The full benefit of lower potato prices in 2008 was not passed on to the South African consumer, Potatoes SA (PSA) said last week. During 2008, the producer price of potatoes dropped by 45 percent, Mark du Plessis, CEO of PSA said.
However, the average retail price for a 10kg bag of potatoes dropped by only 36 per cent and the price for one kilogram of potatoes by a mere eight percent.
In the case of extra small or baby potatoes, the price practically remained unchanged.
Du Plessis said the decrease of 45 per cent in the producer price, together with a sharp increase in production costs, resulted in many producers producing potatoes below break-even point with resultant losses in 2008.
"The impact thereof is already visible in the industry measured against the drop of more than eight per cent in hectares planted for 2009," he said.
This would eventually reflect in lower market volumes and increased pressure on prices, based on the free market system.
"Producer prices started to increase from October 2008, but to the detriment of the consumer, retail prices unfortunately increased faster and even more than the producer price," Du Plessis said.
Producers were asking the question why there was no correlation between the upward and downward movement in the producer price and the consumer price, he said.
The drop in the fuel price would not make much of a contribution to the lowering of the consumer price of potatoes. He said that fuel represented only a small percentage of the total production costs of potatoes on the farm - which could be a much as R100,000 per hectare.
"A 30 per cent drop in the fuel price will only lead to a three cents per kilogram drop in the production cost of fresh potatoes.
"It is also important to note that supply and demand determines the price on our fresh produce markets and the potato producer is therefore restricted in what he can do to influence the market price."
Cedric Porter is Managing Editor World Potato Markets and GUEST SPEAKER at #IPPSC2015 #PotatoBusiness #potato http://t.co/HTVS8CKafr