Volatile potato market requires deliberate choices TRADE AND MARKETING What trends do you observe in the potato sector? ‘In our study, we see a steadily-increasing demand for potatoes and potato products. As a result, we expect rising prices in both free and contract potatoes. The two are linked. When free prices are higher in a particular season, the contract prices for the next season will also rise. Also, you see that acreages increase after years of high prices, as a result of which the actual price in the season fluctuates. How large that fluctuation is again depends on supply and demand. During the season, the volatility of the price is influenced by issues such as acreage and dry weather. This may result in supply and demand diverging by few percent, resulting in disproportionate price effects. A half percent shortage may give a 5-percent price increase. A slight surplus has a significant effect, because the demand has been more or less constant over the years. Consumers won’t start eating more potatoes when they are cheap, or fewer when they are more expensive. This effect is strengthened because potatoes, unlike cereals, can’t be stored for years on end. If you look at the average line within the fluctuation, we expect potato prices to rise further in the coming years.’ How can you avoid the seasonal price fluctuation? ‘A grower has the choice of various tools. A large proportion of the potatoes are contracted out to the processing industry. This means a stable income for the grower, which may not result in a maximum profit in an expensive season, but you also won’t fall flat on your face when prices on the free market are low. But the contracting party doesn’t work for nothing. He’s looking for advantages for his own farm management. Another tool is the potato futures market. Personally, I don’t think this a very stable tool. The volumes are limited, particularly compared to the cereal futures market in America, as a result of which prices can fluctuate enormously. And, it’s a complicated tool in my view. I wonder whether this is a safe tool for the individual farmer. If you use it together with the help of a pro‘We expect rising prices in both free and contract potatoes.’ fessional, it may be a different story. But even then, it’s still important that the individual crop farmer understands the futures market really well and understand how it works.’ To reduce this risk, are you more optimistic in setting up options in future contracts? ‘We may want to support their introduction, but we’re definitely not going to develop them. It’s not the task of our bank. Apart from that, I’m of the opinion that all price constructions have to be transparent and understandable. In this context, we see this as a useful role specifically for the potato trading companies. Even if it means an extra link, it’s vitally important to bring supply and demand properly together and have sufficient knowledge about it. That’s the strength of the trade, but also its weakness. There are growers who say, “I can do that myself if I take the time to study it”. When a grower starts trading in future contracts, he must know how the market operates. If you enter that domain, you must be a professional, a top player. At the same time, you could say that short chains with only a few links are less costly, which is why we anticipate that the trade in future contracts won’t increase, but also ‘We prefer the entrepreneur to come with a plan himself showing what price scenario he has in mind.’ won’t decrease very quickly. If you have a good eye for trade, you can earn a good living with it. That’s why we think it’s an excellent tool for growers with a good knowledge of the trade to cover price and sales risks.’ What sort of effect do you expect from the world-wide increase in potato consumption? ‘World-wide potato consumption and the sector are continuing to grow. This gives a stabilising effect on the price. In addition, the increasing demand steps up export opportunities, both of fresh and processed potatoes. Even if the quantities for fresh potatoes are smaller than for the processed ones, it helps to keep prices level. The total European acreage is expected to remain unchanged. This can have a positive price effect on exports. The processing industry exports to countries such as India, China and South America. In these international trade flows, things such as currency and freight rates determine the market price as well. So these companies are investing increasingly often in these countries to boost local production there, thus creating a new balance. If the total market gets bigger and more international, the effect will be stabilisation.’ You are always talking about making choices to cover risks. Is marketing going to be more important than cultivation in the future? ‘A great deal can be gained there, it’s true. Knowledge about the market can be greatly improved in crop farming, in my opinion. Who are those market players? What does the consumer want? Because the potato is intrinsically a very healthy product, you can use this aspect much more in your marketing strategy. That’s not very easy, naturally. On the one hand, you’ve got the major industries, which have a great deal of purchasing power with the growers. On the other, the processing industry itself is under pressure on account of the increasing power of supermarkets and fast-food chains. When a farmer understands that market really well and gears to it, he can adapt his cropping plan and variety choice. The chain can Potato World 2013 • number 4 5 Pagina 4

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