The following article, "Perched on a Cliff", by Buzz Shahan, Chief Operating Officer United Potato Growers of America offers his view of the potato prices this summer:
This summer’s on-farm potato price promises to be perched on a cliff, high up in the air. This is what happens when nature trims yield. The consequence of price being so high is that, historically, it then falls too far. The last great fall began in August 2008. For the next 18 months, from August 2008, until February, 2010, Idaho grower returns fell from about $18 per hundredweight to a low of about $2.50 per hundredweight. Other potato producing areas experienced a similar slide. Why?
Two principal reasons:
1) unsustainably high pricing in August 2008
2) increased production in 2009
Increased production in 2009 happened in spite of well-researched numbers warning the grower what to expect if plantings reached a certain point. Plantings not only reached that certain point, they exceeded it. Good yields added their portion.
The grower now faces a situation similar to 2008. No one knows how high price will go this summer until we see if growers around the country held sufficient potatoes in storage to maintain shipment levels high enough to satisfy demand, or come close to satisfying demand. Last summer, when supplies in other areas ran low, Idaho had sufficient stocks on hand to fill the gap.
Those potatoes don’t exist now, at least at 2010 levels. Now, the potatoes needed to satisfy this looming supply shortfall must come from the new crop. The new crop poses a challenge as it will enter the market from various areas simultaneously. And the challenge is this: Can growers manage their individual volumes such that price only experiences an adjustment and not a collapse?
The composite individual actions can cause a price collapse or limit market price adjustments. Each grower and each cooperative will have an opportunity to measure its individual actions and potential impact on whichever outcome occurs. Personal responsibility to monitoring supply and decisions about production can be critical to the result.
United Potato Growers of America is sponsoring crop transition conferences on June 9 to update the industry about these concerns. At the conferences red and russet growers will convene in Minneapolis to address this year’s crop transition difficulties. Think of the tens of millions of dollars at risk if growers try to navigate this without the information available at the meeting. Today’s potato grower has enough experience and can get enough information through United to analyze this problem spot and manage it. Your trip to the conference could cost less than the price difference in a single load of potatoes entering an adjusted market compared to entering a collapsed market.
These crop transition conferences are sponsored by United Potato Growers of America, as public meetings and not official meetings of the cooperative where there would be limited Capper-Volstead antitrust protection. In the absence of Capper-Volstead and related antitrust protection, the antitrust laws prohibit certain actions such as price fixing, supply management, allocation of products or customer or similar actions. The conference seeks to exercise cooperative marketing act rights while avoiding any actions which would violate the antitrust laws.
Source: United Potato Growers of America
