BLOG: Making the Market Work
While there seems to be a general air of optimism for the 2017 potato crop, things have not always been good writes Andre Erasmus, and farmers are often victims of bad weather, market forces and even politics.
As far back as the mid-1800s crop failures and fungal problems were noted. Look at the Great Irish Famine of 1845 which spread to parts of Europe and led to the death of more than one million people.
In more recent times, the 2012 and 2013 harvests were bad. The UK’s Guardian newspaper, in 2012, wrote: “Food prices are set to rise after a summer of wet weather has hit harvests. The global price of wheat has risen by 30% over the last year. Potato harvests are down by half in some areas.”
The UK’s Agriculture and Horticulture Development Board’s Market Intelligence report showed that the 2012 harvest was 24% down on the previous year due to weather conditions and the lowest since the major drought of 1976. Production in the Netherlands and Belgium was also bad that year, with North-Western Europe reflecting a 17% production drop.
And, as we all know, when supply diminishes, demand goes up, prices go up (at retail, not always wholesale) and almost everyone suffers in one way or another.
Coping with this is a problem that farmers, processors, and their organizations need to face up to. While most processors have contracts in place, they are not as affected by adverse weather conditions in terms of business – unless the harvest and quality is way below expectation.
And this can depend on how it is done. Look at Belgapom – the association for the Belgian potato trade and processing industry. Romain Cools, Secretary General for the association, has a positive outlook and says that a co-operative approach is beneficial for all.
“Years like this one offer opportunities for long-term relationships between the operators in the potato value chain,” he said recently, adding that the EU and Belgium, more particularly, are well prepared to take up the challenges facing the industry, taking in consideration the investments in sustainable growth and quality policy and the fact that the processing industry is continuously extending its capacity.
He said a strong potato chain and a competitive logistical system will bring about a successful future, but pointed out that contracts made need to be fulfilled. He warned that a shortage of potatoes in the EU has also affected the exports of fresh potatoes from the UK to Belgium.
Interestingly, Andersons Farm Business Consultants director Jay Wootton says an ‘air of optimism’ could see a larger area of potatoes grown in the UK this year adding that this could reverse the better balance in the market – the low yields in Europe must not be forgotten as a key driver of UK market strength.
“For many, however, the volatility of the free-buy/packing market is unlikely to be relevant. For contracted growers who, weather permitting, largely know their likely income around planting time, it is probably a challenge to be profitable enough to cover the continuing reinvestment required to sustain most large-scale operations.”
Mintec says the EU yields for 2016/17 have been estimated at 45.1 tonnes/ha, a decline of 6% compared to last year’s crop and Ryan Larsen, an extension farm management specialist at UtahStateUniversity, predicts potatoes will realize higher prices in the 2016-17 marketing year.
As Cools said, usually a year with higher prices offers more possibilities for the potato trade, but this year trade has also suffered from low yields to deliver the contracted goods.
The good news he says, and I agree, is that the global market is driven by demand, and the demand for processed products all over the world is high.
It appears 2017 will be an interesting year …