The 2023-2024 potato crop was particularly abundant, with production increases translating into higher stock levels. As of June 1, 2024, U.S. potato stocks totaled 3.02 million tons, a 19% rise compared to the three-year average for June. These stocks now represent 15% of the estimated crop, up slightly from 14% the previous year. The increased stock volume is critical for meeting fresh-market demand and processing needs throughout the marketing year, providing a buffer that can stabilize supply chains.
Over 60% of the U.S. potato crop typically goes to processing, with a significant portion of this year’s yield earmarked for frozen and dehydrated products. The larger-than-usual stocks have positioned processors to continue using the 2023-2024 crop well into the 2024-2025 marketing year, potentially smoothing out any supply fluctuations in the coming months.
Processing Trends and Market Dynamics
The processing of potatoes into various products remains a cornerstone of the U.S. potato market. By May 31, 2024, approximately 8.82 million tons of potatoes had been processed in eight major potato-producing states. Of this total, 1.52 million tons were used for dehydrated products, marking the highest volume in three years. Notably, potatoes used for dehydration represented 17% of the total processed volume, aligning with the previous three-year average.
These processing trends are not just about quantity; they also reflect broader market dynamics. For instance, the producer price index (PPI) for frozen French fries in May 2024 was 15% higher than a year earlier and a substantial 49% higher than two years ago. Similarly, wholesale prices for potato chips and sticks rose by 4% year-over-year and 30% compared to two years ago. These increases are partly attributed to higher production costs, including labor, energy, and ingredient expenses, as well as the need to manage excess contracted potatoes.
Impact on Fresh Potato Prices
The increased potato supply has had a noticeable impact on fresh potato prices. Following the large fall harvest in 2023, fresh potato prices fell sharply, with grower prices ranging from $10.20 to $10.60 per hundredweight (cwt) between January and May 2024. This is significantly lower than the $21.20 to $23 per cwt range observed during the same period in the previous marketing year (2022-2023). While retail prices also fell early in the marketing year, they have since stabilized, suggesting that any further price movements in the coming months will likely be modest.
Looking ahead, if historical patterns hold, fresh potato prices in July and August 2024 are expected to be slightly higher than the January-May averages. This potential price increase could provide some relief to growers who have faced lower prices for fresh potatoes over the past several months.
The 2023-2024 U.S. potato crop has set a new benchmark for production and stock levels, with significant implications for the processing industry and fresh potato market. While the increased supply has led to lower fresh potato prices, the processing sector continues to see strong demand and rising prices, driven by higher production costs and market dynamics. As the industry navigates these trends, stakeholders will need to remain vigilant, adapting to both the opportunities and challenges presented by this record-setting season.
