The early potato market has shown a historic decline last week. Never before in the history of the potato trade has a market collapsed so quickly. It therefore seems to be a 'perfect storm' in the sales of early potatoes.
The start of the early potatoes was very difficult. A late and cold spring and then drought led to a tense market until a few weeks ago. The old harvest was finished clean. The planned connection with the early potatoes did not occur. With the first quotations of €50 without any significant offer, the market eventually started to get going. The somewhat forced postponement of the harvest of the early contracts by the processors is now causing a flood of potatoes to be cleared. This results in a total loss of demand for free product. In a few weeks the Belgapom dropped from €50 to €30 to €17,50 today (Friday, August 25). That is an unprecedented sharp drop, but the listing is more or less necessary since the co-supplied kilos must also be provided with a market price.
Capriciousness characterizes the market
Market situations that we are currently dealing with will also determine the picture in the coming years. The large volume of contract potatoes that processors conclude with growers and other suppliers and the further disappearance of any buffer (read: trade) only make the market more volatile. Being completely out of the market (read: loss of demand) or having a shortage of raw materials - as was the case until recently - continues to give the market a capricious and therefore unpredictable character. Growers today indicate that they are very happy with a contract, while only recently there were major concerns about whether they could meet the obligations given the development/state of the potato crops.
In this sense, the uneasy feeling among growers is increasing that in the end there will be little left. That most potatoes have been outsourced (read: contracted) before they have even been planted. However, there is never a guarantee that the cost price will be met. Either there will be a year in which the average hectare yields are disappointing and nothing extra remains, or there will be a year in which a lot of costs have to be incurred (this season is a good example of that) and the extra kilos will amount to, say, €17,50. XNUMX or less will be charged. There doesn't seem to be a middle ground anymore.
Which is special, since processors will have to do everything they can in the coming years to allow growers to grow sufficient acreage. After all, fries sales and the income generated from them are more than good. What the future looks like with the further removal of fenders and shock absorbers (read: trade) will remain a challenge. The intended 'American' purchasing model, which also appears to be being implemented in Western Europe, is an interesting one. given the relatively large number of processors and growers in a relatively small working area and the challenges posed by the climate.
Disease pressure
The market is not expected to improve much in the coming period, as processors appear to be full. In addition, the phytophthora specter is looming large in a number of cultivation areas, causing further pressure (supply). In various plots, often regional, the disease pressure has been very high recently due to the wet conditions, which has hit varieties such as Innovator and Agria particularly hard. There are regular reports of phytophthora being hit in the tuber, leaving growers wondering how to deal with this. With more than 30% infected tubers, storage does not seem to be an option. Letting it rot and delivering it directly from the field is probably the least bad solution, but given the current market price development that is not a luxury either.
Opportunities in the long term
Ultimately, the total EU-4 main harvest is not expected to become a record. A lot below the multi-year average is now in line with expectations when it comes to the EU-4 countries. In addition, the loss due to quality problems can create a further gap. Basically, the market for the 2023/2024 season is certainly promising, but that may have to wait a while. The futures market is also clearly in a split. A quote for the April 2024 contract of €27,50 is not surprising given the current daily market, but the opportunities that the market has later in the storage season do not yet cause a major price drop in the case of the futures market.