Intervening in a market always has consequences for the price. We have seen this recently in the oil market, but in this corona crisis it is also noticeable in many more markets. Like the potato market.
These laws also basically apply to the potato market. The corona crisis and government intervention, the regulations of which were officially published in the Government Gazette on Friday, results in a special development in the potato market. The potato market has been disrupted and will remain so for a long time. The implosion of sales of processed end products, the build-up of French fries stocks, good demand from the table potato segment, exports and demand for feed potatoes are a special cocktail that turns the potato market into a Pandora's box.
No final destination fries for sale
The proposed government regulation in particular has special effects. For example, there are virtually no potatoes for sale in the Netherlands today that are intended for French fries processing. After all, free growers do not want to sell potatoes with final destination for fries for less than €7,00 per 100 kg, as they will then not be eligible for the government scheme. Apart from income that comes from sales of, for example, feed.
Dutch processors have largely stopped processing Dutch potatoes that are in their contract position. These may also be included in government regulations, if these potatoes are not processed into fries. Sales of fries are reportedly picking up slightly again, although still significantly below normal. The raw material used for this comes from neighboring countries where processors also have contract obligations. But these logically fall outside the Dutch government's regulations.
Feed market is running at full speed
As a result, even the chip potato market in Belgium, France and Germany seems to be feeling a little friendlier. However, this is not yet reflected in the market price or the quotations. The feed market (sales for Dutch chip potatoes) is running at full speed. Potatoes are traded in large volumes for all kinds of processing for livestock farming. Prices range from €1,00 to €2,00 per 100 kg. The market price depends on transport costs and/whether the potatoes have been washed or not.
As indicated, there is good demand from livestock farming. Dairy farmers like to feed potatoes. The feed potatoes are also worked through the first cut of grass silage. There is little supply of other options for feed, due to the drying up of alternative streams such as spent grains and shredded chip waste. The drought is also creating more demand, as dairy farmers worry about having enough grass for the coming weeks.
Absolute bottom is risk
The question is how sales of potatoes for feed will develop. Once livestock farmers have a stock or sufficient feed is available, the market for feed potatoes may drop to an absolute bottom (€0). It will then become more of a logistical issue.
Despite all the malaise, exports are doing reasonably well. The low prices lead to demand from different parts of Europe. The supply is sometimes difficult to find here, because growers want to be sure of the arrangement and that there is also a compensation for sales for export (instead of feed or flakes). Exporters buy potatoes for between €3,00 and €4,00 per 100 kg.