The consumer, producer and farmhouse price of potatoes is under pressure due to the corona crisis. However, that ex-farm fell the most sharply. In January of this year, that 43 percent was below the level of January 2020.
The consumer price index for potatoes was 111 in January 2021 (2015 = 100). That is 13 percent lower than in January 2020. Due to the corona crisis, the producer price index fell from the beginning of 2020, but recovered slightly in recent months to 117 points in January, 1 percent lower than two months earlier in November. The ex-farm price is at the very low level of 70 points.
Price development
Figures from Agrimatie show that the potato price ex-farm in the 2019/2020 season was considerably lower than in the previous, very dry season 2018/2019. In September 2019 the index was 116 points. Combined with the continued good demand, potato prices rose to 123 points in February 2020.
However, from March to May, the price fell to a low of 56 points as a result of the corona crisis. Catering and fast food restaurants worldwide were closed to prevent corona infections. The global demand for frozen chips fell sharply and Dutch chip exports slumped. The potato processing industry processed considerably less chips potatoes.
Unsalable stock
Around 1 March 2020, the warehouses still had a stock of more than 1 million tons of potatoes. These unsaleable stocks due to the drop in demand have caused grower prices to fall very sharply for the rest of this season. For non-contracted potatoes, growers could apply for compensation under certain conditions via the ‘Compensation scheme for French fries potatoes’.
Grower prices will recover somewhat from May and will be 80 points in September 2020. Due to the second lockdown, sales of potato products stagnated again in many countries, causing grower prices to fall to 66 points in November. In January 2021, grower prices were 70 points, 5 percent higher than in November 2020 and 43 percent lower than a year earlier (January 2020).
Equal acreage
The corona crisis in the Netherlands broke out when the potatoes were planted for the 2020 harvest season. Because the seed potatoes had already been ordered and delivered, the outbreak hardly affected the area of potatoes planted in the spring of 2020 (76,730 hectares; 3 percent lower than 2019).
Despite the dry weather conditions in the spring of 2020, the alternating wet and dry periods in the summer, it was a growing season. Wet weather conditions in the autumn made harvesting difficult in various regions. Especially on heavier soils, this led to a delay in harvesting and a greater risk of rot during storage.
2021 smaller chip area
Nearly all potatoes had been harvested by mid-November. The total 2019/2020 consumption potato harvest was of normal size (3.7 million tonnes), the same size as the previous season. Due to the corona crisis, the cold stores are overflowing with chips and the catering industry, including fast food, will not fully recover for the time being.
It is expected that French fries potato prices will also be under pressure this season. Due to the difficult sales of chips potatoes last season, the acreage for chips potatoes is expected to decrease in 2021.
Pricing
The consumer price follows the price development in the potato market, but the relative results are smaller than for ex-farm prices. This is partly because the consumer price is composed of both fresh potatoes (table potatoes) and processed potatoes. In order to secure an important part of their raw material supply, processors and traders offer contracts prior to the growing season. About 75-80% of the potatoes processed by the processing industry are pre-contracted. There is a wide variety of contract types.
Because processors purchase potatoes on contract, they can maintain relatively stable sales prices. Producer prices are therefore considerably less volatile than ex-farm prices. The margins of the packaging and export companies have been under pressure in years with high potato prices; in years with low prices, the Netherlands is better able to cope with competition on foreign markets. Potato growers sell their product on a contract basis or via the open market. On the free market, prices are determined by supply and demand in the main potato countries in northwestern Europe: the Netherlands, France, Germany, Belgium, the United Kingdom and Poland.
