May 3, 2018Red potato market tumbles
Marketers in the Red River Valley held the base price for #1 size A reds at or above $15 per hundredweight (cwt.) from September through February but a chain of events this spring sent the market on a big decline, with some loads being sold as low as $8 per cwt. in mid-April. That is a 14-year low, according to an article by Ted Kreis with Northern Plains Potato Growers Association Communications.
Kreis outlines four factors that led to the price decline. (Begin Block Quote)
- Big crop – The Red River Valley had a big red potato crop, perhaps the largest since the 1970s. Shippers knew it would be a challenge, but there was hope it may turn out OK like another big crop year, 2015-16. But one key event happened that year that bailed the Red River Valley out; a crop disaster in Florida. That didn’t happen this year. With both regions having a large red crop, the late winter market became very competitive.
- Transportation shortage – There is a well-documented shortage of truck drivers in the U.S. for various reason. Areas outside busy shipping lanes, like us here in the Red River Valley, have been hit particularly hard. Finding trucks to move loads out of the valley has been exasperated by this year’s big crop.
- Lost business – Because of the inability to get trucks earlier in the season, ads with large retailers had to be turned down because shippers could not promise on-time deliveries. Multi-load sales opportunities for Thanksgiving and Christmas ads were lost. This likely led to the loss of return business for the remainder of the season. Retailers began running fewer red potato ads; statistics from USDA’s Agricultural Marketing Service National Retail Report confirm this. A year ago, grocery retailers ran 96,201 red potato ads nationwide from October through February. This year they ran only 68,019, a 29 percent decline, or the loss of over 28,000 promotions.
- Backed Up Supply – Events #1, #2 and #3 led to event #4 – backed-up supply. As of April 1, the Red River Valley had over twice as many red potatoes left in storage compared to its five-year average. Combine that with a big Florida red crop and the old law of supply and demand now demanded lower prices.
Red seed growers in the Red River Valley have felt the pinch, too. They also produced a big crop and a substantial amount of that crop is finding its way to the already over-supplied fresh market.
Concerns going forward – There are serious concerns going forward. The truck driver shortage isn’t going away any time soon. Shippers in the Red River Valley may need to cut production to ensure the crop can be moved with the transportation that is available.
Increased competition from other growing regions is also a concern, particularly those regions that have a transportation advantage. As an example, trucks are more readily available in Canada. Combine that with the very favorable exchange rate and you can look for continued stiff competition from the north in the upcoming season. Quebec and P.E.I. shippers have been particularly aggressive targeting the U.S. eastern seaboard which happens to be one of the best markets for Red River Valley potatoes.
Also of much concern, late planting in central Minnesota and Wisconsin will delay their harvest which could land it on top of the Red River Valley’s typical harvest window.