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.
Vicky 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.
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