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US: Why play poker when you can grow potatoes?

Potato farming is a rough business in the best of times. But this summer has been especially hard because of a sharp drop in prices for fresh spuds that has baffled many in the market.

After months of rising prices, Idaho growers were getting $7.75 to $8.25 per hundredweight for fresh Russet Burbank potatoes in the first week of June. Then prices started to plummet, hitting $4.25 to $4.75 in the first week of July and $3.25 to $4 for the first week of August, according data compiled by Paul Patterson, a University of Idaho economist at the Idaho Falls Research and Extension Center.

Potato farmers are used to market volatility. Prices tend to seesaw especially in the summer in anticipation of the fall harvest, when most of the national crop is gathered. Growers also have been buffeted by shifting appetites for spuds among U.S. consumers. Most farmers rely on other crops like barley, alfalfa, or wheat to carry them through the rough patches from potatoes.

But this year’s decline was surprisingly sharp. The market “looked like it was going up, up, up and all of a sudden it said, I don’t think so,” said Bryan Searle, owner of Searle Farms in Shelley, Idaho.

The fall has been doubly vexing because its exact cause is a mystery. Farmers, economists and analysts agree that perceptions of oversupply pulled prices down. But they’re not certain why the perceptions were suddenly so pessimistic.

“I have a hard time justifying why prices are going down,” Bruce Huffaker, publisher of the North American Potato Market News, said last month. “I can see a couple of excuses but they don’t make a lot of sense to me.”

One apparent impetus was a trade problem with Mexico. The country had limited imports of fresh potatoes from the U.S. to an area within about 16 miles of its U.S. border, citing concerns about possible pests affecting Mexico’s domestic crops. This year, U.S. and Mexican officials reached a deal allowing U.S. potatoes to reach all of Mexico—a big boost for U.S. growers. Then Mexico reverse course, after a lawsuit from Mexican growers against their government—meaning suddenly there were a lot more potatoes than anticipated available for the domestic U.S. market.

It doesn’t help, farmers say, that the market is easily spooked. There are no potato futures contracts in the U.S., limiting the ability of buyers and sellers to hedge and making them hyper-sensitive to factors they think might move prices.

“The market can go down with a rumour or a thought like it fell off a cliff,” said Terry Wilcox, owner of Keith Wilcox & Sons Farm. “But you have to bring in the National Guard to bring it back up.”

Prices could yet rebound. August is generally the most volatile month for potato prices. New season Idaho Norkotah potatoes sold for between $6 and $7 in the first week of August, according to Mr. Patterson. Russet Burbanks aren’t available yet for the new season, but he said they usually sell at a premium. Most farmers harvest their potatoes in September and October.

For all the stress, many potato farmers say they stay in their business for the love of it. More than one likened his work to a game of chance.

“I have no desire to go to Las Vegas to gamble,” Mr. Wilcox said. “I do it every day.”

Source: wsj.com

Publication date: 8/22/2014


 


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