Cost price must be basis for contract price

The first contours of the 2021 potato season are emerging. The table potato market is still looking good, at least in terms of volume. The market for chips potatoes, on the other hand, is much less hopeful. Is there anything that can be done about it?

When the coronavirus hit in late February/early March, measures were put in place around the world to slow down the further spread of the virus. This created a huge run on table potatoes and the market for chips potatoes collapsed. And now, three quarters of a year later, the situation is still the same. As a result, there is little or no interest from the industry in free potatoes and the price has been at the level of €0,03 per kilo since March. Although the table market is doing well, prices have also been lowered here (due to the low price level of the chips potatoes).

Too much product?
What can be done? The answer is simple: if you feel that the price of the product in the market is too low, then there is too much of this product available. For the 2020 season, it was too late for a large part of the growers to switch and limit the acreage. That is why we are still dealing with an oversupply of potatoes, with the known consequences. For 2021 we (as growers) can still switch.

The Producers Organization for Consumer Potatoes (POC) has shown with calculations that an area reduction of 5% is required in the EU-15 to bring the market back into balance. The NAV, VTA and the NEPG have happily supported this call. What the final harvest will be in 2021, of course, strongly depends on the weather conditions during the growing season and the final yield per hectare. We can't control the weather, but we can control the potato area. That is the most important switching option. This sharp contraction can bring the market back into equilibrium in one fell swoop and the price on the free market can reach an acceptable level.

Risks are placed too much with the grower
The industry will of course also switch. The first signs are that both contract volume and contract price are falling. No one could have foreseen this pandemic and its consequences. The POC believes that the risks are now very much placed with the growers. The contraction volume contraction is of course not very good for potato growers in the current situation, but the contraction is understandable.

However, the POC cannot understand the drop in contract prices. The costs for growers continue to rise due to, among other things, the disappearance of a number of chemical agents. For growers who were already in the slump before the 2019 harvest and who are fully participating again for the 2020 harvest, there cannot be another loss-making year. After all, the customers also benefit from the fact that we can continue to grow potatoes.

Price reduction is wrong signal
If the industry wants a shift in the relationship between early potatoes and long storage, a simple price reduction is the wrong signal. The POC thinks we can get through a conversation more than we smoke each other out. To guarantee a healthy and future-proof sector, both cultivation and processing must be profitable. In that case, the cost price of the growers must be the starting point in the potato contracts. That has always been the case, of course, although this current situation makes it all the more necessary.

* Written by Keimpe van der Heide, chairman of the Producers Organization for Consumer Potatoes (POC).

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