The BO only takes the basic price into account. By putting a lower basic price on the sales agreement and increasing it with, for example, a quality premium or storage fee, the BO is, as it were, deceived and the buyer keeps the grower in question satisfied with an apparently higher price than is common on the market. This is within the rules, but the boundaries are being pushed according to critics.
Free potatoes can also quite easily be completely excluded from the listing. This is done by putting a delivery date on the sales agreement that is at least one month in the future. That agreement may then not be included in the listing. In practice, the buyer and seller have already agreed that the potatoes will be loaded earlier. An option that processors in particular use is to send a (foreign) middleman to buy potatoes. The transactions from trade to processor are not included on the Pat and at PotatoNL and, unlike four Vavi members, traders have not agreed to hand in their free transactions to the BO.
Responsibility
Buyers on the potato market are pushing the boundaries, but sources say that growers also have to take control. Growers give buyers the opportunity to put their stamp on the quotations. A common complaint, for example, is that growers themselves submit relatively few transactions. And if the trade does not hand them in, the grower will really have to do that himself. However, transactions from the VTA list and from the DCA Transaction App are used for the listing in addition to the input from informants. So there is even input from the growers.
Some growers are not aware of what happens to the co-delivered kilos. They are given to the buyer in good faith and the grower can see what they have yielded on the bill. This also makes you, as a grower, very dependent on your buyer. And yet there are quite a few options, including for farmers to know what is being paid for potatoes in the market. In addition to the traditional listing, consider the VTA list, the DCA Transaction App or app groups among farmers. When an onion trader comes to a farmer, the rumor mill, so to speak, immediately goes into full swing about what he has received for his onions, while no one is concerned about the potatoes.