No Silver Bullet

Acreage control only part of the equation

Published in the July 2009 Issue Published online: Jul 06, 2009 Potato Harvesting, Potato Storage Lee Frankel
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Every year, United Potato Growers of America advises potato growers to strategically manage their acreage, but acreage control alone isn't the silver bullet. Potato growers still need to actively manage their crop as it moves to the consumer.

This growing season is an ideal time for growers to re-examine some of the fundamentals they can control. Growers can make sure they are aligned with their customers' needs and that their supply chain to the customer is working in their own and consumers' interests.

To aid growers, United distributes a report of the Fresh Weighted Average and a Grower Returns Index for up to six major shipping areas. The FWA is a market basket of various pack types built around the historic distribution of sizes for a particular area.

The GRI is an estimate of the net back to the grower after typical packing and sales charges are deducted using long-term pack-out ratios.

A grower can use this data to see if they are consistently above or below these area returns.

A grower should then go to the next step and understand why there is a difference. Is it because the grower's product is not yielding as many high-quality potatoes as the industry in general? Is it because the marketing agency does not have the customer base for what the grower is producing-as in the case of a grower's crop mostly producing foodservice-sized potatoes, but the sales agency is more focused on retail accounts? Does the grower give an incentive to sales agencies to reward them with a greater fee if the agency sells for a higher price?

Growers are wise to understand what their real returns are and find ways to be proactive to make sure their product is selling closer to the top of the market instead of the bottom. One of the other critical components in the GRI is the cost of packing. The industry was sending nearly 110 million cwt to the fresh market just seven years ago. In addition, growers were using seed varieties and strains that were producing lower pack-out per cwt sent to the packing plant.

While growers have begun to plant fewer acres to better produce the right amount of potatoes for the fresh market, there has been much less consolidation of packing facilities. This means that the return for the grower's product will drop substantially because of over-packing in the multiple plants.

There are simply too many packing plants. Other growers have moved their product to plants that have brought together potatoes from various growers to help reduce the cost to the grower while increasing their ability to deliver more specialized pack types.

Smart growers are proactive in the marketing of their crop, ensuring that they have the best plan in place to deliver their product to the market and fill consumer needs.