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Market Report

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Will 2010 be profitable, break even or be unprofitable?



     
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Planning Ahead

Planning for the future. It’s a constant in a farmer’s life and business — just as it is for the United States Potato Board.

The USPB is holding its summer meeting this week, Aug. 10-13 in Pocatello, Idaho, with a number of side-trips to American Falls and surrounding towns when the meetings end for the day.

One of the main topics on the agenda for the meeting was sounding out the draft plans for the next five-year long-range plan: 2012 to 2016.

I spoke briefly with Kathleen Triou, vice president of the domestic marketing committee, between meetings at the Red Lion Inn on Aug. 10. She said she’s hearing positive feedback from members of the industry to keep the current core strategies in the new long-range plan while being open to exploring new channels and new opportunities — and making sure they get a return on their investment.

I also spoke with Tim O’Connor, USPB president and CEO, Tuesday afternoon. You can read his comments on the long-range plan in the market update below.


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A Profitable Year for Growers?

Last month's USDA National Agricultural Statistics Service report that potato acreage planted for 2010 is down 4 percent nationally and 8 percent in the Pacific Northwest has Paul Patterson, University of Idaho Extension agricultural economist, cautiously optimistic that the fall harvest could be a profitable one for growers.

“I think it is certainly the trend that everyone wanted to see,” he said. “I guess one of the questions is whether the magnitude of the change is going to give the result that the industry wants.”

Patterson listed two crucial components yet to be answered that will help resolve market stability and return to profit: overall yield and consumer demand.

“By itself, the acreage is not going to give the desired result that people wanted. I think we need some reduction in yield compared to the phenomenal yield we had last year,” Patterson said. “It’s extremely unlikely given historical perspectives we would see yields exceed what we saw last year.”

Patterson is somewhat optimistic that yields would be lower than last year’s records and that the industry would see reasonable prices — but that is also predicated on an improvement in demand.

And demand seems to be showing some improvement in the process sector and showing positive movement in the fresh sector.

“Even on the fresh side, the improvement in prices the last few weeks has certainly been encouraging,” Patterson said. “Prices are higher compared to a year ago, which is one of the first times we’ve seen that in the fresh market this year. They’re not great by any stretch of the imagination; growers are still below their cost of production in terms of what they have in the potatoes this time of year, but it’s certainly much better than what we’ve seen in some of the earlier months this shipping season."

Patterson said last year’s record yields in the face of decreasing demand was a wake-up call for the industry.

“Some of the lessons that were learned from 2006 to 2008 would show that if they did control production and balance that with demand, they could get some reasonable prices,” he said. “Unfortunately, that lesson was lost last year. When that was coupled with the blessing from Mother Nature with record high yields, that was a one-two punch. But hopefully that lesson was not lost on the industry.”

Patterson’s advice to growers is to look at demand when they are making their production and marketing plans for the coming year for all crops.

“Try and balance out supply and demand and try to come up with something that is sustainable in the long term because the bankers are going to be wanting to look at that as well," he said.

Jerold Myler is one of those bankers closely watching and monitoring the potato industry. Myler is Key Bank's area executive and senior vice president of commercial banking in Pocatello.

Myler seconds Patterson’s advice to growers: Plan for the future.

“If a grower’s got a good plan, if he has a history of profitability, if he has a balance sheet that allows him to kind of draw on his equity in the event that things don’t turn out all right this year, those guys are getting financed,” Myler said.

He advised growers to conserve equity for the upcoming year.

“Make sure your balance sheet and your financial position is such that you can weather the storm, so to speak, if we have another down year,” he said.

 

Market Report

Those on hand during USPB's meeting will be discussing a number of issues this week. Among them, boosting lagging fry demand and resolving the threat of acrylamide through development of new varieties lower in asparagine, the amino acid that helps create acrylamide.

Tim O’Connor is a man on a mission at this week’s USPB summer meeting. The USPB president and CEO seems to be in perpetual motion going from one meeting to another while discussing the development of their USPB five year long-range plan.

Following a presentation to the Domestic Marketing Committee on the long-range plan for developing demand for fries in the U.S. and staying ahead of the acrylamide issue. O'Connor sat down with Spudman to discuss the issues at hand.

“That’s one of the new initiatives in the long-range plan,” he said, “that we would focus a chunk of our initiative around building demand for fries in the U.S. and participating in the acrylamide variety development search and making sure that we were capitalizing on the developments we have done on the chip side in getting incorporated into the fry side.”

He was quick to caution that it is an important new development but there are many pieces to the long-range plan.

“It’s certainly not the whole program but it is an important new addition to the program,” he said.

O’Connor emphasized that much of the current plan will remain in place in the new five-year plan set to begin in 2012.

“One of the most important things to recognize is that about 90 percent of what we’ve been doing, the industry told us to keep doing that,” he said.

O’Connor said that along with the fry initiative the USPB also is entering into the deli arena in supermarkets and into the food manufacturing area with frozen meals on the domestic marketing side.

Internationally, O’Connor said, they have learned over the past five years that the board needs to continue to have a presence in a market even after the initial program has ended.

“When we decide we’ve done our job in a market and we move to a new market, then we leave a void behind. Our services would still be beneficial to maintain that market,” he said.

Calling it a market maintenance program, O’Connor said the program will allow USPB to move to new target markets and leave support in the existing markets.

 

Spudnik

Spudnik has introduced its new single-pass planter hitch option. The option allows any three-point mounted implement to be mounted to the planter and pulled through the field during planting, allowing greater farm efficiency and eliminating additional fieldwork, thereby reducing fuel consumption, according to the company.

The hitch can be added to any 6-row or 8-row Spudnik pull-type planter. The hitch is made to accommodate any cultivator or hiller. An auxiliary remote hydraulic function can be routed to run hydraulic functions on the cultivator.

The single pass planter was field tested during this past planting season and is available now.