Rethinking Economic Policy

The “why” of business decisions is as important as the “what.”

Published online: Feb 12, 2019 Articles Buzz Shahan, Chief Operating Officer, United Potato Growers of America
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This column appears in the February 2019 issue of Potato Grower

Anyone who has ever worn a headset and sold fresh potatoes against the Idaho brand knows all about facing that challenge. Unequaled for decades, the Idaho Potato Commission has promoted the Idaho brand far beyond anything seen in the potato industry anyplace else. Ask anyone you run into anywhere in the United States which state is known for potatoes, and the immediate response will be, “Idaho!” With wonderful brand recognition and a product that backs up all claims made about it, is there something Idaho growers can do to take better advantage of their product’s excellent market position?

The Idaho Potato Commission represents the face of Idaho potato growers in terms of economic policy regarding their product. Whether intended or not, the IPC’s promotional efforts have historically performed more as a long-term than a short-term approach to helping their growers achieve financial success.

In discussing economic policy, John Maynard Keynes (1883-1946), the originator of Keynesian economics, said, “Long run is a misleading guide to current [economic] affairs. In the long run we are all dead.” In potato market terms, Keynes’s reference to “current economic affairs” would refer to the present market. With solid margins out there to be rationally and fairly earned by their exceptional brand, again, what can Idaho growers and shippers do to make this happen?

The answer lies in what is happening in competing regions; what have they been doing that allows them to pull up to twice the freight differential for their growers from the same markets into which Idaho sells? First: Growers in other regions keep meticulously abreast of potato markets and events coast to coast and within Canada, Mexico, the Pacific Rim and the EU. This is done through intense data-tracking of current supply/demand/price situations across the potato-product spectrum. Second: Even though each region is filled with fierce competitors and even though regions themselves compete with one another, each recognizes the value of knowing what is happening within their region and within other regions. This allows them to collaborate on the many short-term issues that uphold price. After all, it is price that pays the bills.

If you want to make money raising fresh potatoes, collaboration among suppliers yields significantly better results than taking fellow producers on in hand-to-hand financial combat.

Grower/shipper/sales organizations announced periodically that within a certain period of time, they would command a certain percent share of the fresh potato market. (This gambit is still used as a ruse to gain product for certain volume-based sellers.) Today, after recognizing their naïveté and losing a lot of money, they come to the same conclusion: If you want to make money raising fresh potatoes—because of the nature of fresh-produce markets and their tight supply/demand balance—collaboration among suppliers yields significantly better results than taking fellow producers on in hand-to-hand financial combat.

This economic reality has been recognized not just in potatoes, but in lettuce, citrus, tomatoes, peaches, pears and on and on across the range of fruits and vegetables, with excellent results. With all that technology now offers in information gathering and dissemination, growers and sales organizations have learned that utilizing this technology to work together to balance the supply/demand/price equation yields fair and sustainable profits every day of every year.