Weuthen, CBS and the miracle called Fontane

Now that the 2023 harvest season is continuing to unfold and a better picture can be formed of how potato crops are developing in the EU-4 countries, the various market parties seem to have to change course. This shift in focus is happening at a rapid pace, as just over a month ago the combination of the settlement of the old harvest and the state of the crops for the 2023 harvest caused quite a bit of stress. A year of market prices with a lower limit of €30 per 100 kilos was in the offing!

To balance
It therefore always remains a balance between the European area and the average hectare yields in order to meet the coverage of further increasing processing capacity. That makes it extremely difficult, especially during the period when the crops have to grow. Due to the growth spurt of the last few weeks, the cards have been shuffled again. The supply is currently greater than demand, mainly due to the large contract volume and the delayed start of the season, which has resulted in additional kilos. This creates a kind of 'bulldozer' effect, potatoes are, as it were, pushed forward in terms of sales. Apart from the possible harvest issues, it is expected that there is little prospect of a recovery of the market price for the time being, which is not in anyone's interest as this is not advantageous when it comes to contract negotiations for the sale of the end product. After all, the raw material has been secured in large volumes from growers for the 2023/24 season.

Potato day
A good benchmark when it comes to the market price season is the annual 'Weuthen day', traditionally held at the end of August, organized by the leading German-based potato trading house Wilhelm Weuthen GmbH & Co. KG. Many European traders and processors come together, well taken care of by the hosts (think of a hot meal with potatoes and/or a bratwurst of course) to exchange ideas about the course of the coming season.

The initiative for exchanging ideas regarding the course of the upcoming season is always made by Ferdi Buffen, director of potato trading house Wilhelm Weuthen. In addition to the traditional opening of the season by the 'kartoffel Königin' chosen that year, followed by a presentation by Buffen in which he makes a yield and price prediction for the coming season. How this prediction will turn out remains to be seen, as there are still a number of factors that are difficult or impossible to predict, just think of the corona year. It is also difficult to predict what the subsequent growth and/or harvest will be as desired (risk).

Buffen's predictions regarding price formation show that, despite unforeseen situations, the crystal ball functions quite well, so it can best be seen as a good guideline for the rest of the season!

For the 2023 harvest year, Buffen was clearly less explicit. Which is also logical given the price movements in recent months, the until recently very mediocre growing conditions and the current significant catch-up. All the widely differing assumptions regarding market price developments until mid-2024 make it extremely difficult to make the correct prediction.

potato area
Incidentally, the Dutch acreage figures from Statistics Netherlands (small shrinkage) this week were striking to say the least. Consolidation and preferably growth of the potato area is important for processors in particular. The demand for fries worldwide is high and we are responding to this by building more capacity. There is great competition when it comes to raw materials, especially with processors outside the country's borders. That is why the Dutch acreage figures are surprising, especially considering the enormous jump that contract prices have made. This is a downer for the processors, as the average yield per hectare has also shown a downward trend in recent years. Another important element for the shrinking potato area in the Netherlands may also be the result of legislation. Having to harvest potatoes in certain areas before October 1 and keeping buffer strips around plots free also automatically causes the area to shrink.

Catch growth
As mentioned earlier, the enormous change in sentiment in recent weeks is due to the growth spurt of potato crops in many growing areas. The late spring and subsequent drought made many potato growers concerned about the final yield. The first trial harvests gave an idea of ​​the poor conditions in which the crops had to start. The first test harvest figures were the worst in recent years, even worse than in the 2018 harvest year. However, due to the growing months of July and August, the tide turned so that the most current figures show that the growth gap has been largely made up. The Fontane variety, which dominates in terms of acreage in Europe, in particular shows enormous growth resilience, as evidenced by the trial harvest results from Fiwap/PCA this week (35).

Fontane is by far the most important variety for Belgian processors. The concern about a shortage during the storage season seems to decrease further by the week, which will not improve the mood. However, for a number of other varieties, such as Innovator in particular, it will still be a challenge to achieve the multi-year average, which should certainly make a significant price increase later in the storage season possible. The fact will remain that the Belgian quotes (PCA/Fiwap and Belagpom) dominated by Fontane can have a depressing effect for a long time. Ultimately, a market price around the contract price level is the highest achievable for the time being. Something that at least the processors can live with.