UNITED Calls For Shippers To Back Off
In a Thursday, December 22, news release, UNITED Potato Growers of America called for shippers to back away from an overloaded market and the resulting lower prices and to develop a shipping pace that will assure buyers potatoes at the end of the marketing season.
Right now growers are receiving as much as $5 per cwt FOB less than they could expect to obtain later in the season.
Cary Hoffman, chairman of the National Fresh Marketing Committee, said shippers of fresh russet potatoes are foregoing profits. This year's U.S. fresh potato production is 101.2 million cwt, but the industry is shipping at a pace and at a price equialent to a crop of 106.9 million cwt, or 6 percent larger than
what is available.
Economic forecasting models developed by UNITED's consulting economist Bruce Huffaker, indicate the fresh-weighted average FOB price for this season's fresh potato crop is projected to be $16.40. To date shipments in excess of available supply have capped this price at $14.82 per cwt.
Thus the average price for the balance of the season will need to be $17.03 to restore market equilibrium. Of great concern to growers should be the economic model's forecasts of increases of up to $5 per cwt for late-season sales of 10-pound film bags, the industry's largest volume product.
The National Fresh Marketing Committee has developed a plan for shipping this year's crop at a pace that satisfies customers' needs and maximizes growers' returns. However, growers and shippers have not followed this plan and have oversupplied the market, substantially reducing the price paid to growers.
According to Huffaker, "The later we wait to get back on this plan, the more abrupt and steep the price increases will be. The total revenues accruing to the year's crop will be the same regardless of the time of the shipments, and revenues lost on potatoes shipped at too fast a pace are recovered as prices pick up and the inevitable slow down occurs.
Rick Shawver, marketing committee member and grower from Idaho, cautions, "The fresh potato shipping industry needs to slow down and get back on the marketing plan so that we can take care of fresh potato customers' needs throughout the entire season.
Several years of oversupply and severely depressed farm-gate prices for fresh potatoes resulted in the creation of UNITED Potato Growers of America, a Capper-Volstead-protected grower cooperative. The co-op was instrumental in reducing fresh russet acres in 2005 in order to prevent another oversupply of potatoes.
"Our national pack shipping plan is in place to help ensure we don't short our customers, but we as growers have to make sure we don't over-ship and short our customers at the end, and at the same time, under-sell and short our growers all season long," said UNITED's Chairman Albert Wada, an Idaho grower/shipper.