Process contracts take shape
The annual eastern migration of process contract negotiations has begun, with Washington growers agreeing to an offer from Lamb Weston last week and offers from Simplot and McCain this past week.
Dale Lathim, executive director of Potato Growers of Washington (PGW), said that the overall weighted average increase is 10.5 percent for the 2012 contract.
Lathim said that PGW has one more contract to finalize with Heinz after approving contracts with Lamb Weston, Simplot and McCain.
Lathim said that they are seeing an increase in acres contracted on the process side.
"The extra acres are for outside of the area," Lathim said, "because of our yields and our earlier harvest window. Most of our increase is going to be for potatoes to be shipped and processed in other states and provinces."
Lathim described the contract as very good for PGW.
"We're blessed with the soils and weather, this is the potato growing Mecca," he said. "We appreciate the blessing that we have and we're glad to fill the void that was created during this past crop year.
"The 2012 contract is a very fair, reasonable contract. It has a little more risk, but the payout is there to warrant the risk. So in terms of profitability, if we have an average crop, this 2012 contract will maintain our profit margins."
The contracts are on a modified acreage contract, according Lathim. The volume cap is 103 percent of a grower's three-year average for a specific variety.
The first round of talks has concluded in Idaho as well. Dan Hargraves, executive director of the Southern Idaho Potato Cooperative (SIPCO), said that his organization had just finished the first round of contract talks with Simplot, Lamb Weston and McCain.
Hargraves predicted that the contracts would be completed toward the end of February.
He went on to say that the incremental increase in Washington would not work in Idaho and SIPCO is looking for an increase closer to 15 percent for 2012.
"Each area has significant differences in yield and cost," Hargraves said. "Columbia Basin is a pretty homogenous area — within there's a big difference. That's indicative of the shorter growing season in the East and the longer growing season in the West."
Hargraves said that the differences in growing seasons and yields in Idaho complicate contract negotiations.
"We're working off one set of numbers for eastern Idaho, one set of numbers for south-central Idaho and one set for western Idaho," Hargraves said.
Hargraves said it is likely that growers will see an increase in contract volumes for 2012.
Dana Wright, executive director of the Agricultural Bargaining Council of Maine, said that they are watching with great interest current contract negotiations in Idaho and Manitoba.
At this point, they can only watch as grower organizations and processors wait for contracts in the West and Midwest to be concluded.
"Maine is working on cost of production figures and profit margins unique to our area, which is also being done in New Brunswick and Prince Edward Island," Wright said.