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Cautious Optimism

Cautious Optimism

Looking back over my first five months with the United States Potato Board (USPB), one of the more impressive things about this industry is how well it works together on many important issues, such as market access. The cooperation between the National Potato Council (NPC), U.S. government agencies, state potato grower organizations and the USPB is remarkable. The benefits of this cooperation to U.S. growers in terms of increased access to international markets are substantial and vital to the future growth in demand for our products.

An example of what can be achieved through this cooperative network is the recent progress toward the real possibility of increased access for U.S. fresh potatoes to Mexico. While there are no guarantees, this is a perfect example of the successes achieved by the industry by working together towards the same objective. When this access does occur, the opportunity for U.S. growers will be unprecedented as demand for both table-stock and chipping potatoes should be significant over time.

Since access for fresh potatoes to the 26-kilometer border zone in Mexico was achieved in 2003, exports of fresh potatoes have grown from 9,195 to 79,721 metric tons (MT) in 2012/2013. This region is home to approximately 10 million inhabitants out of Mexico’s population of 112 million. There are no chipping plants in the border zone. Full access to Mexico should result in exports of up to $150 million or roughly 375,000 MT within five years of access being achieved. Importantly, it is likely that much of this business will be incremental business that should benefit not only U.S. potato growers, but also growers, processors and consumers in Mexico as demand for more potatoes is expanded.

However, this opportunity could be easily lost if we, as an industry, are not extremely disciplined in our approach to the market. We must take a strategic and tempered approach to the development of this market, taking into account the needs of the Mexican consumers, the import requirements and the established potato industry in Mexico. Overly enthusiastic reactions, without concern for the sensitivities of this market, could cause long-term impediments to achieving a healthy and vibrant market for U.S. potatoes in Mexico.

As part of this strategic approach, the USPB has been working in concert with the state organizations over the past few years to educate consumers on the border about U.S. potatoes, which are very different than the round white Alpha potatoes grown in Mexico. Through promotional efforts at retail, these consumers have learned the differences and benefits of U.S. varieties, mainly russets, but also reds, whites and yellows. The USPB has successfully taught consumers in Mexico how to use U.S. potatoes to prepare both American, as well as Mexican dishes. We have also provided extensive training to the retailers on proper storage and handling of U.S. potatoes, and more recently, marketing. Utilizing the best-in-class (BIC) principals developed for the U.S. market, we have demonstrated to Mexican retailers the benefits of cross-merchandising potatoes, improved displays and selling in bags and not just bulk.

Moreover, the USPB has been implementing an extensive public relations program throughout Mexico for a number of years, focused on the nutritional benefits of potatoes. This campaign has helped increase demand for fresh potatoes as well as frozen and dehydrated potatoes. Based on consumer research and the lessons learned from over 20 years of promotional work in Mexico, the USPB will work closely with the states and U.S. shippers to educate consumers and build long-term demand for U.S. potatoes throughout the country.

For growers in Mexico, we believe there will be an associated benefit for them as well, as the demand for all potatoes expands. Of course, continued coordination and cooperation will be very important to provide consistent messaging and to get the highest return from U.S. grower dollars invested in the market.

It is critically important to understand that even if full access is gained, there is no guarantee it will remain that way. There are numerous examples where U.S. agricultural products have been allowed to enter Mexico, but then, the access was later revoked or anti-dumping duties or quotas were put in place that severely limited sales. The U.S. potato industry should be very aware of this possibility and do everything possible to prevent it from happening.

This starts with strict adherence to all requirements for entry. There can be no pest finds on U.S. potatoes, and all other packaging, labeling and documentation requirements must be met in each shipment. Failure to meet the requirements could quickly result in a closure of the market. Moreover, U.S. potatoes sold in Mexico will be scrutinized for quality by importers, government, and consumers. Shipping excessive quantities of low-quality potatoes to Mexico likely will result in anti-dumping duties, poor consumer acceptance and other problems. Mexican consumers demand high quality products, and building demand for U.S. potatoes means they should receive the highest quality every time they purchase U.S. potatoes.

Notwithstanding this, Mexican produce is sold very differently than it is in the U.S. The wholesale markets located in all major cities still play an extremely important role in the distribution of produce in Mexico. Many large-scale retailers, and all smaller retailers and foodservice operations, receive all of their produce from the distributors who operate out of the wholesale markets. For potatoes many of these distributors are owned by or directly linked to large-scale potato producers.

It is very important for U.S. growers and shippers to take the time to establish personal relationships throughout the supply chain in Mexico. The U.S. growers and shippers should get to know their importer, wholesaler, distributor, retailer and customers. The USPB and state organizations will provide many opportunities for U.S. growers and shippers to establish these personal relationships.

The potential opening of Mexico to U.S. fresh potatoes is an unprecedented opportunity for the U.S. potato industry, but it must be treated as such and handled with commitment, care and above all else — caution. This is an exciting time to be part of the U.S. potato industry, and everyone working with the USPB is looking forward to working with our many industry partners to build what should be an exceptional market for our products.

— By Blair Richardson, USPB president and CEO

Originally posted Tuesday, Dec. 31, 2013

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