Almost 20.000 hectares more potatoes for consumption and an excellent harvest have ensured that the potato yield in the United States will be significantly higher in 2023. This ensures that processors have more potatoes than they can process. This will inevitably have an impact on the area. The ever-increasing cost also weighs heavily.
Prices on the free American potato market are under considerable pressure now that there is a surplus of product. Prices for Russet potatoes are up to half lower. This mainly concerns the table potato market, because the country hardly has a free chip potato market. A low market price is offset by a considerable volume being traded and exported. Last year, the consumption potato area increased by 19.800 hectares. Thanks to a positive growing season, potato production increased in nine of the thirteen states. Especially in the potato states of Idaho and Washington, processors have many more potatoes than they need.
Less volume on contract
Grower organizations and factories are still busy negotiating contracts for this year. Both when it comes to price and volume. It is certain that the volume will decrease. The contract position does differ per state. In the Midwest and Northeast, processors do need more potatoes. The contract volume for chips and table potatoes is also under pressure. Due to the ever-increasing production prices, growers are aiming for higher contract prices. The question is whether processors want to go along with this.
After two years in a row with disappointing yields, factories have choked a bit this season on the large volume of potatoes that came their way. Even draconian measures were taken – such as not digging up or tilling crops – because there was no need for them. This is mainly the case in Idaho, the Columbia Basin growing area and parts of Canada. Due to the well-stocked barns, the new harvest season starts two to three weeks later, because the old harvest continues for longer. Insiders estimate that processors use more than 10% less volume.
Alternatives
Looking at the Relative Strength Index (RSI) for ware potatoes, there are a number of alternative crops that are interesting this year. The figures for malting barley, wheat and soy beans in particular are relatively good compared to potatoes. For example, the RSI for Idaho is 80.1 points for Russet potatoes and 76.9 points for wheat. That is the lowest figure since 1980 and a third below the multi-year average.
Looking at past movements, there is a particularly good chance that the area will decrease. Insiders estimate that around 2% fewer potatoes will be planted based on current data. In the early growing areas in the northwest, the planting season starts in just over a month. Growers need clarity. Most people don't like growing potatoes on spec. Production costs are at a very high level and the free market is uncertain.
Cost increases
According to recent figures from Idaho, production costs per acre were $3.667 to $5.500, depending on the growing region in the state. That is 7% to 8% more than a year earlier. Converted, you are talking about €8.372 to €12.557 per hectare. Due to the greatly improved yield, the price per ton (or hundredweight) is slightly lower than usual. The prices of land rental and mechanization are expected to rise again in 2024. Despite slightly lower interest rates, many potato growers are not prepared to take these risks. The political mood also plays a role in their decision.