The potato processing industry presents its potato growers with contracts with lower prices than last year, while cultivation costs are rising significantly. The contract prices for delivery ex land and October / November are generally 5 to 10 percent lower. With the offered contract prices, growers are not reimbursed for their higher production costs. For many reasons not (yet) to sign the submitted contracts.
The United Growers Arable Farming (VTA) signals falling contract prices against rising production costs. In the eyes of the VTA, both aspects are not in agreement. The VTA draws its conclusion based on the new contract prices that the potato processing industry has presented in recent weeks. For example, prices for delivery ex land and October / November are generally 5 to 10 percent lower than last season. Potatoes for long-term storage (May-June 2022), the decline is less significant. In most cases, the contract prices for that period are even slightly higher than those for the 2020-2021 season. In addition, a number of processors have offered contracts with a lower tonnage per hectare than in 2020.
Some processors offer their growers a contract for a larger area compared to the 2020-2021 season. In addition, in some cases the seed potato prices, linked to the contract, are lower than last year. The VTA also notes that multi-year contracts are often proposed to growers. The VTA has received reports from various countries that growers are still reluctant to sign contracts. The reason is that growers with the offered contract prices are not reimbursed for their higher production costs.
According to the VTA, the higher cultivation costs during the last growing season are the result of more use of MH, higher costs for irrigation, haulm killing and crop protection. In addition, the mechanization costs are also increasing to get the product off the land properly. For storage there is an increase in costs due to cleaning of storage sheds and investments in renovation and better insulation for the use of misting. Furthermore, the costs for purchasing and applying the new sprout inhibitors are considerably higher. And that while the effect is less effective. Due to the weather conditions during the season, growers are facing more storage problems, especially potatoes that germinate prematurely. According to the VTA, this problem differs per country.
While most of the contracts for the coming season have already been signed, the NEPG (North-Western European Potato Growers Foundation) urges growers to make a proper analysis of production costs before signing anything. Possibly waiting to sign a contract is a possible option to strengthen the position.
Due to the combination of the sometimes much higher (and extra) costs that growers have had to incur in recent months and the considerably lower financial returns, various companies are facing (serious) financial problems. According to the VTA, some growers are trying to keep their heads above water by postponing payment for ground rent and seed potatoes, requesting extra credit from suppliers or banks.
According to the VTA, a positive development is the fact that the processing industry has invested heavily in new or existing production lines throughout the NEPG working area. As a result, the potato processing industry has significantly more processing capacity and therefore also needs more potatoes.
Current market developments
Since Christmas, the prices of free potatoes have tripled. They are still on an upward trend. The demand is currently higher than the supply. Some entrepreneurs (who have to fulfill contracts that they cannot complete), traders who have to fulfill their obligations towards the processors, and to a lesser extent processors themselves are active in the same market. In recent weeks, merchants and / or processors have also purchased at significantly higher prices for delivery from March to June. According to the VTA, this has created a kind of double market, in which the latter is much less visible than the former (the one for immediate delivery).