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Plant and shed capacity is becoming a concern

Demand for potatoes switches over to retail

Potatoes are proving to be an in-demand item at the retail level as COVID-19 continues to permeate North America.

But is the demand for potatoes being felt at retail enough to set off other evolving consumer habits? “The foodservice business is tanking while the retail business is going in the other direction. Will the loss of demand for foodservice balance the retail demand?” asks Rett Landers of Northern Star Co. in Minneapolis, Minn. “People who were eating at restaurants now have to go to grocery stores. So, while there’s a good chance that this could put me in a long position…the question is how long will this last?”

Landers says the change in demand flipped relatively quickly, particularly over the last week. “It coincided with the announcement each state was making with restaurant closures,” he says. “I heard reports on the logistics side where trucks were not being unloaded and being told to go away as well as orders being cut for trucks en route.”

At the same time, plant and shed capacity is becoming an increasing concern. “For our facilities, we’re re-evaluating capacity relative to the demand swing. How creative can you get with your other lines operating for foodservice that you might be able to use for retail?” he asks. “And consider that the packaging is different, the serving sizes are different, the ingredients are different, etc.”

Prices rising
Not surprisingly, pricing on the open market for potatoes is moving up. “The fresh market will take off again because grocery stores are making up for foodservice loss and those businesses heavily into retail sales will perform better financially than those in foodservice,” adds Landers.

It also means planning ahead has become much more short term. “Each day, you get more information and add it to the information you have. I’ve got five days worth of information because it was such a quick change,” says Landers.

One assumption though could be the continued drop off in demand for foodservice supplies. “We’re very volatile over the next couple of weeks. I think the next two weeks will be critical,” says Landers. “Every day there’s a new announcement from somewhere i.e. the president, the governor, etc. and people react to that. And then we’ll hit bottom and I think it’ll move along relatively steady with fewer spikes. And as the disease slows down, people will come back and buy normally.”

For more information:
Rett Landers
Northern Star Co.
Tel: +1 (952) 368-6500
[email protected]