Bruce Huffaker, Publisher, North American Potato Market News
USDA reports that U.S. growers planted 921,000 acres to potatoes in 2020. That is 47,300 acres fewer than they planted in 2019, a 4.9 percent reduction. Preliminary data from Canada show that growers in that country planted 363,371 acres to potatoes this year. That fell 1,039 acres short of the year-earlier area, a 0.3 percent decline. The combined North American potato area is 1.284 million acres, down 48,339 acres or 3.6 percent from the 2019 crop. The issue facing the industry: Is this year’s acreage reduction sufficient and in the right categories to balance potato supplies with demand?
North American potato production could increase despite this year’s reduced acreage. Both the U.S. and Canada experienced extreme harvest losses (abandonment) last fall. They left about 46,400 acres of potatoes unharvested. Average abandonment during the previous five years is only 17,400 acres. There is no reason to believe that abandonment from the 2020 crop will exceed the average. It probably will be lower since the planted area is down. With average abandonment and yields matching the 20-year trend, North American potato growers could produce 530.2 million cwt of potatoes in 2020. That is about 800,000 cwt more than they produced in 2019. Though the projected increase is marginal, it highlights the challenges that the industry is facing, as it tries to match production to demand for potatoes and potato products during the coming year. The situation varies by industry sector, as we outline here.
Russet Table Potatoes
The russet table potato market may face the most complicated demand conditions of any potato industry sector. Supplies from the 2019 crop were extremely constricted until fryers released a portion of their contract potatoes for sale in the fresh market at the height of the COVID-19 lockdown. The market for russet table potatoes split into two segments during that time, with that pattern likely to continue through the 2020-21 marketing season. Demand for potatoes sold through retail outlets soared as the pandemic encouraged people to eat at home and limited opportunities for meals away from home. Retailers emphasized sales of product in 5- and 10-pound bags, with sales in that category reaching their strongest level in several years. In contrast, sales of count cartons dropped precipitously as sit-down restaurants and mass feeding operations shut down operations.
While the situation has moved closer to a balance in recent weeks, we expect table potato sales through foodservice outlets to remain depressed through the 2020-21 marketing season, due to the continuing risk presented by COVID-19. Early reports that this year’s russet size profile is likely to be larger than the 2019 crop, which normally would yield more count cartons, complicates the supply outlook for the coming season.
Evidence suggests that growers planted fewer russet table potatoes in 2020 than they did in 2019. The cuts are in the Columbia Basin, the Klamath Basin and Idaho, partially offset by increased acreage in the San Luis Valley. However, supplies available to the fresh market are likely to be up, due to rebounding production in both Idaho and Wisconsin. On the other hand, processors are likely to purchase more open russet potatoes this year than they have in the past, as evidence suggests that contract volume reductions left processors with less raw product than they are likely to need. The cross currents involved in the russet table potato arena make it extremely difficult to project market conditions for the coming year.
Red Potatoes
Barring another disaster in the Red River Valley, red potato supplies should be up from last year. After 18 months of limited supplies, packers report that selling red potatoes is challenging. The challenges could continue through the coming season unless the industry makes a concerted effort to boost sales in that category.
Processing Potatoes
Fryers cut 2020 contract volumes by 20 percent to 25 percent across North America to make room for surplus potatoes from the 2019 crop and to adjust for anticipated reduced demand for frozen product during the 2020-21 marketing season. As demand rebounded, some contract volume was restored, but contract volumes are substantially lower than they were for the 2019 crop. By the end of May, frozen product sales were running 10 percent short of year-earlier sales. Evidence suggests that QSR sales have picked up more since that time, though some of that increase may be offset by setbacks in the sit-down restaurant sector. Nevertheless, if QSR sales continue to run ahead of last year’s pace, fryers do not have enough raw product under contract to cover demand for finished product. They anticipated that growers would plant enough open processing potatoes to cover their needs if demand for finished product outstripped expectations. However, it appears that North American processing growers tailored their acreage to match contract commitments, leaving the russet table potato market as the most likely source for open raw product, particularly Idaho where Russet Burbanks make up a substantial portion of the table potato crop.
Europe is a complicating factor for the French fry industry. While North American growers cut back on acreage in line with contract volume reductions, European growers did not. The European industry has experienced a more severe downturn than its North American counterparts. One bright spot for the European fryers has been exports to the U.S., which increased 85.8 percent during May. Imports of European product remain small relative to total consumption, but with ample supplies of cheap raw product and limited demand from other growing areas, those imports are likely to continue growing rapidly during the next 12 months.
Chip Potatoes
Acreage cuts reported for California, Florida and Texas are mostly related to reduced contract volumes for early chip potatoes this year. The chip industry had a larger supply of storage potatoes during the spring than it had in storage a year earlier. That, together with surplus conditions during the summer of 2019, prompted adjustments to early contract volumes. Potato chip demand has strengthened during the pandemic. By the beginning of August, there was still a tight balance between chip potato supplies and industry raw product needs. That bodes well for a balanced supply of storage potatoes for the 2020 crop. It does not appear that many field delivery contracts will be converted to storage contracts this year.
Growers, handlers and processors are facing one of the most complex marketing seasons they have ever seen. The demand outlook is fluid, shifting with every twist and turn of the COVID-19 pandemic. Potato markets usually are driven by shifts in supply, while demand remains relatively stable. Marketers will need to be cognizant of both the supply situation and the shifting outlook for demand for finished product in all sectors of the potato industry.
Huffaker’s Highlights:
- North American potato production could come close to matching the 2019 crop despite a 3.6 percent drop in acreage.
- The COVID-19 pandemic is impacting potato markets unevenly, creating potential imbalances between industry sectors.
- The crosswinds affecting the russet table potato market create an extremely complex and uncertain outlook.
- Red potato packers indicate that demand for red potatoes has been slow to rebound following 18 months of tight supplies.
- Fryers may need to compete with table potato interests for Russet Burbank potatoes, as it appears that contract volumes will fall short of industry needs.
- Chip potato supplies appear to be balanced with industry usage requirements.
