A lack of buyers on the European potato market and futures market has caused prices to spiral downward. A lack of traded volume that can act as a shock absorber is missing, which means that sharp price corrections are the order of the day. Will the potato market recover?
Compare the potato (futures) market with an old-fashioned cartoon character. He confidently jumps out of an airplane with a parachute on his back. After enjoying a free fall, the character pulls the cord to unfold his parachute. But no matter how many times he pulls, no parachute appears. In the meantime, the earth comes closer and closer.
Such a free fall and a faltering cord, that is what the current situation on the physical potato market and the futures market reminds us of. We are waiting for a miracle and in the meantime it is incredibly exciting.
Comparison material
Many growers and insiders have done their best to analyse the market as well as possible this season. The price developments of the past two seasons were often included. Admittedly, the 2024 harvest year showed quite a lot of similarity. Friend and foe were quite surprised in November when the market shot out of the starting blocks, after a difficult warm-up during and immediately after the harvest. This applied not only to growers and processors, but also to buyers of potato products.
Magical border
Last year we saw prices continue to rise, to a price level of €39,50 per 100 kilos for the April contract. The year before that there was some decline, but it did not really drop far below the magical €30. A similar picture was visible on the physical market as on the futures market. For example, PotatoNL prices rose to €60.
It is not easy to find a year with a similar price trend. They are not really comparable. 2020 (harvest year '19) comes closest, when the market 'went out like a candle', to use a winged expression. That was due to the corona pandemic, so it is certainly not comparable material. In 2012 and - much further back - 1998 we also saw a decline in this period. In 2010 this happened gradually and the market had already peaked earlier. The market then went from €33,80 to €16,70.
Contract tons
There is a second (important) reason why comparing is dangerous. Last week, 111 contracts were traded. In 2011, that was 869 and in 2013, even 1.488! One contract represents 25 tons of potatoes, which means that in five days, more than 37.000 tons were traded, compared to 2.775 tons last week. And then last week was even a relatively 'good' week.
This thin base is also noticeable on the physical market. There are fewer and fewer truly free potatoes, where the grower himself has complete control. If one party is looking for potatoes, then there is immediate commotion in that tight market. The lack of volume also has consequences for the market, which is fed by very few truly free transactions. The majority of these prices concern the so-called co-delivered kilos, which the factories collect at the same time as the contracted tons. Often there is little or no negotiation about the price. In addition, there is the 'danger' of prices being pumped around by different platforms. Think of the VTA, TransactieApp, POC, Service2Potato and more. Often one party is submitted multiple times by a seller, which means that it can also be included in the quotation multiple times.
Positions
The lack of transactions can cause the market to fluctuate violently, as we have seen. When one Dutch processor had an urgent need for Innovators at the end of last year, and tried to get it done with a heavily priced tender, it turned the market upside down. Competitors had no choice but to follow. In such a situation, potatoes suddenly appear from all corners and holes that were previously not on the radar. Now that the positions have been filled, and the processors in Belgium have also got their supply in order, the demand from the industry has completely disappeared. The impact on market prices is great.
What is comparable between years is the course of a growing and harvesting season. Especially when a market is pumped up by a disappointing harvest, difficult harvesting conditions and storage problems. If these problems are resolved, the inflated mood can quickly disappear. When an increase in area is estimated and especially when the weather conditions indicate a favorable and early spring, as we are currently seeing. Processors are more concerned about the sales of end product, which for the first time since the corona pandemic is showing a clear decline.
Five months market
It is going too far to bury the 2024/25 potato season now. What the market needs at the moment is peace, to calm things down. Volatility in a market with a thin base is increasing, which means that downward corrections can be followed by sharp upward corrections. Just like with skydiving: there is always a reserve parachute.