Wine and Fresh Potatoes

The immense value of market data

Published online: Nov 03, 2017 Articles Buzz Shahan, Chief Operating Officer, United Potato Growers of America
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This column appears in the November 2017 issue of Potato Grower.

Growers of fresh produce create market data cooperatives for the express purpose of delineating market balances. What producer of any commodity would invest in that commodity unaware of its economic potential and all the drivers that create that potential? Consider the wine industry as an example:

With Prohibition ending in 1933, two Italian immigrant brothers started a winery in Modesto, Calif. Over the next few decades, this winery became the largest family-owned winery in the world. Not only did the winery make lots of wine, those who managed the business knew more about the U.S. and global wine markets than any competitor.

At the same time these ambitious brothers learned how to make and sell wine, behind the scenes they added an unprecedented and highly detailed market-information arm to their business. Relying on information unavailable to other wine makers, not to mention completely unavailable to wine buyers, they did, and still do, dominate the wine business worldwide.

Most wholesalers in the wine business are too small to afford a staff capable of gathering and parsing sufficient market data to instruct them precisely how to negotiate the wine market. While we will leave this winery unnamed, this particular wine producer understood the value not of just knowing how to make wine, but of knowing the supply/demand/price equation for all types of wine in all types of markets, even globally. Ultimately, this wine maker invested as much cash and effort in gathering and interpreting wine market data as it did in wine production itself. Everyone in the wine business knows who this firm is, and everyone in the wine business dances, to some degree, to the tune suggested by this firm; who, exactly, wants to take on a competitor infinitely better armed for a market battle than oneself?

Is growing fresh potatoes any different than producing a bottle of wine in terms of the need to maximize profit from the effort? Does it make business sense to blindly wade into a fresh potato market without weighing all available market data?

In a recent conversation with an experienced grower/shipper, the discussion centered on the process by which fresh produce prices rise and fall. He called the process “The One Load Effect.” By that he meant that when supply and demand are balanced and price is stable, it only takes one load too little to raise the price or one load too many to lower price.

When a buyer tries to place an order, and no one has it, the only way to fill his order is to offer a higher price than is currently being paid. This process raises market price. Conversely, when a shipper is given one load more to sell than the market wants, the shipper must offer the load at a bargain. This process lowers market price.

So, how does this all tie together? Just as the wine maker we’ve been talking about knows every nuance of the wine market, United Potato Growers of America’s database contains comparative amounts of fresh potato market information. If you’re a fresh potato grower and you’d like to know how to fit your crop into the market for a fair return, you now know who to call.