January 2011
2nd Annual Industry Survey By Bill Schaefer

Overproduction and higher cost of production – specifically input costs – top the list of grower concerns for 2011, with water and contract prices following close behind, according to Spudman’s Second Annual Grower Survey.

Spudman’s survey brought in responses from 125 potato growers from around the nation. In addition to the growers surveyed, Spudman sought input from the members of its editorial board, plus one more economist, for good measure, in reviewing the data.

Growers included Randy Hardy of Idaho, Harry Strohauer of Colorado and Don Sklarczyk of Michigan. Other experts included Joe Guenthner, an agricultural economist with the University of Idaho; Robert Thornton, retired Washington State University Extension potato specialist; and Paul Patterson, an agricultural economist with the University of Idaho Extension office in Idaho Falls.

Growers report spending more than $460,000 annually on equipment and crop protection products. Colorado’s Strohauer said $300,000 in crop protection was right on target by his calculations.

Once again, overproduction is a major concern and it appears that all sectors of the industry will be planting more acres of potatoes in 2011. The largest increase is in the chip sector with 24 percent of growers planning on planting more acres. Fresh growers show an increase of almost 9 percent, frozen 7 percent, seed 12 percent and dehy almost 4 percent.

“I hope that doesn’t happen,” said Sklarczyk, “and as more growers are educated on the fact that for every extra cwt. out there, the reduction in value in the industry is insurmountable.”

Hardy said he had heard some growers in the Midwest are increasing their acreage after having cut their acres for the past two years, only to have poor yields and have to ration their crop.

Patterson expressed some concern over the potential for increased acres but he saw a positive trend in the response also. “The thing that was encouraging,” he said, “was that roughly two-thirds of the growers were going to roughly hold acreage at the same, which is pretty encouraging from that standpoint.”

A majority of those acres will be planted with Russet Burbanks, nothing new there, but the ironman of potato varieties is continuing to decline in popularity while Yukon Golds and Norlands almost as popular among responding growers.

Even in the current recession, the survey shows some positive growth indicators, at least for the agriculture.

Planned Purchases Graphic

All six of our experts said that the high percentage of respondents indicating that they were planning on purchasing new equipment during the next year is not only good news for equipment dealers, but indicates that 2010 proved to be a much better year than 2009.

Other than storage equipment and GPS, which showed only slight gains, and irrigation, which showed a slight decrease, all other forms of equipment showed increases over 2010 predictions, ranging from 20 percent to 250 percent.

Potato handling equipment, seed cutters, planters and used general-use tractors are all in demand for the coming year. Robert Thornton said that the increased percentages of those looking to make new and used purchases is an indicator of the better season growers had in 2010.

“Every year that is a good return year for potato growers has been a good year for equipment people and part of that is the opportunity and the other is if you don’t replace the old equipment,” Thornton said.

Hardy said the 0 percent interest rates equipment dealers are currently offering is a major incentive for equipment purchases right now. That and the accelerated depreciation currently available but due to expire in 2011 are major inducements for those looking to purchase equipment.

Patterson said that he was initially surprised at the number of respondents looking to buy land. However, looking at current commodity prices and low interest rates available, if you can get the financing, it makes sense for growers to be looking at buying more land, it also makes sense that so many are not looking at selling their land in the current economic environment.

He said that it’s not just agricultural interest looking at buying land – institutional investment firms see land as a stable return in these volatile times.

Patterson sees the non-agricultural buyers and low interest rates are the dual forces in this equation.

“Right now we have high commodity prices and low interest rates and that’s the other thing that I think is fueling some of the interest, not just by institutional people but by farmers,” he said. “If they can lock in some low interest rates right now, if you lock in a 30-year contract, if you lock in at a low enough, this may be an opportunity you’re never going to see again in another 10 years.”

Annual Costs Graphic

The 2011 survey responses are grist for a lot of talk among growers, shippers and economists, that’s for sure. In fact, next month Joe Guenthner’s column will address the concerns expressed by growers in the survey.

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