SAN ANTONIO — After a disastrous 2012-13 marketing year, fresh-market potato supply and demand appear more in balance for 2013-14, resulting in steady pricing and reasonable returns — but the processing sector still has the potential to affect that.
Vicky BoydRon Cegnar (left), president of CEO Partners, talks to Steve Patterson, global vice president of sales for JR Simplot’s Food Group, during a break in the Potato Business Summit.“We have a balanced crop and the outlook says there’s no reason for us to give it away and there’s no reason for us to lose money,” said Jerry Wright, president and chief executive officer of the Salt Lake City-based United Potato Growers of America.
His comments came during the Potato Business Summit, Jan. 8, where agricultural industry experts discussed market trends for potatoes as well as for potentially competing crops, such as wheat, corn and soybeans.
Midway through the 2013-14 potato marketing year, wild cards remain in the dehydrated and processed sectors, Wright said. Dehy exports are expected to decrease, but the actual amount will depend on production in some of the other larger foreign exporters.
Although frozen exports are predicted to grow, he said figures range from 4.4% to 17%.
“So it’s clear, (processors) are sitting on some potatoes, so the big question is how is that going to impact the fresh markets?” he said.
Should an oversupply occur in dehy or processed, those potatoes tend to end up in the fresh market, destabilizing prices industrywide, he said.
Wright also was quick to call for the industry to take a cautious approach to 2014 acreage and not overplant.
“What happens when you have some good news in the potato industry is everybody doubles down,” he said.
The challenge won’t be limited to any one sector, either, but will be shared by the industry as a whole, Wright said.
“We have to take a holistic view,” he said. “We’re all in this together, and holistically, we have to understand — whether you’re a processed grower or a dehy grower or a fresh grower — we’re all in the same pile of potatoes.
“Every sector has its own defined supply and any sector that’s long impacts all sectors in its cost of goods and pricing. We’re not independent agents.”
For growers of dehy or processed potatoes, that means having a contract for all tonnage and not planting any “open” or uncontracted potatoes on speculation.
The U.S. fresh-market potato industry will most likely ship about 94.1 million cwt. this season. That compares to about 101 million cwt. in 2012-13.
Another big difference this season is average shipper prices are above the cost of production, whereas last year, Wright said they were less than break-even.
Because of improved technology and improved varieties, growers have been able to harvest an average of five cwt. per acre more each year than the previous year for the past few decades. At the same time, fresh-market potato consumption has declined at least 1% per year since 1998.
In addition, 2013 crop yields were down about 1.9% from expected forecasts.
Altogether, the three variables could result in 19 million cwt. more potatoes in 2014 even if growers plant the same acreage they did in 2013, he said.
The mix of potato types also has shifted, with much of the growth coming at the expense of round white potatoes.
Brown potatoes — namely russets — still comprise about 75% of the overall fresh-market potato category.
Since 2007-08, white potatoes have fallen from 7.8% of the category to 4.45%. During the same time, reds have grown from 13.3% to nearly 15% whereas yellow have gone from 3.5% to 5.5%.
Despite the growth of yellows, Wright cautioned against every grower planting an additional half-circle of that type this season.