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State of the Industry

The state of the nation’s potato industry is constantly changing, and the past few years have seen marked differences in the world market and in the marketing of potato products in the United States. To shine light on those changes, as well as paths for the future, Spudman has asked leaders from the nation’s state potato organizations to answer a few questions on the state of the industry. Read on to hear what they have to say.

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Will Wise
Oregon Potato Commission
President and CEO

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

Several challenges face Oregon potato producers going into 2005. Among those are processing plant capitalization and economy of scale, export growth and trade patterns and consumer tastes and preferences – including the dieting trends. The doors of a frozen product processing plant will close in Oregon this year, and this points out how the critical mass of the many potato processing operations in our state and region has benefited growers for the past several decades. What producers and processors do to strive for cutting-edge comparative advantages in narrow processing sectors will be important to the industry going forward. New technologies, government contracts, specialized export growth and diversified product lines are helping, but it may be that smaller-scale processing development will be the trend in the region.

What do you see as the areas of biggest promise for the potato industry?

In the current global marketplace, there exist some extremely favorable opportunities for the right producers. One item of particular interest is the export of raw product to Asia, Mexico and elsewhere. As many know, the growth and development of exports of frozen and dehydrated products to Asia is something the Oregon Potato Commission has pushed relentlessly.

More recently, I have had the pleasure of working with the national groups and other state organizations to push for the opening of markets to fresh potato exports from the United States. What we are seeing is dramatic growth in some of these newly-opened markets such as Korea and Taiwan for chipping potatoes or Mexico for fresh tablestock. It takes an extremely dedicated team of people to get these markets open and to keep them open. But the result has been a small but growing number of international visitors touring the Pacific Northwest looking at our production and buying it. If the growth we worked so hard to help build for processed products can be translated into a parallel model for fresh and raw product, we may be able to provide opportunities for a growing number of Oregon producers.

Should there be national certification standards for seed?

National certification of seed would be helpful in many ways in terms of dealing with Canadian issues, APHIS work in the international marketplace and with technical border issues. The constraint has been the individuality of respective states concerning their system and way of doing things. In Oregon we have met several times to discuss the Industry Improvement Plan (IIP) and some of its provisions that Oregon seed growers would have to incorporate should this agreement be signed. Among these would be shipping-point inspections of seed leaving the state, an item that could get prohibitively expensive for isolated seed growers. Yet many seed growers see the potential benefit of some nationwide efforts dealing with seed standards. It will be interesting to see what Oregon seed growers decide to do as this process moves forward.

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to world markets as growers in other countries?

The proverbial level playing field in trade is a common argument. Yet, for U.S. potato producers, we have worked extremely hard to provide for reduced tariffs, more transparent regulations and expanding market access for items like fresh product. Some argue that free trade agreements are too complex to work or these agreements are too one-sided and they don’t favor the U.S. or Oregon producer. But more and more we seem to have the support of our growers to push for equitable standards in the free-trade agreements that the U.S. government puts forward. For example, if we get a good U.S.-Thailand FTA in 2005, then we remain on level ground as far as frozen french fry tariffs with Australia, who already has an FTA with Thailand. If we don’t get that done, we handicap ourselves because our competition will have better market access to this important market.

The same is true for the Central American FTA; Canada has trade agreements in place with some of these same countries, and we must get equal or better market access for U.S. producers to help them remain competitive. Joint efforts such as the American Potato Trade Alliance (APTA) have been dramatic in their influence on international trade policy, and I am pleased that the Oregon Potato Commission helped put this group together. APTA was formed by uniting small budgets from individual states with the clout of the processors and restaurant chains in dealing with the endless need for representation on the part of the potato industry in trade negotiations and agreements. The result has been a coordinated effort that has lead to lower tariffs, better trade law and a real chance for Oregon and other U.S. growers to have fair trade benefit their bottom line.

What are the best marketing opportunities for growers in the future?

Marketing opportunities are all around us, and we are fortunate in Oregon to have a diverse array of market conditions. While we don’t have an agricultural system in our state wherein one or two commodities dominate the landscape, we feel that our diversity in terms of production and marketing is very beneficial. For example, having California on our southern border, combined with the recent opening of Mexico to fresh potato exports from our state, is a true blessing. California represents and economy larger than those of all but a few nations, and whether it is Russet grocery retail trade or new varieties being tested by specialty restaurants, there is opportunity for good marketing throughout California. I am aware of processing being designed specifically for certain Mexican end users and of specialty potatoes being test marketed with San Francisco chefs. These kinds of activities point to the fact that innovative growers are doing things in Oregon specifically for these nearby markets.

Also, looking west across the Pacific Ocean is something that is a significant benefit for Oregon. While traditional exports of frozen fries continue to dominate the Asian trade numbers, we have had numerous visits from potato chip manufacturers to look at supplies from our region, and this has grown from just a couple of Korean companies to manufacturers from around the continent. Japan and China currently do not allow tablestock or raw product for processing to be imported at this time. Just consider what those markets represent if we can get them open. Japanese potato chips manufacturers have met with us on several occasions and would definitely buy our potatoes if they were allowed. These are challenges that commodity groups like the Oregon Potato Commission deal with because these developments won’t take place without effort, and most growers or processors do not have the time or personnel to deal with these issues. However, the benefits outweigh the costs by a significant margin, and I believe we will continue to gain ground and get these markets open.

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Mike Carter
Wisconsin Potato and Vegetable Growers Association
Executive Director

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

The top three issues are the same in Wisconsin and the rest of the country:
1. Over production of potatoes;
2. Decreasing demand for potatoes;
3. Escalating cost of production.

What do you see as the areas of biggest promise for the potato industry?

The new co-op provides some hope and promise to growers. While there are a number of challenges that will have to be overcome, at least the fact the industry is recognizing there is a problem that needs to be addressed, and is showing signs of being able to put aside differences and work together for the sake of the entire industry. While developing this type of organization can be uncomfortable for some individuals, it ultimately has the potential to help strengthen the industry as whole and address overproduction problems that have plagued the industry for the past several years.

Should there be national certification standards for seed? Why or why not?

IIP has done a yeoman’s job of addressing the difficult questions surrounding seed certification at national level, and I think the concept that IIP has developed to address this issue is on the right track. I do not believe a true national seed certification law is feasible or practical. It is important for the states to retain their own seed certification standards. It is, however, also important for USDA to have a set of standards in hand they can share with our trading partners that all seed produced in the United States can comply with. This will undoubtedly eliminate confusion, and will take away existing artificial trade barriers. It is important that all potato states help finish this unique and important project by working with their state departments of agriculture to ratify the agreement.

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to the world market as growers in other countries?

Simply put, we cannot stand for weak negotiations. I think over the past two years our trade negotiators have done a much better job of protecting the interests of our industry, but we must continue to insist on our negotiators being bullish when they sit down at the table. As an industry, we do an incredible job of producing a high-quality product that should be able to compete on an international basis if the playing field is level. We must continue to work to insure the playing field is level.

What are the best marketing opportunities for growers in the future?

New varieties will undoubtedly play a roll in our industry as we move forward. We’ve already seen varieties like Yukon Gold and others have. As consumers become more in tune with these varieties, there will be opportunities for the whole industry. On the french fry side, it is important for new oils and processes to be developed to meet the changing demands of consumers, and consumer’s needs for healthier processed alternatives.

I would also like to commend the USPB for their Healthy Potato campaign. I think this is the kind of image that needs to be in front of consumers as they make food choices. As an industry we need to promote potatoes in this image by using the data developed by the board and using the same consistent messages as we talk to people outside of our industry.

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Chris Voigt
Colorado Potato Administrative Committee
Executive Director

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

Colorado issues: Water use, transportation availability and profitability.
National issues: Balancing supply with demand, correcting trade issues with Canada/Mexico and developing more convenient food uses of potatoes.

What do you see as the areas of biggest promise for the potato industry?

The U.S. potato industry is on the verge of making a big impact on international trade. Never before in the history of the U.S. potato industry has there been so much progress made on opening markets for fresh U.S. potatoes. The states and entire industry has cooperated very well in organizing efforts and resources into opening markets. And we need every new market we can get!

Should there be national certification standards for seed? Why or why not?

I would like to see a national certification standard for seed, but it shouldn’t be our biggest priority. It needs to be flexible, under local control but have national oversight. The individual state programs are a confusing concept for many of our foreign customers. A national certification program will help us in export markets for both seed and commercial production.

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to the world market as growers in other countries?

The U.S. government has made great strides in opening up markets for U.S. potatoes and potato products but could do even better if they take stronger stands in negotiations by using trade sanctions or quotes/tariffs on imported products until other countries level the playing field and give free access to U.S. potatoes. It’s frustrating to see so many goods imported into the United States from so many different countries, and yet those countries don’t always provide access to their markets for our goods.

What are the best marketing opportunities for growers in the future?

Filling niche markets will be one of the ways to grow the potato category. Growers will and do have an excellent opportunity to fill niches by offering consumers more choices. We’ll see more specialty varieties, more organics and more health-targeted potatoes. The fresh-potato market will become more complicated as consumers diversify their potato wants and needs.

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Ben Kudwa
Michigan Potato Industry Commission
Executive Director

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

State:
• The threat of heavy-handed regulation of water used for irrigation
• Market stability
• Declining profit margin

National:
• Changing consumer-buying patterns for fresh potatoes and potato products
• Emphasis on exporting to offset declining domestic demand for potatoes
• Pulling apart of the agricultural research infrastructure and corresponding notion that it can be privatized

What do you see as the areas of biggest promise for the potato industry?

The entire industry coming together under the banner of the Potato Outlook Conference in an attempt to sort through changing demand and marketing issues

Should there be national certification standards for seed? Why or why not?

No, there are too many regional and state differences to allow a standard to exist under one umbrella. Commercial growers are not really interested in seed standards. They want to buy good seed, and that is a moving target. Commercial growers must rely on the reputation of the seed grower. The consolidation of the industry has opened the door for relationships to take the place of regulation.

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to the world market as growers in other countries?

The industry seems to be continually running into circumstances that clearly show trade barriers are used to deny access. U.S. growers are asked to go through extreme measures to prove that a pest may not exist in a production area or a shipment does not contain a pest. What is really needed is a fair trading relationship. This should be a government-to-government relationship as opposed to industry-to-government relationship.

Export opportunities are not equal among production regions of the country. Currently there is a great deal of interest in exporting potatoes, however, here in Michigan export opportunities are limited because other production areas are in closer proximity to export markets. We support the export work of the council and the board however we are not in a position to take advantage of their work.

What are the best marketing opportunities for growers in the future?

Potatoes seem to be in every category of unwanted food. Yet the facts don’t support the bad rap potatoes are given. More emphasis needs to be placed on the health benefits beyond the usual nutrition information on a bag of potatoes. Potatoes have the added benefit of being a low-cost per serving item, which makes the product readily available to all segments of the population, not just those who can afford the high-end products touted as functional food.

It is interesting to see the research community that has been traditionally production directed now begin to scratch the surface of the health benefits of potatoes.

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Frank Muir
Idaho Potato Commission
President and CEO

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

1. Improve long-term financial returns to growers and total supply chain
2. Significantly expand export business
3. Educate consumers on the health benefits of potatoes…reversing decades of negative views
4. For Idaho, specifically, encouraging consumers to “look for the seal” to ensure they’re getting genuine Idaho potatoes

What do you see as the areas of biggest promise for the potato industry?

1. Low carb diets have reached apex.
2. Opening of foreign markets (Mexico, Korea, etc.)
3. Developing new and innovative products for fresh, frozen and dehydrated
4. Expand participation in government food-aid programs

Should there be national certification standards for seed? Why or why not?

Yes. We need to establish clear standards that will improve overall quality, reduce disease, help expand export business and better control imports from Canada and other countries (as they will have to meet the same standard).

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to the world market as growers in other countries?

We simply ask that fair, transparent and equitable practices be utilized on both sides. Currently, that is not the case.

What are the best marketing opportunities for growers in the future?

1. Expanding export business
2. Developing new varieties for specific needs
3. Convincing consumers to return to eating potatoes as part of a healthy, balanced diet
4. Strengthening the role of branded potatoes (e.g. “Idaho”) in produce sections…less commodity driven

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Pat Boss
Washington State Potato Commission
Executive Director

What are the top three issues facing potato growers in your state? What about potato growers in the nation?

While we can’t speak for other states, these issues are nationwide as well as a problem in Washington:

• Low returns/low prices;
• Low availability of transportation (truck, rail, barge);
• Environmental restraints on farming;
• Trade barriers (phytosanitary issues, tariffs, imports);
• Low-carb diet trends/obesity issues.

What do you see as the areas of biggest promise for the potato industry?

Externally, we are increasing dialogue with other countries with the potential of expanding markets. Within the industry, increased research will bring better science to the field, crop protection and management.

Specifics:
• Increased demand for potatoes and potato products in Latin America and Asia should continue to increase exports from the Pacific Northwest.
• Production efficiency will need to continue to increase for Washington state and U.S. potato industry to be competitive in global market.
• More targeted, selective, lower residue crop protection tools will need to be continued to be developed to combat the increasing public and regulatory scrutiny of pesticides in the United States.
• Irrigation efficiency will need to continue to improve to deal with the increased regulatory and public scrutiny concerning the use and competition for water between urban, environmental and agricultural needs in the PNW.

Should there be national certification standards for seed? Why or why not

No answer given

What needs to happen in the international trade arena to make sure U.S. growers are given the same access to the world market as growers in other countries?

With regard to Canada:
• Bulk easement restrictions need to be eliminated on U.S. exports there;
• The imposition of anti-dumping duties by British Columbia on U.S. potatoes needs to be challenged.

With regard to Southeast Asia:
• Phytosanitary restrictions impacting exports of U.S. fresh and chip potatoes to Japan and China need to be a top priority for the U.S. trade negotiators;
• Tariffs and related trade restrictions need to be continued to be lowered on U.S. frozen fries to Thailand, Vietnam and India.

What are the best marketing opportunities for growers in the future?

Besides those opportunities mentioned in No. 2, new, healthier frying oils are being developed. New research into nutritional attributes and new uses of potatoes should result in breakthroughs.

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If you would like to comment on any of the questions or on the state of the industry as a whole, please e-mail Kimberly Warren at editor@spudman.com. You also can fax responses to (616) 887-2666.

Originally posted Saturday, Apr. 7, 2007

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