Potato industry mulls remedies to supply-demand imbalance

01/10/2013 09:51:00 AM
Vicky Boyd

LAS VEGAS — The U.S. potato industry is grappling with what could be considered the perfect storm of decades-long per-acre yield increases coupled with a slow but steady decline in fresh-market consumption.

Kirk Wille (from left), partner in Wysocki Produce Farm Inc., talks with Nick Somers, owner of Plover River Farms, Stevens Point, Wis., and Jim Wysocki, another partner of the Bancroft, Wis.-based groVicky BoydKirk Wille (from left), partner in Wysocki Produce Farm Inc., talks with Nick Somers, owner of Plover River Farms, Stevens Point, Wis., and Jim Wysocki, another partner of the Bancroft, Wis.-based grower-shipper.Attendees at the Potato Business Summit spent much of Jan. 9 listening to speakers discuss oversupply and declining consumption and ways to correct them.

Jerry Wright, president and chief executive officer of the United Potato Growers of America, Salt Lake City, suggested that growers reduce fresh-market shipments to what he considers a profitable level — about 91.7 million cwt. — for the 2013 season.

“We can certainly produce more,” Wright said. “We can certainly ship more, but we won’t make any more at that.”

In 2012-13, fresh-market shipments are forecast to be more than 98 million cwt.

“We need to work holistically as an industry to balance supply with demand,” he said. “It impacts all of our business, not just fresh, not just frozen and not just (dehydrated).”

When one sector has an oversupply, it tends to dump it into the fresh-market side. The result is wild price fluctuations for all sectors, Wright said.

He attributed this season’s oversupply to an 8.6% increase in planted potato acreage and increases in per-acre yields.

In fact, average per-acre yields have crept up 500 pounds each year for the past 50 years.

The fresh-market potato supply equation has razor-thin elasticity. For every 1% of oversupply, grower-shipper prices drop 7%, Wright said.

Currently, oversupply is 5%-6%, resulting in a 42% price decrease, he said.

On the packing side, the industry has about 40% excess capacity, which sets the stage for consolidation, Wright said.

Consumption drops — again

To add insult to injury, fresh-market consumption has continued a steady 1.5% decline annually during the past 25 years, Wright said.

During the 52-week period ending the end of October, the overall potato category saw a 1.6% decline in sales volume and a 4.1% drop in sales dollars, said Don Ladhoff, U.S. Potato Board retail marketing consultant, citing Nielsen FreshFacts data.

The potato category was the only one of the top 10 produce department items experiencing sales volume declines.

Broken down, russets, reds and whites experienced the largest declines. Fingerlings, purples and medleys — bagged mixes of colored specialty potatoes — experienced significant increases, although they still represent a small fraction of the overall category.


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Nathan W Canaan    
Rhode Island  |  January, 19, 2013 at 05:46 AM

Interesting article, only problem is you have not addressed the real issue. RETAIL $$$. Potatoe prices have become a luxury in some chain pricing. Until you address the demand side[$$$], you will not get a consumer reaction on the supply side. That being said, when you have growers from one area of the country, come to another, that promote smaller crop plantings, and go back to the side of the country they are from, only to plant 40,000 more acres, do not be surprised you are in a situation as we are in.

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