The potato market remains depressed. Even a reduction in the harvest estimate in France has not changed this. Prices remain stuck at exceptionally low levels.
The fact that a reduction in the harvest estimate in France by more than 200.000 tons has had no impact on the market is indicative of this season. There are also reportedly significant spillages. This, too, will not change the situation for the time being. As long as there are still many potatoes in emergency storage and there is no significant recovery in French fry sales, demand for free-range potatoes will remain subdued.
Cash-settlement
The Leipzig potato futures market recorded its first cash settlement this week. The cash settlement reflects what is paid for potatoes on the physical market. At the end of the period, open positions are settled based on this value.
Cash settlement is determined based on physical market prices in the Netherlands, Germany, Belgium, and France. This price is set weekly. The first result this season is €2,50 per 100 kilos. Prices in the Netherlands and Germany have risen slightly; otherwise, the price would not have exceeded €2.
Less than the feed price
The cash settlement is €1 higher than the prices paid for Fontane – the leading variety in French fry production. On the other hand, it remains surprising that the French fry industry – aside from contract potatoes – is currently apparently unable to pay more than a feed price for these potatoes.
The low cash settlement price is therefore no surprise. Remarkably, it's not even the lowest starting price ever for this listing. Eleven years ago, the initial price was even lower, at €2,30 per 100 kilos. That year, prices in Belgium and France were slightly higher than they are now, but prices in the Netherlands and Germany were even lower than they are now.
The low price is considered highly unusual, as until February of this year, it seemed like the sky was the limit. For a long time, many stakeholders in the sector hadn't expected the potato price to drop below €10 again. Even apart from the coronavirus year of 2020, this has happened quite often.
Once every three years
In the past fifteen years, this is the fifth time that the start of the cash settlement has fallen below €4 per 100 kilos. That's effectively once every three years! However, these "lean" years have a significant impact on the average level, which remains just below €13. The average in the ten "good" years is almost €18 per 100 kilos.
It's worth mentioning that this average is also largely determined by the period before the sharp increase in contract prices. Currently, contract prices during this period are higher than the average starting price of cash settlements in the ten best years. For example, Belgapom reports a contract price of €19 per 100 kilos for Belgium this week.
Over the past fifteen years, the Netherlands has made the highest contribution, with an average price of €14,35 per 100 kilos. Prices in Germany, Belgium, and France are consistent, averaging around €12,40 per 100 kilos.
Irrigated plots
In France, it's reported that there are currently some bids, but only for good-quality potatoes from irrigated fields. There's no official quotation, but an accompanying text mentions that some lots of potatoes are being included at prices ranging from €1,50 per 100 kilos for Fontane to €3 for Innovator.
Viaverda reports prices for Belgium ranging from €1 to €1,50 per 100 kilos, depending on the buyer. Belgapom, Reka-Rheinland, and PotatoNL are all keeping the Fontane price unchanged at €1,50 per 100 kilos. Challengers are not being listed by Belgapom this week due to a lack of transactions.
PotatoNL is quoting Innovator this week at a fraction higher, at €3 to €5,50 per 100 kilos, while in Germany the price remains at €4. Agria is quoting €6 to €9 in the Netherlands, while in Germany the price is stabilizing at €7 per 100 kilos.