Beware of Phrase "light demand"

Growers are leaving money on the table

Published in the November 2009 Issue Published online: Nov 06, 2009 Lee Frankel
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It is that time of the year when growers in the major storage areas complete their harvests and tuck their remaining potatoes that are the fruit of their labor, time, love and financial investment into storage.

For too many years and for too many farmers, growers have decided that their hard work has ended once the crop is in storage. However, in order to achieve profitability and long-term success, growers must be more proactive by taking responsibility for maximizing their revenue from the marketing of their crop.

In addition to the many tools and resources that United provides growers, there are several items for growers to consider that require no Capper Volstead Act protection and no coordinated efforts with other growers. Growers must remember that the packing plants growers hire to market their crop will do their best to maximize the amount that is packed into a product that can be sold into the fresh market. Likewise, a sales organization will strive to sell whatever product a grower puts into the system.

At times the market will become oversaturated with a particular size or pack that drives down the ultimate return for growers. Growers must be careful to understand how certain terms are used in the market and in the USDA's market reports.

Sellers in the industry often use the term "demand is light" as shorthand for situations when they really mean to say that the total volume in the marketplace is more than the market is willing to buy at current prices. For instance, actual demand for consumer bags of potatoes was extremely high in the second quarter of 2009 according to the retail sales reported through the U.S. Potato Board. However, supplies being put into the marketplace were even greater than the increase in demand and movement resulting in poor grower returns.

If growers continue to send product for packers to pack and sales organizations to sell, the market will continue to suffer "light demand."

This past spring and summer the market for dry eliminators yielded more than the return growers were receiving for non-size A Russets in several regions once all costs were considered.

In short, growers left money on the table simply by not paying attention to the market. There will likely be opportunities again this season for growers to make more money by sending additional amounts of their product to dehydrators, mashers and/or canners.

But these gains will only be there if the grower works with their packer and sales agents to make sure that product that does not have space in the fresh market is not forced into the fresh market when more attractive alternatives exist for dry eliminators or washed-process grade potatoes.