A popular YouTube video is titled “Every Principle has a Promise.” It makes the point that living certain principles leads one’s life to a better place. This also works in reverse; following a faulty principle can lead one’s life to a lesser place, like eating the wrong foods can lead to poorer health. Principles come in many categories. There are scientific principles, economic principles, medical principles, political principles, religious principles and so on. Principles—laws—govern all aspects of life as well as the cosmos from the biological, to the physical, to the metaphysical. Here are two principles for the potato grower to consider:
1. The principle of the supply/demand/price:
Fitting your farm’s potato supply into and not on top of local supply is the goal. United’s database was developed to quantify this volume. If this database has proved one thing, it is this: Grower returns are inversely proportionate to supply; oversupplying a market pushes price down while undersupplying or balancing a market pushes price up. Growers in each sector—frozen process, fresh, dehydration and seed—can recount the times when supply was short and price rose, and when supply was long and price plummeted. Such is the nature of the beast—a market that is highly reactive to production swings.
This is the produce market’s proverbial principle with a promise. The principle: a produce market wants the volume that it wants and no more. The promise: A grower or region of growers who ignore this principle will be harshly punished by low price. A grower or region of growers who obey this principle prospers.
2. The principle of being the low-cost producer:
As it happens, Mr. Potato Grower, you are in a competitive contest with your potato-producing neighbors, not unlike any other competition that you have entered. By definition, competitions produce winners and losers. Acknowledging your fellow growers as competitors means one thing: To beat them, to outlast them, you must produce higher-quality potatoes for less cost. While pennies may be shaved by enhancing packing, sales, distribution and service efficiencies, none of these tactics compares with your becoming the lowest-cost producer at the field level.
Being the low-cost producer is simple math: Because of potatoes’ extreme per-acre production potential, they naturally mine the soil of essential nutrients to a greater extent than almost any known crop. Inseparably connected to mining the soil are yield drops associated with potato over-cropping.
Here’s the principle: Each year of extended rotation adds 40 hundredweight per acre of yield. This means that, on average, if a two-year rotation produces 300 hundredweight acre, a five-year rotation produces 420 hundredweight per acre. Here’s the promise: If growing costs are $2,500 per acre, a 300 yield costs $8.33 per hundredweight to produce, and a 420 yield costs $5.95 per hundredweight to produce. Regardless of market conditions, in which position would you rather find yourself?
On the rarest of occasions, two plus two really does equal five. Finding yourself as the low-cost producer in a balanced market is one of those times.