Potato price outlook firm, RaboResearch report says
War, drought and a global pandemic aren’t exactly all the horsemen of the apocalypse, but three out of four are bad enough.
Because of those ill omens, the potato market will see higher processing and higher fresh prices this year, according to a June RaboResearch report on U.S. potatoes, authored by Rabobank analyst Almuhanad Melhim.
“The near-term outlook for the U.S. potato sector is bullish on prices, particularly those for processing potatoes,” the report said.
In the report, Melhim considered the continuing effects of the COVID-19 pandemic, the Russia-Ukraine war and the Western U.S. drought on the potato.
“COVID-19-related foodservice closures and the sector’s lagging full recovery still loom over growers upstream, increasing uncertainty and keeping a lid on acreage growth,” a summary of the report said. “The surge in input costs and the prices of acreage-competing crops brought by supply chain crises and the war also dampen potato acreage expansion plans.”
While the Russia-Ukraine war has resulted in higher fertilizer prices, RaboResearch said it is leaning toward the view that elevated fertilizer prices will have a negligible to low impact on potato yields.
The persistent, multi-year drought and heat stress in the Western U.S. still carry the risk of reduced yields, similar to last year, the report said.
Reduced yields in major potato areas hit by three weeks of temperatures over 100 degrees last year have left shippers cautious in moving dwindling storage supplies of the 2021 crop, the report said. The heat and dry conditions last year resulted in the largest drop in potato yields seen in the past two decades and resulted in the smallest potato crop since 2010, the report said.
"Growers and shippers continue to be very cautious with their shipping schedules in order to make remaining stocks last until the arrival of the next crop in July – August,” the report said.
The report projects that U.S. potato acreage for 2022 at 925,000, about 8,000 acres or 1% less than last year.
RaboResearch projects the annual average fresh market potato price to increase slightly from the previous year to $13.70 per cwt this year; the annual average processing potato price is projected to increase by 22% to about $11 per cwt.
“The projected increase in the processing potato price implies that contract prices will likely increase by a similar percentage to incentivize growers to commit more acreage,” the report summary said. Meanwhile, the report said the cost of delivering potatoes to final buyers and consumers will remain high but will rise more slowly into 2023.