Increased Production and Stock Levels Drive Market Dynamics
The 2023-2024 potato crop in the United States saw a remarkable 10% increase from the previous season, marking the largest year-over-year growth in the 13 states surveyed by the National Agricultural Statistics Service (NASS) since 1996. This surge in production follows a robust fall harvest, positioning the industry to meet the demands of both fresh-market and processing sectors throughout the marketing year.
As of June 1, 2024, U.S. potato stocks reached 3.02 million tons, representing a 19% increase from the three-year average for June stock volumes. These stocks account for 15% of the estimated crop, a slight increase from 14% in the previous year. Over 60% of the U.S. potato crop is directed towards the processing market each season, with substantial volumes earmarked for frozen and dehydrated products.
Processing Sector Utilizes Larger Stock Volume
The increased stock volume is expected to support processing needs into the early part of the 2024-2025 marketing year. An estimated 8.82 million tons of potatoes were processed by eight reporting U.S. states through May 31, 2024. Notably, the volume of potatoes processed into dehydrated products, excluding starch and flour, totaled 1.52 million tons, the highest in three years. This figure represents 17% of the total processed volume, aligning with the previous three-year average.
Market Prices and Economic Impact
The large fall harvest of 2023 led to a significant drop in fresh potato prices, which have remained low throughout the 2023-2024 marketing year. According to the USDA-NASS, grower prices for fresh potatoes ranged from USD10.20 to USD10.60 per cwt between January and May 2024, compared to USD21.20 to USD23 per cwt during the same period in the 2022-2023 marketing year. Despite ample supplies, fresh potato retail prices, as reflected by the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI), fell in early 2023-2024 but have stabilized since January 2024. Projections suggest that prices in July and August will slightly exceed the averages observed between January and May 2024.
Processing Market Remains Strong
Despite the decline in fresh potato prices, the processing sector has seen robust pricing. The producer price index (PPI) for frozen French fries remained high, with prices in May 2024 standing 15% above the previous year and 49% higher than two years ago. Similarly, wholesale prices for potato chips and sticks averaged 4% higher than a year earlier and 30% above the same month two years ago. Industry reports indicate that higher costs per pound of processed potato products are partly due to excess contracted potatoes and mild inflation affecting labor, energy, and other product ingredients.
The U.S. potato industry’s resilience and adaptability are evident in its ability to manage increased production and navigate market fluctuations. As the sector continues to evolve, stakeholders across the supply chain, from farmers to processors, must stay informed and responsive to ongoing economic and market trends.
