Tall haystacks and overflowing grain bins are sending farmers clear signals to look at alternative crops for the 2016 planting season.
Bruce Huffaker, publisher of North American Potato Market News, hopes they choose to idle acres rather than increase potato acreage, but history suggests that won’t be the case.
“Our experience is that the relative price between wheat and potatoes is the best indicator of planting intentions,” Huffaker told growers and lenders during the University of Idaho’s Agricultural Outlook in December. An October-to-December average price of $4.60 per bushel for wheat and an average potato price of $6 per 100-pound sack suggests U.S. potato growers will plant 1.9 percent—or nearly 1 million acres—more potatoes in 2016.
But based on conversations he’s had with potato growers this month, Huffaker is afraid the increase may be closer to 4 percent. And that could further depress a market that is already struggling. He described the 2015 potato market as one of the most interesting situations he’s seen in the last 20 to 25 years. Overall, the U.S. potato crop was up 1.2 percen,t with most of the growth concentrated in the Midwestern processing states. According USDA estimates, North Dakota was up 14 percent, Minnesota up 12.7 percent and Wisconsin up 12.2 percent. Overall, the U.S. fall potato crop is projected to reach 408 million sacks, up 5 million sacks from 2014 and 18 million sacks over 2013.
“Given that we had too many potatoes last year (2014), that was a little disconcerting,” Huffaker said.
The Pacific Northwest crop, on the other hand, was down. Idaho is projected to be down 1.9 percent, with Washington and Oregon down 1.6 percent. High temperatures during harvest time may have meant some potatoes were put into storage too warm. Those quality losses could pull Idaho’s crop down as much as 3.7 percent.
Idaho production was just 417 sacks per acre in 2015. That works out to 8 sacks per acre below long-term production trend lines. When making his forecasts, Huffaker expects Idaho production will return to the trend line, which has been an increase of 4 sacks per acre year-over-year. If that holds true, Idaho producers could be looking at an average yield of 431 sacks per acre.
Even if the acreage increase is just 2 percent over last year, that could mean an additional 20 million sacks of potatoes to be marketed in 2016.
“Even if acreage holds steady, we’re setting ourselves up for a big price disaster,” Huffaker said. “To keep potato prices close to today’s level, next year’s acreage needs to come down 3 to 4 percent.”
At $6 per sack, potatoes are below break-even costs for most producers. However, that price level is high enough to cover a portion of the operation’s overhead. And that’s where the temptation to switch from low-priced wheat or hay to potatoes comes in.
“This is very important for everyone to consider when making planting decisions,” Huffaker said. “It makes more sense to idle acres rather than [to] shift to potatoes.”
But he knows growers are already making decisions. Many hay acres in eastern Idaho’s Upper Valley were plowed up this fall to be planted to a different crop in the spring.
Complicating the price outlook is the fact that the potato chip market is up 10 percent while the fresh market is down nearly 6 percent. Chip potatoes are largely grown in the Midwest. Idaho, Texas and the Columbia Basin are largely responsible for the decline in fresh potato sales, Huffaker said.
Some forecasters anticipate fresh sales could slump to the lowest level since World War II. Huffaker attributes the decline to more options in the produce section including an abundance of fresh potato choices.
Idaho requires that each of the 20 to 25 different russet varieties sold be labeled individually, but marketers sell those varieties as an interchangeable commodity. However, low-solid russets don’t cook the same as high-solid russets.
“We don’t give the consumer any guidance for preparing those different varieties,” he explained. “If a recipe doesn’t turn out the way they expect, they are not likely to be excited about buying fresh potatoes the next time they’re in the grocery store.”
Source: The Times-News