By Bruce Huffaker, Publisher, North American Potato Market News
North American potato buyers will face challenging supply conditions for the remainder of the 2019-20 marketing season. Yields on the 2019 potato crop have fallen short of year-earlier levels. Adverse harvest conditions have compounded the situation. A hard freeze stretching from Oct. 9 to Oct. 11 caught about 15 percent of crops in Idaho and southern Alberta, Canada, still in the ground. Growers in North Dakota and Manitoba, Canada, still had about 30 percent of their crops left to harvest during the last week of October. Over 10 percent of Michigan’s potato crop was still in the field at that time due to saturated fields. Though growers may attempt to salvage the remainder of their crops during November, it is clear that the fall weather will have a severe impact on potato supplies and open-market prices for the remainder of the storage season. History suggests that prices are likely to be high and that they could be volatile.
It could be December before the industry has a complete assessment of the damage to the 2019 potato crop. Preliminary information is not encouraging. Losses are not confined to potatoes left to be harvested. The quality and storability of many of the potatoes that were harvested has been compromised. As we go to press, it appears that table potato losses are likely to be the most severe. Nevertheless, supplies of fry-quality processing potatoes also are likely to be a major constraint for the frozen processing sector. Chip potato supplies could tighten substantially if Michigan growers are unable to harvest their remaining potatoes.
Table Potato Supplies
Russet table potato supplies were set to decline before the Oct. 9-11 freeze. Growers in several growing areas, including Idaho, the Columbia Basin, the San Luis Valley, Texas and Nebraska, had cut back on planting. Reported yields in most of those growing areas were significantly lower than they were for the 2018 crop. The freeze has exacerbated the supply outlook. Though Idaho growers are attempting to salvage most of the potatoes that were affected by the freeze, field reports indicate that frost damage averaged 20 to 25 percent on those potatoes. Sorting out the damaged potatoes is a challenge. In addition, the frost-damaged potatoes create the potential for additional breakdown in storage. Nationwide supplies of russet table potatoes could be down 5 to 8 percent, depending upon how many potatoes can be successfully cleaned up and how many potatoes are diverted to the processing sector.
Red potato supplies could be extremely tight for the remainder of the season. August-October red potato shipments fell 25 percent short of year-earlier movement. That pace is likely to continue until new-crop potatoes become available, beginning with the Florida crop in late February or early March. Half of the Red River Valley table potato crop could be left in the ground this year because of adverse harvest conditions. Other red potato growing areas, including Wisconsin and Idaho, have had challenging growing and harvest conditions.
Table potato shipments from the 2019 crop could fall 5 to 10 percent short of 2018 movement, to their lowest level since World War II. A downturn of that magnitude is likely to continue driving prices higher. It also may result in extreme price volatility, particularly if shipments are not distributed evenly throughout the marketing year. We have identified eight years since 1975 when U.S. fresh potato shipments have declined by more than 5 percent from the previous year. On average, Idaho’s shipping point prices increased 70.6 percent from year-earlier values during those years.
With shortages such as the one expected this year occurring roughly 18 percent of the time, buyers and handlers might be expected to know how to handle the situation in an orderly fashion. However, the last similar downturn came with the 2010 potato crop. As a result, this is likely to be the first experience of a supply shortage for many of the players in the market. By the end of October, the market for Idaho table potatoes was 40 percent above the 2018-crop average. Further price advances are likely. While it may be tempting to hold potatoes in hopes of catching the top of the market, the timing of market tops is so uncertain as to make that impractical. Maintaining an even flow of product offers a much better chance to get a favorable return.
Marketing potatoes with frost damage will add additional challenges. While at least 85 percent of Idaho’s crop is in good condition, the remaining potatoes could poison the market if not handled properly. Frost damage is difficult to remove from product. It can result in breakdown during transit and rejections upon arrival. In an ideal world, growers would opt to discard heavily damaged potatoes, but tight supplies and high prices are likely to encourage shippers to attempt to clean up the damaged potatoes. The same is true of potatoes compromised by wet growing and harvest conditions.
Processing Potato Supplies
Supplies of fry-quality processing potatoes also are likely to be tight this year. Canadian growers may leave as many as 10 million cwt of processing potatoes unharvested, due to the combination of saturated fields in Manitoba with frost and hail damage in Alberta. Up to 10 percent of Idaho’s processing potatoes had not been harvested by Oct. 9. Processing plants in North Dakota and Wisconsin also will be dealing with supply shortages. Fryers are looking for open potatoes in Idaho but would have to pay substantial premiums to pull potatoes that meet their needs away from the table potato market. We also expect fryers to ramp up 2020 early-season production in the Columbia Basin, with the aim to move as many processing plants as possible to new-crop potatoes shortly after July 4. Nevertheless, raw product supply will constrain both exports and domestic use of French fries during the next nine months. Supply shortages in both North America and Europe will limit the growth of global French fry trade for the second consecutive year.
Chip Potato Supplies
The chip potato industry is hoping that its raw product supply situation will be better than it was during the 2018-19 processing season. While harvest has been challenging in Wisconsin again this year, growers managed to harvest their 2019 crop without a repeat of the severe freeze that destroyed a substantial portion of the 2018 crop. Yields on this year’s crop have been below average in several growing areas. That will keep the industry from running on storage potatoes for as long as it did during the spring of 2018. However, the wild card is the Michigan crop. Growers in that state could have close to 5,000 acres of chip potatoes left to harvest during November. If a substantial portion of those potatoes are left in the ground, it will be a game changer for that industry sector. It might force chip companies to contract almost as many early-season potatoes as it did for harvest during 2019.
Huffaker’s Highlights:
- Supplies of table and processing potatoes will be extremely tight during the storage season.
- Adverse harvest conditions have compromised crops in Idaho, the Red River Valley, the Canadian Prairies and Wisconsin. A substantial volume of Michigan potatoes was still at risk at the beginning of November.
- Russet table potato prices from the 2019 crop could be up more than 50 percent from year-earlier levels, on average, due to this year’s limited supplies.
- Red potato supplies will be extremely tight, at least until new-crop potatoes start coming to market.
- Michigan’s late harvest is the wild card for chip potato supplies. If growers can get them out, storage supplies should be sufficient for a normal season. If not, buyers will be hungry for new-crop chip potatoes again in 2020.
