May 31, 2023Rising potato prices could be good news for growers, report finds
With potato prices rising while production and acreage shrinks, growers should find themselves in a good bargaining position for the 2023-24 marketing year, according to a recent survey.
Grower cooperatives and/or associations that negotiate on behalf of potato growers can leverage price increases to improve contract price and terms, according to the U.S. Potato Outlook 2023/24 report compiled by RaboResearch. The report found that for the current marketing year, on average, the price increase of open market potatoes is twice that of potatoes under contract.
The 893,000 acres harvested in 2022-23 was the smallest on record and marketed the fourth consecutive year U.S. potato production declined, the report found.
That drop fueled a price surge, but the report warned that increase may not last for another year, with a 2% increase in planted area expected for the 2023-24 marketing year.
“At that level of production, potato prices could potentially drop faster than unit costs, squeezing margins,” the report said.
Processors will likely be willing to pay higher contract prices this year, the report said, given continued strong retail demand. Processors may also find improving contract terms a more effective option than relying on imports and/or supply from distant regions to bolster inventory.
“Strong open market prices and strong demand for frozen potatoes are typically sufficient reasons to raise contract prices, particularly since heightened demand for processing potatoes has gone unmet for two years running and fryers were able to pass on costs to consumers without a loss in sales,” the report said.