Challenging the Potato Market

Nothing depletes equity faster than a poor market

Published in the June 2012 Issue Published online: Jun 10, 2012 Jerry Wright, President & CEO, United Potato Growe
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There's an old adage often applied to dogs and horses that also applies to potato markets: "There's nothing better than a good one, and nothing worse than a bad one." Nothing grows equity faster than a good potato market and nothing depletes equity faster than a poor potato market.

The average North American potato grower has recently experienced a rare succession of healthy potato markets. With the exception of 2009, when yields soared and acreage bumped up, six of the last seven years have significantly improved a potato grower's equity. Will the 2012 crop duplicate these good years? It probably portends something else as 2012 contracted acreage plus fresh planting intentions already aggressively challenge the supply/demand/price equation.

As UPGA surveyed each of its co-op member's areas for 2012 planting intentions, acreage appeared to remain stable, at or near 2011's plantings. Does this mean we'll have another good year in 2013? Probably not. Harsh spring weather significantly affected the 2011 crop. Wisconsin alone suffered a double-digit percentage yield decrease. With a warm spring this year in much of the nation, especially in the Midwest, the Wisconsin occurrence is unlikely to repeat. In fact, reason dictates yields will likely go the other way and return to trend line.

Early spring potato crops in California's Imperial Valley and South and Central Florida saw excellent yields-the best yields in years. Other commodities such as lettuce, cauliflower and broccoli also experienced terrific early spring yields. During those unusually high yields, the leafy markets suffered severe glut and accompanying poor prices. History tells us that spring weather patterns predict summer weather patterns.

If warmer-than-normal weather trends continue through 2012, 2012-13 fresh potato supplies could easily exceed demand by many millions of hundredweights. Add to fresh potato overproduction a similar overproduction of process potatoes, and what happens? If processors can't use all of the potatoes grown for their use, where will that excess end up? Some will certainly end up in fresh markets, adding oversupply on top of oversupply, and the potato grower will face a great challenge: Now, rather than maximizing profit, he will be looking for a strategy to minimize loss.

The North American potato grower is not the innocent, uninformed fellow he used to be. He has learned that hope is not a strategy. He has learned to base market strategy upon real, identifiable numbers that clearly explain the supply/demand/price paradigm. He has learned that matching supply with demand results in stable pricing. So, removing oversupply will be the obvious first step.

This past spring saw lettuce growers take the disk to hundreds of acres of lettuce, as did growers of other fresh vegetables. Once they began disking, they didn't quit until supply came in line with demand and prices returned to profitable levels. The historical overproduction scenario for a potato grower has been to hunker down and ride the crop out, taking whatever the market offers. But there are other alternatives that even now the industry should be considering. While individual growers are free to plant, there is no law that tells them that they have to harvest or send to market more than it demands.