Growers Face Changing Market Trends, Higher Production Costs

Published online: Mar 10, 2022 Articles
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Source: Wisconsin State Farmer

After being forced to cancel the event last year due to the coronavirus, the Grower Education Conference sponsored by the Wisconsin Potato & Vegetable Growers Association and University of Wisconsin Extension, made a successful return to Stevens Point, Wisconsin, last month.

Attendance by growers, processors, other industry professionals and exhibitors returned to pre-pandemic levels, according to event organizers, with a variety of informational sessions held over three days.

One of those sessions included an industry update by Blair Richardson, CEO of Potatoes USA.

Richardson began his presentation by noting that for several years dollars spent for potatoes by the foodservice industry outpaced those spent by consumers for use at home. “When I was here two years ago, I predicted this trend would never change, but I’ve learned over the past two years not to use the word never,” he admitted.

The potato industry, like so much of the rest of the economy, has changed considerably over the past two years due to the coronavirus. “As with other food purchases, spending on potatoes shifted dramatically from restaurants and other areas of the foodservice industry to home consumption,” he said.

During the height of the pandemic, 55% of potatoes purchased were for home consumption and 45% were for use in the foodservice industry.

“Many people were buying potatoes in bulk and they had no idea what to do with them,” Richardson said. “We had to teach people how to store potatoes and how to cook potatoes at home. So we’re focusing on creating new and exciting recipes for cooking potatoes at home similar to what you might find at a restaurant.”

Demand Increasing 

Potatoes are still America’s favorite vegetable,” Richardson said. “It’s America’s favorite take-out dish and the number one side dish at restaurants. The incremental increase in consumption is continuing.” 

As of September 2021, foodservice purchases have rebounded somewhat, and are now about even with purchases for home use. Fresh, frozen and dehydrated potato sales are increasing

“The potato is winning at restaurants, grocery stores and in the home,” said Richardson. “Retail stores are still selling high volumes of potatoes, restaurant purchases are coming back, but school purchases are still lagging.”

Current demand for potatoes is outstripping the available supply, according to Richardson, and potato imports are up over 130%.

“The European Union is exporting a lot of potatoes to the U.S. – particularly in the the frozen-food departments of grocery stores in the eastern half of the country like Trader Joes and Aldi’s – and we’re really trying to understand what’s going on here and why our companies aren’t fulfilling this demand,” he acknowledged.

Potatoes USA is continuing to promote potatoes on social media. “We have a retail tool kit that includes Asian cuisine cooking and a new culinary training center that is live-streaming information on the Internet, and where we’re also  bringing in chefs from around the country to teach them new ways of preparing potatoes,” Richardson said.

“We’re increasing potato exports to Mexico, which is now our number one market, surpassing Japan and Canada. We’re seeing a lot of product going down there. We’re also increasing exports to Saudi Arabia, which is now our fastest-growing market,” Richardson explained.

Supply Chain Challenges

Recently, there have been numerous examples of bare produce shelves at supermarkets. “A lot of our customers around the country are contacting their suppliers and are finding a lack of products,” Richardson reported. “Many of these shortages are due to transportation shortcomings."

Richardson says U.S. ports aren’t as efficient as other international ports. “Our ports are not loading and unloading as fast as those in Europe and other countries,” he admitted. “But even with ports operating 24 hours a day, we’re not getting products into trucks and on the road.”

Over the past two years, the trucking industry has witnessed a shortage of drivers. This, in turn, has created fierce competition by fresh fruit and vegetable shippers to move their perishables across the country, according to the United Vegetable Growers Cooperative (UVGC). And, as anticipated, has driven the cost of transporting produce to record levels.

In addition to the overwhelmed supply chain and driver shortages, the U.S.'s largest produce trading partner, Canada (the U.S. exports 90% of Canada’s fruits and vegetables during the winter months), has imposed new vaccine mandates on truckers, which have led to massive protests by Canadian truckers. 

The Canadian Trucking Association is estimating up to 16,000 drivers could be eliminated by these mandates. All these supply chain pitfalls lead to one unfortunate truth: these issues will negatively impact U.S. growers across the country.

Thinner Margins

Working off razor-thin margins is not a new phenomenon for growers. However, the sheer number of supply chain cost increases that growers will be facing this season – such as minimum wage increases to $15 an hour, 40-hour overtime work week, all petroleum-related inputs, including fertilizers, diesel fuel, as well as health insurance – will be daunting.

Richardson advises that all growers must be hyper-diligent in all their farming practices. “On-farm efficiencies will be more important than ever to achieve the highest yields and superior quality in an effort to keep pace with incremental costs,” he stressed. “But current problems with supply-chain channels may take a long time to fix.”

However, all the fundamental farming practices used to keep costs in check likely won’t be enough, according to the UVGC. "Growers must have the opportunity to pass along some of the increased cost of production and transportation in order to keep consumers supplied with the widest and richest variety of the healthiest vegetables the world produces."