Avebe is not leaving growers stuck with their potatoes this year

Royal Avebe is extending its two factories in Ter Apelkanaal and Gasselternijveen by about three weeks during this campaign. The campaign will now end in the second half of March instead of February. An exact date is not yet known; it depends on how the processing progresses. The starch company cannot operate the factories any longer because it would jeopardize maintenance prior to the next campaign.

The longer campaign is a result of this year's large potato harvest. An early start and favorable growing conditions have led to high yields in the Netherlands. CEO David Fousert reports incredibly high yields this year, with some growers harvesting 12 to 13 tons of starch per hectare.

Previously, the rule was two shares per hectare. With the yields we've seen this year, this rule of thumb is no longer valid, explains Fousert. Avebe members have a delivery obligation or right of 3,8 to 5 tons of starch per share. If growers want to deliver more potatoes, they must notify the potato processor.

Every year, there's a so-called autumn survey. Growers can indicate how many potatoes they want to supply during this campaign. For quantities exceeding 5 tons of starch per share, growers require approval from Avebe. The starch company can make good use of the potatoes this year and has therefore accepted all requests.

Basic price €110 per tonne
This year, Avebe is paying a base price of €110 per tonne for A-grade potatoes. This price applies to potatoes the company already knows will be delivered in the spring before the campaign. Growers must then indicate how much starch they intend to supply; this is somewhere between 3,8 and 5 tonnes of starch per share.

Depending on their registration in the spring, growers are entitled to supplement their starch supply up to a maximum of 5 tons. These are called B-potatoes. The base price for these potatoes this campaign is set at €30 per ton, excluding the performance component, but including a €5 member fee.

Avebe will be making some changes in this regard next year. The lower limit for which shareholders can subscribe will increase from 3,8 to 4 tons of starch per share. The starch company has decided to do this to reduce the variation in raw material supply. The company benefits from keeping the supply as consistent as possible. 

The full-delivery premium (when the full 5 tons of starch are delivered) will also be increased to €10 per ton. This makes it less attractive for growers to supply less than 5 tons of starch per share. Dual-purpose growers sometimes shift their potato supply, depending on revenues in other sales channels. Avebe, on the other hand, strives for a constant flow of potatoes.

Although the starch producer can make good use of the registered potatoes, the group does not intend to issue more shares. In recent years, approximately 10.000 shares have been surrendered to the cooperative. Growers paid €681 per share for these shares. They opted for this because French fry potatoes, in particular, yielded a higher return.

Thanks to the starch company's strong performance, resulting in significantly higher payout prices and a decrease in the number of shares, the value of Avebe shares has risen. Recently, the share price has risen above zero again. "That's good news. It's nice that a share has a positive value," observes Fousert.

Battle for hectares
Although the battle for arable hectares has taken a completely different turn in the past year, little has changed for Avebe. Arable farmers are facing low grain and sugar prices and a desolate open market for potatoes. Fousert: "We're no different in this competition. We're all doing our utmost to achieve the most attractive value possible for Avebe growers. Year after year, we have to earn our place in the cropping plan. That hasn't changed for us."

According to the CEO of Royal Avebe, the starch company is also affected by the lower dollar and import duties in the United States. This is a key market for the company. Despite all the market uncertainties, he currently sees stable demand for the starch producer's products. The goal is to sell as much of the product as possible in the high-end segment.

Avebe's strategy is also focused on this: strengthening the foundation and accelerating sales in markets with higher added value. Significant successes are being achieved in this area. For example, Avebe's potato starch (PerfectaGEL) halves the drying time of plant-based jellies (gummy candies), resulting in significant energy savings. The use of starch (PerfectaMAR) also improves structure retention during heating in fish processing.

Resolving customer problems
With starch, Avebe contributes to solving customer problems. The starch company sees opportunities for high added value in starch. This contrasts with the sale of bulk products like native starch, which also faces significant competition from corn and tapioca.

In the lower segment, there's price pressure due to a large supply. The extent to which this pressure can be offset by good prices in the higher segments remains to be seen. "Fortunately, demand is stable. It's still too early—we're only four months into this campaign—to say whether the large supply in the market is leading to lower prices across the board."