The outlook for potato producers is positive this year, says Ian Wishart, who grows 300 acres of irrigated spuds on his 1,500 acre mixed operation north of Portage la Prairie, Man.
“Near as we can tell, the demand is probably going to clear up everything that is out there and maybe some of the inventory will go down, too,” said Wishart, who is also vice-president of the Keystone Vegetable Producers Association.
Quality issues dogged producers in parts of the province last year. Potatoes were “frying up dark,” which means the ends of french fries turns dark when deep-fried.
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“They call that a ‘sugar end.’ When you deep fry sugar, it goes black,” he said, adding that although weather stress is suspected to be the cause, the problem also showed up in irrigated fields.
“We can’t really say what the cause is.”
His potato acres are contracted with the McCain and Simplot french fry plants in Portage la Prairie.
“They are talking about static contracts,” said Wishart.
Potatoes are a lucrative crop for his operation, but input costs have been rising, especially diesel for running tractors and irrigation pumps, and labour costs are also up. Wishart said he has heard rumours that if contract prices don’t improve this year, some producers may stop growing potatoes.
Gary Sloik, chair of United Potato Growers of Canada, said the processing market looks fairly strong.
“The statistics show that the North American market has picked up a bit,” he said, adding a drought in Europe last summer kept prices up. Western European production was down six percent from 2005 and down 11 percent from 2004, according to the Northwest European Potato Growers.
The demise of the low-carb diet fad and news that more fast food companies are opting for trans fats-free cooking oil have helped restore potato demand. French fry demand had suffered as some consumers became concerned about trans fat intake.
“Fresh market consumption is still down somewhat, so there needs to be some promotional campaigns there,” said Sloik. “Potatoes are still a healthy, nutritious and cheap food.”
Growers need to be cautious, he added, because the potato market tends to swing further than most commodities in cases of over or under supply.
“The strength of the market right now has to do with Europe,” he said. “That doesn’t mean that there is going to be a strong market for next year. It doesn’t take much of an outside influence to make it look like a strong market.”
Larry McIntosh, chief executive officer of Manitoba’s Peak of the Market, said last year was a good one for production, with yields up significantly, but quality and price were average. Inventory carryover this year is about 10 percent.
“Sales have been very good. We’ve moved through most of the extra product that came off the fields,” he said. “There seems to be good, strong movement out there, especially with California having some problems with frost.”
Operating like a marketing co-operative, Peak of the Market sells all the non-contract potatoes grown in the province and divides the proceeds among its members. Growers can plant as many potatoes as they want but must sell through Peak of the Market on a co-operative basis. Quota allotments allow a grower the right to sell a certain amount of potatoes. Red potato quota recently sold for $18 for a 75 pound bag.
Creamers, the smaller baby potatoes typically sold in grocery stores in two lb. bags, are fetching good prices, he said.
“Generally, a two to three lb. bag sells for about $2 to $3 depending on the retailer,” McIntosh said.
“In most cases the retailer gets about $1 lb. or more. The producer gets significantly less than half of that.”
Medium-sized potatoes for the home cooking market, which makes up about 70 percent of Peak of the Market’s production, are a bit stronger going into this year because of a shortage in the United States.
“Generally speaking, I think we’re going to be looking at putting in less acres. The industry as a whole is trying to cut back so that there isn’t as much of an oversupply as there has been in other years,” he said, adding the reduction could be around 10 to 15 percent.
Growers south of the border are struggling with overproduction, according to the United Potato Growers of America.
Albert Wada, chair of the group’s board of directors, said in a news release in late January that higher yields, more acres planted by non-members and an alarming drop in fresh potato consumption negated the effect of a call last year to slash 10 percent from each grower’s 2004 acreage.
While bad weather in Europe hurt potato crops last year and helped boost prices in the U.S., a repeat of the situation this year is unlikely, Wada added.
He urged growers to cut their production acreage by 15 percent and said better prices for other commodities should make complying with the group’s 2007 acreage management plan easier.
U.S. processors would likely move to more contract agreements and buy fewer potatoes from the open market, he added.
