How COVID-19 is backing up potato supply chain, reducing acreage
Stories from two potato farmers in Idaho symbolize the havoc created by the disruption in the food supply chain that has come as a result of coronavirus-related shutdowns. Restaurants and other foodservice operators don’t need product and uncertainty as to when they will is already hindering the 2020 crop.
“Processors have cut our acres back 50%. We already bought, hauled and cut the seed, fall fumigated and fertilized the ground,” said James Tiede of Tiede Farms in American Falls, Idaho. “(There is a) potential loss that will bankrupt us and many more.”
Eighty miles away in Oakley on April 14, Cranney Farms chose to give away 2 million pounds of potatoes in storage meant for processing that Ryan Cranney said he could no longer sell. Cranney posted to Facebook to invite members of the community to come and grab some free spuds, which went viral and was covered by CNN.
“With people staying at home, these restaurants have shut down and so our markets have just kind of fallen apart,” Cranney told the national news outlet. “The factories that we sell to for french fries, they’ve lost their sales and had to shut their factories down with freezers full of french fries and so the outlets for our potatoes, we’re having a difficult time getting them to market.”
In 2019, 58% of all U.S.-grown potatoes went to the processing market, according to data from Potatoes USA. Growers in Washington, which is second only to Idaho in terms of potato production, sell to frozen potato product producers at a higher ratio than any other state.
“Roughly 90% of our potatoes go to processing and a substantial amount of those go to exports,” said Chris Voigt, executive director of the Washington State Potato Commission. “Ninety to 95% of those sales happen in restaurants.”
The supply chain of potatoes in Washington is designed to have the previous year’s crop — 2019, in this case — be distributed out of cold storage throughout the winter and spring months and then deplete right before the early-maturing varieties start being harvested in early July. At the current rate, Voigt said, there will still be billions of pounds of potatoes left to be sold and processed when the new potato crop harvest begins this summer.
Voigt added that the three major potato processing companies in Washington have cut their contracted acres for 2020 between 14 and 35%, which will leave Washington’s total planted acres of potatoes 20% fewer than last year. As Tiede noted, preparations begin and production supplies are purchased weeks and even months before planting starts. To complicate matters, some growers who plant early, like in Washington’s southern Columbia Basin, now have seed in the ground for potatoes that processors say they’re not going to need.
“The cuts have been painful,” Voigt said. “What do you do? Do you plow it all under and try to plant something else?
“Nothing they do is going to recoup that loss.”
As the foodservice market fell off because of shutdowns, quarantines and restaurants being reduced to takeout, drive-thru or curbside only, the opposite side of the market — retail — saw a spike. According to data from Potatoes USA, during the four-week period between Feb. 24 and March 22, nearly every segment of the retail potato retail market (chips, frozen, fresh, refrigerated, dehy and canned) saw a year-over-year increase between 26% and 114%. The one exception was deli-prepared sides, which fell 0.9%.
The Idaho Potato Commission (IPC) worked diligently to divert as many potatoes meant for processing to the fresh retail market as possible and worked closely with foodservice operators to help them best utilize potatoes for takeout menus.
“There has been an unprecedented shift from foodservice to retail,” said IPC President and CEO Frank Muir. “We had higher shipments that first week (of coronavirus shut downs) than we have the week of Thanksgiving. The pipeline was not prepared.”
While some of the lost processing sales were rerouted to fresh retail, there is no way the substantial losses from foodservice can be recouped. It’s worth noting that potatoes grown to be processed are often grown much larger (10 ounces or more), making them less desirable for the fresh market than the 5- to 6-ounce medium-sized potatoes typically found in 3-, 5- and 10-pound bags of russets.
Maine Potato Board Executive Director Don Flannery said the retail spike in early to mid-March, when people were stocking up on groceries, was evident, but has “flattened out” in recent weeks. In Maine, where planting occurs in mid-May, growers who sell to processing — about 40% of Maine potatoes — have had a little more time to adjust before planting. As of April 15, processing contracts were still in limbo, Flannery said.
“Usually we have something done by now,” he said. “I suspect guys are not going to plant acres they don’t have a contract for.
“There are a lot of questions and not many answers.”
Last year, Idaho grew 308,000 acres of potatoes. Muir figures the acreage will be lower than that, although some state growers, particularly in southeastern Idaho, were yet to plant as of April 15.
“Bruce Huffaker (of North American Potato Market News) recently had an estimate of 295,000 acres (which would be about a 4% decrease),” Muir said. “I’d be hard-pressed to argue with that.”
Northern Plains Potato Growers Association President Donavon Johnson told Spudman April 7 that acres in the Red River Valley could be down 10% or more, but it is too early to know for sure.
Chip sales, which are less dependent on foodservice than fries, have remained stable.
Michigan is the largest producer of chipping potatoes in the U.S. Kelly Turner, executive director of the Michigan Potato Industry Commission, said the increase in retail chip sales is neutralizing what is being lost in foodservice. While acreage in Michigan should be about the same, growers there are concerned about lasting effects of surplus processing potatoes.
“I can see more of the damage from the virus effects hitting Michigan during the next harvest season, as the open potatoes from the west seek homes in the fresh markets further (away) than normal,” Turner said.
Tamas Houlihan, executive director of the Wisconsin Potato & Vegetable Growers Association, estimated a 3-5% reduction from the state’s 64,000 acres planted a year ago. About one-quarter of state potatoes go to the frozen processing sector, but Wisconsin growers also produce a large amount of chipping potatoes. Like Turner, Houlihan expressed concern over what the lack of processing demand will ultimately mean for the entire potato supply chain.
“There is the potential for a massive oversupply situation this fall as large quantities of processing potatoes do not have a market,” he said. “The sooner we see restaurants, hotels and schools reopen, the better it will be for everyone.”
Federal aid and uncertainty
The potato industry certainty isn’t alone among food producers that are feeling the hurt. Specialty crops, dairy and livestock have suffered across the board. Dozens of agriculture associations have pleaded with the federal government for assistance in the form of surplus purchases and direct payment.
Among the leaders has been the National Potato Council (NPC), which has worked closely with state associations, Potatoes USA, growers and the processing sector to speak on behalf of the industry to the U.S. Department of Agriculture and Secretary Sonny Perdue.
“There is a game plan in place and everyone bought into it,” said NPC CEO Kam Quarles. “All the major players in the industry really got together and locked arms on this in saying ‘this is what we need.’ That’s actually been very gratifying, to see everyone come together.
“We lost our biggest customer (foodservice), and the government needs to become that customer. It’s not just restaurants, hotels are down. Tourism has shut down. Schools, which some of that (diverting the supply) is being worked on, but schools are a big institutional foodservice demand.”
Quarles said the USDA has been “very receptive” to the plea of the industry. He added that he is confident that an announcement of a relief package that will include specialty crops, livestock and dairy is coming (see link below). It is unknown if the USDA will include already processed potatoes in the initial surplus package, but Quarles said that was part of the request.
“Really, it’s going to be a down payment on the true needs of American agriculture,” Quarles said. “At least it will give growers and processors some clarity on what things are coming in the weeks and months ahead and provide some options for folks.”
Added Flannery: “Right now, we need to get the current pipeline cleaned out. We’re probably going to have to treat ’20 as a separate issue.”
More grower feedback
Spudman sent an online survey to subscribers the week of April 6-10 to get feedback on how the COVID-19 situation is affecting their jobs and businesses.
Among grower respondents, 58% said they either would plant (or did plant) about the same number of acres of potatoes as they originally planned; 40% said they planted fewer acres due to decreased demand. Only 2% are planting more.
When asked if they altered the varieties of potatoes they planted, only 7% of grower respondents said “yes.” The majority (70%) said they did not, nor would they have even if they had more time to adjust, while the remaining 22% said while they did not change the varieties they planted, they would have if there had been more time to plan.
Asked to classify the disruption to their job or business caused by the COVID-19 situation, 39% of survey respondents called it “significant,” while 36% said “moderate.” The remaining 25% said “minor.”
In addition to growers and packers, the survey was sent to Extension professionals, crop protection and equipment providers and processors who subscribe to Spudman. The vast majority of respondents (95%) classified themselves as a grower, packer or shipper.