Sep 18, 2009Idaho Shippers Driving Down Returns by Overshipping
The Idaho Grower Shippers Association meeting in Sun Valley on Sept. 2 found Idaho growers in the unenviable position of bemoaning an excellent growing season that will likely translate into an increasing surplus of potatoes available on an already overburdened market.
Jerry Wright, President of the United Potato Growers of Idaho gave those in attendance at the 81st annual convention the good news and bad news during his post-luncheon analysis of the 2009 potato growing season.
Wright castigated the growers and shippers for overshipping potatoes that results in lower GRI. To prove his point that oversupply results in a lower Grower Return Index (GRI), Wright cited the three-year weekly shipping average of 591,000 cwt., yet in 2008 from August to November Idaho growers shipped an average of 486,000 cwt. each week, more than 100,000 less than the three-year average, resulting in a GRI of more than $11.
Then in the last half of the year, when shipments average 600,000 cwt. per week growers see the GRI plummet to $6.50.
Wright said that the 2008 crop had a record number of U.S. No. 1s – 46 percent of the crop was No. 1s.
“We shipped about 800,000 more consumers this last year than we did the prior year and that’s exactly why we got the market we got. Shouldn’t surprise anybody,” Wright said.
“The message is,” Wright said, “when you get information you need to use it. We knew back in October and November, that was the crop we were going to have but we just sort of run it and we got what we got. Every month we kept shipping, overshipped, overshipped, over, over and we kept saturating the market and kept running the market down.”
Growers could have improved their GRI by up to $2 if they had moved the 800,000 cwt. to the dehy or fry sector, Wright said.
Adding to the lower GRI is the negative trend and negative consumption of process potatoes, specifically french fries. As the economy nosedived, the number of people dining out also dropped.
“We’re at the lowest level of frozen potato movement in the last 10 years, business in restaurants are flat” said Wright.
Wright’s analysis for the upcoming year: “Economy is going to be the wild card and that is going to affect us a lot this year and we have to be thinking ahead of this curve. This is not going to be a normal shipping year, not a normal packing year. Even though we have a better than normal crop, we have an abnormal economy to deal with,” he said.
This season’s Idaho harvest will produce between 30.5 to 31 million cwt. shipments, Wright said.
“With 31 million shipments in this economy, I’m not real optimistic where you’re going to be on your GRI. It’s going to be tough to be above break even GRI all year long. It’s going to be a tough year. Overall, too many potatoes for this year,” he said.
Wright gave a brief breakdown on how harvest conditions were looking in other areas. In Colorado, they are flat on acres but bringing in a bumper crop, up 5 percent on yield. Estimated production is up 3.4 percent from last year. The Columbia Basin is down 6.5 percent in acres but a good yield should result in shipping the same amount as last year. Wisconsin is the big wild card this year.
“Flat on acres but awesome yield, up 4 percent. They’re expecting about 1.5 million more shipments,” Wright said.
With foodservice down, fresh market flat and increased yields, the initial overall outlook for growers is less than favorable.
