Jan 4, 2006Overshipping Could Mean Shortages Later
Fresh potato growers now shipping potatoes are receiving as much as $5 per cwt. f.o.b. less for their potatoes than they could expect to obtain later in the season, according to the National Fresh Marketing Committee of United Potato Growers of America (United).
Right now, we are so over shipping our projected fresh russet supplies that not only are growers foregoing profits, but we also might lack sufficient supplies to meet our customers’ late season needs,” said Cary Hoffman, chairman of United’s Fresh Marketing Committee.
This year’s U.S. fresh potato production is 101.2 million cwt., but the industry is shipping at a pace and a price equivalent to a crop of 106.9 million cwt., or 6 percent larger than what is available, according to a December press release from United.
Economic forecasting models developed by United’s consulting economist Bruce Huffaker indicate that the fresh-weighted average f.o.b. price for this season’s fresh potato crop is projected to be $16.40. To date, shipments in excess of available supply have capped this price at $14.82 per cwt. Thus, the average price for the balance of the season will need to be $17.03 to restore market equilibrium. Of concern to growers should be the economic model’s forecasts of increases of up to $5 per cwt. for late season sales of 10-pound film bags, the industry’s largest volume product, according to United.
The National Fresh Marking Committee of United has developed a plan for shipping this year’s potato crop at a pace that satisfies customers’ needs and maximizes growers’ returns. However, growers and shippers have not followed this plan and have oversupplied the market, substantially reducing the price paid to growers.
“The later we wait to get back on this plan, the more abrupt and steep the price increases will be,” Huffaker said. “The total revenues accruing to the year’s crop will be the same regardless of the time of the shipments, and revenues lost on potatoes shipped at too fast a pace are recovered as prices pick up and the inevitable slowdown occurs.”
“The fresh potato shipping industry needs to slow down and get back on the marketing plan so that we can take care of fresh potato customers’ needs throughout the whole season,” said Rick Shawver, marketing committee member and a potato grower from Idaho.
“Our national pack-shipping plan is in place to help ensure we don’t short our customers, but we as growers have to make sure that we don’t over-ship and short our customers at the end, and at the same time, under-sell and short our growers all season long,” said Albert Wada, United’s chairman. ”