Can You Handle the Truth?

Knowing the Industry as it Actually is

Published in the June 2013 Issue Published online: Jun 20, 2013 William H. Bohl, UI Extension Educator

Bohl is a UI Bingham County Extension Educator in Idaho who handles programs on planting and harvest management. Originally from Montana, Bohl has a bachelors degree in general crop production, a masters in crop production and botany and a Ph.D. in crop production/crop physiology. He can be contacted at (208) 785-8060 or via email at wbohl@uidaho.edu.

In an older movie, Jack Nicholson plays a crusty marine colonel. When testifying in a criminal trial, Nicholson's character famously shouts, "You can't handle the truth!" He shouted the phrase to an attorney naïve to the harsh but actual ways of the world. The old colonel was correct in that many people prefer seeing the world as they would have it rather than the way it actually is.

For a potato grower to know and follow the industry as it actually is makes all the difference. What does that statement mean? It means that every sector of the potato industry: chip, frozen, fresh, dehydration and seed, each has a very real price-positive supply parameter. Exceeding the price-positive supply parameter in any sector has the destructive effect of threatening price not only in its own sector but in other sectors as well.

Think about it: Within the chip industry, while there are many smaller chip companies, one large company stabilizes both general price and general volume, and does so for most of North America. This in part is why chip growers seldom complain about their returns. You see, someone who knows the facts is in charge. Similarly, frozen processors also do a reasonable job of matching supply to demand, and, like chip potato growers, frozen-process growers seldom fall on hard times. When they do experience economic difficulty, the problem usually arises from over-supply resulting from speculated acreage on their own farms, from speculated acreage within their own sector or from speculated acreage spilling over from a neighboring sector.

What's the take-away here? Matching supply to demand: 1) stabilizes the grower's price; 2) stabilizes the cost of goods for the processor or chipper, and; 3) stabilizes the wholesale market for the processor's and chipper's finished product. Everyone wins.

What about dehydration and fresh sectors? Dehydration and fresh sectors can't be examined independently because of the variability of washed-process grade volume and its volatile effect on the dehydrator's raw-product price. Since no dominant force exists to manage supply in either sector, what would be the logical steps to make these interdependent sectors both stable and profitable? The process begins with the fresh grower learning and producing the correct volume of potatoes to adequately supply his farm's portion of the fresh market without oversupplying it.

Once this cumulative figure is known for a region, certainly in the Northwest, the dehydrator can now estimate the volume of washed process grade heading his way. Because washed process grade meets only a portion of the dehydrator's needs, the dehydrator can now responsibly contract field-run, utilizing the same fresh grower to fulfill his portion of the dehydrator's field-run needs. When this relationship happens between all growers and their dehydrator, the likelihood of un-contracted or uncommitted volume wreaking market havoc among sectors greatly diminishes.

Now the big question: Where can a fresh grower find out just what volume of potatoes his farm should market, such that the fresh sector will return a dependable profit? Can he turn to a buyer, broker or sales organization? No. Buyers, brokers and sales organizations make their living with volume; the more, the better. The grower has a different view; more may not be better if too many supplies destroy price. Beginning in 2004 growers began assembling a highly dependable database precisely to understand and reliably predict the optimum fresh-potato supply/demand/price relationship. The number is real and easily accessible down to the last acre, thanks to United Potato Growers of America. PG

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