The old pattern was that fresh potato growers made healthy profits every sixth year (1989, 1995, 2001). In most other years, according to my research, growers either lost money or broke even.
After the 2001 crop was marketed, prices fell for four consecutive years. Losses mounted, forcing some out of the industry and pushing others to the brink of survival.
Then prices jumped up and stayed there. For the 25-month period from July ‘03 through July ‘05 the average monthly price for Idaho growers was above $4 five times. During the next 43 months, there were only five months when the price was BELOW $6 (Figure 1).
Never before, in more than a century of United States Department of Agriculture records, have potato prices remained high for four consecutive crops. With the old pattern it would have taken 24 years to get that many profitable fresh potato crops.
Prices have been on a higher plateau because growers avoided an old problem – excess supplies. Grower decisions will determine if the problem will re-appear in 2009.
Growers control plantings
The U.S. fresh potato industry faces some challenges. One is how to manage success. After four years of keeping supply at profitable levels, it may be hard to do it again.
There is a powerful urge to plant more potatoes in 2009. Wise growers may show restraint but other people could jump in. Record high prices ignited enthusiasm for planting potatoes.
Several other factors will have some impact. High production cost and price risk could restrain potato plantings. Alternative crop prices are giving mixed signals. Lower grain prices tend to increase potato plantings, but high hay prices have the opposite impact.
Several economists have developed econometric models to forecast potato plantings. I built one years ago for my doctoral research, but it is now outdated. Bruce Huffaker, who publishes North American Potato Market News, built a similar model. In January, he used his model to predict an 8.2 percent increase in U.S. 2009 potato plantings.
Expert opinion can also be a good forecasting tool. I collected some at potato industry presentations I made recently. When I asked growers for a show of hands about several planting scenarios, most raised their hands for an increase in the range of zero to 5 percent.
After the 2001 crop was marketed, prices fell for four consecutive years. Losses mounted, forcing some out of the industry and pushing others to the brink of survival.
Then prices jumped up and stayed there. For the 25-month period from July ‘03 through July ‘05 the average monthly price for Idaho growers was above $4 five times. During the next 43 months, there were only five months when the price was BELOW $6 (Figure 1).
Never before, in more than a century of United States Department of Agriculture records, have potato prices remained high for four consecutive crops. With the old pattern it would have taken 24 years to get that many profitable fresh potato crops.
Prices have been on a higher plateau because growers avoided an old problem – excess supplies. Grower decisions will determine if the problem will re-appear in 2009.
Growers control plantings
The U.S. fresh potato industry faces some challenges. One is how to manage success. After four years of keeping supply at profitable levels, it may be hard to do it again.
There is a powerful urge to plant more potatoes in 2009. Wise growers may show restraint but other people could jump in. Record high prices ignited enthusiasm for planting potatoes.
Several other factors will have some impact. High production cost and price risk could restrain potato plantings. Alternative crop prices are giving mixed signals. Lower grain prices tend to increase potato plantings, but high hay prices have the opposite impact.
Several economists have developed econometric models to forecast potato plantings. I built one years ago for my doctoral research, but it is now outdated. Bruce Huffaker, who publishes North American Potato Market News, built a similar model. In January, he used his model to predict an 8.2 percent increase in U.S. 2009 potato plantings.
Expert opinion can also be a good forecasting tool. I collected some at potato industry presentations I made recently. When I asked growers for a show of hands about several planting scenarios, most raised their hands for an increase in the range of zero to 5 percent.
