BURLEY, Idaho — Members of Southern Idaho Potato Cooperative (SIPCO) who grow for J.R. Simplot Co. have approved a contract with the company that reduces their payments by roughly 2.5 percent.
SIPCO will now go back and adjust its previously approved contract with McCain Frozen Foods, which would have kept payments to growers flat, said SIPCO executive director Dan Hargraves.
Hargraves explained SIPCO had agreed to revise McCain’s contract upon reaching a lower payment rate with another processor.
Hargraves said the SIPCO growers narrowly approved the Simplot contract during a March 11 meeting in Burley, reluctant to accept a second consecutive year of backward-moving contract prices. The new contract takes about 20 cents off of last year’s base rates, bringing them down to about $7.40-$7.60 per cwt. for Russet Burbank, depending on the growing region.
“The grower support for the Simplot pricing was mediocre. The offer passed, but it was not by any stretch of the imagination an overwhelming majority,” Hargraves said, adding his growers disagree with cutting their margins while demand for frozen potato products remains flat.
Simplot officials declined to comment.
Contrary to Simplot’s position, SIPCO members believe input prices for 2014 range from flat to up slightly.
“We really appreciate and agree with McCain’s actions in Idaho,” Hargraves said. “They did their own analysis, and they recognized that and took a position in Idaho to try to help our group maintain pricing so we could continue to put all of our inputs in to grow the quality of potatoes they need for processing. We’re disappointed that was not shared by the other processors.”
Though fall fertilizer prices were down, Hargraves said potassium and nitrogen costs have risen this spring. Furthermore, he said Idaho growers will be saddled with significantly higher power costs that won’t be experienced in the Columbia Basin. He said chemical costs are also up.
In 2013, Hargraves said Idaho growers lost part of their margin when they weren’t fully reimbursed for the added costs of spraying crops for zebra chip, a relatively new disease to the Pacific Northwest that ruins potato quality by creating bands that darken when fried.
“The end result is we’re going to go backwards. We’ve gone back to where we’re selling those potatoes for less than we were in 2012,” Hargraves said.
He emphasized that hot weather during the past two growing seasons has boosted yields and helped growers pad their margins. He believes margins in the new contract with Simplot could prove to be slim if weather conditions result in more typical yields. For this season, he said growers have already purchased their seed and fertilized fields and likely won’t make any changes in their rotations.
“I think there’s going to be a lot less enthusiasm as we go forward to plant these acres unless we get a more accurate rendering of what costs are,” Hargraves said.
Source: Capital Press