China: Price of new potatoes continues to drop

The price of new potatoes in the northeast of China dropped last week and dropped even further this week. The supply speed also seems to slow down in comparison with earlier in the season.

Why does the potato market develop in this way? The reasons are as follows:
 

1. The new potatoes from many production areas in northeast China enter the market in large volumes around the same time. The supply from production areas, in addition to regular supply from storage, suddenly expanded, but market demand did not show a significant increase. Suppliers have difficulty absorbing the additional volume and market supply slows down.


2. Potato production areas in Gansu and Hebei suffered from occasional rain in recent days. These weather conditions are unfavorable for trade and the stock piles up. When the weather improves, the supply suddenly grows, which puts pressure on the market price of potatoes. The price then drops.


3. The supply of new potatoes from south China also grows daily. In addition, the trade in potatoes from warehouses in north China still continues. Farmers are eager to sell their stock and some farmers lower their prices to guarantee a continuous trade volume. The average price of new potatoes in Gansu and Hebei therefore slightly declined even further.


4. Schools have not yet started, which limits the ability of the potato market to absorb the supply of new potatoes. In this situation where supply exceeds demand the price naturally falls.

The main reason for the low price of new potatoes is excessive market supply. Demand from end-markets did not significantly grow and the market has difficulty absorbing the surplus.

The current potato supply from Gansu and Hebei is still relaxed. If farmers continue to push their stock and the market fails to absorb additional supply, then the price will certainly drop even further.