The UK Potato Market - A Farmer's View
The UK Potato Market - A Farmer’s View
I have been procrastinating about the Farmer’s View for some time simply because I have been baffled by the market this year. The only consolation is that a lot of other potato market watchers are in the same boat!
The 2015 growing season started off slowly because of the cool spring which meant that the crop was later to harvest which, in turn, meant that prices remained high. Furthermore, grower confidence was boosted when the ADHB (Agriculture and Horticulture Development Board) calculated that there were 7% less acres grown compared to the 2014 growing season. As I said at the time, some growers expected prices to stay high for the season.
However, when the harvest was finally completed it became clear that many growers had bumper crops and stores were overflowing. An unexpected problem for growers was where to find sheds and storage to house the extra volume and it has meant that over this last winter, more crops had to be stored in buildings which are not normally used for the purpose of potato storage. During the winter months, the figures published by the ADHB, which estimate the volume of potatoes in store, suggested that there were ample stocks for the season.
It seemed to me as the winter progressed that demand had not been increasing so that the big crops might adequately compensate for the reduced area grown. This, in turn, made me think that prices might ease back somewhat during the winter months. What I didn’t expect was the complete opposite; a continual price rise which is still happening today and which shows no sign of abating.
In trying to analyse what is happening there are a number of possibilities that might explain the continuing rise in prices:-
1. Consumption may be higher than forecast
2. Some growers had very poor crops which were not taken into account by the ADHB
3. There has been more wastage when the crop is graded – a possibility because we are finding quality very mixed
4. Grower confidence remains at higher levels than are truly warranted and those with remaining stocks continue to have the expectation that prices will rise further.
Looking at the first point, recent figures from Kantar Worldpanel, which the ADHB have published, suggest that consumption of fresh potatoes has increased slightly which will have an effect but the increase is not huge so is unlikely to have caused these increases.
I don’t know of any growers in our area or in the Lincolnshire area who had poor crops but I have heard anecdotally that some growers in the South East area and Scotland did not have high yielding crops in 2015. This is hearsay only, as I haven’t seen any hard data to confirm this.
With regard to the possibility of more waste, when prices rise the waste usually reduces because crops are utilised more efficiently; for example, companies who peel potatoes for caterers or manufacturers tend to utilise stocks which would usually go for stock feed. Potatoes with poor skin finish or mechanical damage just need more peeling than normal but it is worth doing when prices for better stocks rise to high levels. So, it seems unlikely that this is the cause.
Turning to the fourth point, there are some other market observers who think that this last possibility is the most likely. I have also been of the same mind but as the trend continues and at this stage in the season, I am beginning to think that it is possible that there is a genuine shortage. We will only truly know in a couple of months’ time. If it is grower confidence and they are holding on to stock expecting further rises, it can be a risky strategy because the market can change very quickly. In the past we have seen prices collapse in a matter of days if the weather changes quickly, demand drops off and there is a loss of confidence.
One thing that may have boosted confidence further in the last few weeks is that we have had a relatively late spring once again. With the mixed weather recently, including a cold weather front that ensured our fields had a covering of snow less than a month ago, planting has fallen behind again in our area. That said, in other parts of the country, the potatoes have been in the ground for some time and as we all know from previous years, with the right weather now and over the next few months, crops can soon catch up.
What will happen next? I am at a loss as to what to predict. If there is a genuine shortage then prices may continue to rise because it is a long time until the new crop is ready. If the weather continues to improve, as is forecast, and consumers start eating more new potatoes the market could quickly change.