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North-Western European Potato Growers
Higher stocks on the NEPG
All recent surveys of stock levels in the NEPG (North-Western European Potato Growers) countries show larger stocks of potatoes than the levels observed last year, or on average over several years. Remember that yields were 11% higher in 2017, and that surfaces had increased by 6%. Currently, potato stocks and the supply/demand imbalance have a negative impact on prices on the open market, despite the 15% increase in industrial demand over the last 5 years.
Higher production losses
Last December, the NEPG estimated production losses at 5%, which now seem quite realistic or even underestimated in the scope of the NEPG, given the number of conservation problems that have been reported. And these problems often arise on the same varieties. That is why, even if the availability of potatoes is still sufficient to meet the demand of processors, they have recently returned to the market, which could have a positive impact on the market environment.
Even if the overall quality is rather good in storage, as destocking must be anticipated on certain buildings for qualitative reasons, the hypothesis of a lack of availability of lots with (very) good characteristics of friability at the end of the season is quite realistic. The current cold weather in Europe could lead to additional challenges. And, as in previous years, the question is: when, and under what conditions, will the 2018 plantations take place? The earliest early plantings in parts of Germany have already been delayed.
The industrial activity is still good, even if the potatoes are mainly worked as part of the contracts, leaving little room for free requests these days. The export of potatoes for the fresh market has rather good dynamic, in the context of competitive raw materials. In addition, exports of finished products to third world countries are continually increasing as well.
A decrease in contract prices for the 2018 harvest
Given the current market environment, the contract price reductions on the industry for 2018/2019 were expected; which is confirmed by the NEPG representatives, who note, in most of the situations, decreases from 5 to 10% depending on the delivery period, the variety, and the buyer. As such, the contract prices are not only lower than those proposed in the previous harvest, but even lower than the prices proposed 2 years ago in some situations: according to the NEPG, this is why these contract prices sometimes dip below the production costs.
Producers are therefore encouraged to optimally plan their 2018 plantings, taking into account the evolution of supply and demand, and incorporating the fact that the current trend, with for example less and less of Bintje but more and more industry-specific varieties with higher yield potential (in France and Belgium), will continue.
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Publication date: 3/1/2018
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