Grower: 2010 to be interesting for process growers
The process potato market seems to be in a state of suspended animation across the country at the beginning of 2010. From reduced consumption in the quick-service restaurant (QSR) category, a concomitant overabundance of potatoes due to exceptional yield and an economy in recession and you have growers and the processors unsure of how to approach the new year.
At the same time growers and grower organizations are waiting to begin contract negotiations with the major processors, Lamb Weston, J.R. Simplot, Heinz and McCain USA.
Nate Schroeder, a process grower in southeast Idaho, said the upcoming 2010 planting season would be interesting.”
Schroeder signed a three-year contract with Lamb Weston last year and then had his acres and prices cut back after signing the contract, and he has a hunch that his acreage and his prices will be cut back again in 2010.
“I feel that there’s a couple of things that happened,” Schroeder said. “One is we’re coming off a big crop. We planted too many acres and, two, we’ve got a big yield out there and our demand is slow. They (Lamb Weston) got a lot of potatoes bought and they’re wondering what to do with all the potatoes they bought.”
Schroeder said he understands the processors’ plight and said that the Lamb Weston plant in American Falls shut down for two weeks during the month of November.
“That just kills us and the reason their off is they don’t have the sales. They can’t get their freezers empty and he only option they have is to shut the plant off until the freezers empty out,” he said.
Schroeder, a member of the Southern Idaho Potato Cooperative, the negotiating body for process growers, said he doesn’t expect to see a contract offered by Lamb Weston until the spring and if his contract is cut back he’ll just plant more corn, wheat and hay.
Mike Leavitt, executive director for SIPCO, said that SIPCO is currently not in negotiations with any of the processors and expressed disappointment with the failure of last year’s negotiations.
“We’d like to return to a normal system of doing things and the dialog we’ve had in the past,” he said, “processors meeting with the negotiating body and working with the processors in the next few months on the 2010 contracts.”
Leavitt said that what is happening in Idaho’s process industry is rippling though the whole country.
“Other states that grow process potatoes are feeling the same pinch we are. The whole point of having a body to negotiate the contracts is to keep a level playing field so one processor does not gain a competitive advantage over another,” Leavitt said.
Dale Lathim, executive director for the Potato Growers of Washington and the president of the Potato Marketing Association of North America, hopes to have a contract in place prior to the Washingon-Oregon Potato Conference near the end of January.
Lathim said that the 2009 year turned out almost exactly as they expected from a contract performance point of view. Not a bumper crop but an average one, he said. Growers are dealing with some quality issues due to frost damage, something Columbia Basin growers don’t normally experience, and are monitoring their potatoes in storage.
Lathim said there are three types of process growers in the Columbia Basin: annual contract grower, long-term contract grower and company farms.
Of the three, the annual contract grower is the first to see their acres cut by the processors. In 2009 the annual growers saw their acreage cut by approximately 70 percent Lathim estimated.
Lathim said that 2010 growing season is looking very stable for Washington growers.
“In 2009 we agreed to a two-year contract arrangement whereby the price for 2010 will be indexed off the change in costs of production as projected for 2010,” Lathim said.
Lathim explained the indexing for 2010 will be negotiated by the PGW and Lamb Weston using model farms and “real world numbers” when figuring the costs of production.
“We’re dealing wit a real, live farming operation,” Lathim said, “Lamb Weston on their side is looking at their company farms. That’s where they’re generating their numbers. The two are very close to each other but we’re not on the same numbers so we’ve got work to bridge that gap but we’re not a long ways apart by any means.”
Over on the east coast, Dana Wright, executive director of the Agricultural Bargaining Council of Maine, said they have not been experimenting with indexing costs of production when negotiating contracts but they are in Prince Edward Island.
“It can really go against you quick if fuel prices or fertilizer prices change, for lack of a better word, overnight,” said Wright explaining his aversion to using indexing when negotiating contracts.
Wright said that Washington state, the largest producer of process potatoes, is the trend-setter and that everyone is waiting to see what kind of contracts processors present to the Washington growers.
Wright said that process growers’ representatives agreed during the annual fall meeting of the Potato Marketing Association of North America in Las Vegas to have no contract negotiations with the processors until after their winter meetings in Orlando the first week of January.”