The government decision made a few years ago to change the Cypriot potato sector from a monopoly to a free market, in line with other EU members is now in operation.
On April 22 this year, changes to legislation dating back to 1964 were introduced and the Cyprus Potato Marketing Board’s (CPMB) monopoly has ended. Potato production was controlled by the CPMB since 1965. However, with the republic’s ascension to the EU on May 1, the board’s role is already changing from marketing the local sector to a production/consultancy board.
The CPMB is headed by chairman Neoclis Psappis, has 12 members appointed by the minister of commerce and industry, and is managed by Stavrou Panikos. The CPMB’s role was to represent the interests of growers, exporters, government and co-operatives with its main task to increase and stabilise growers’ incomes.
The board’s responsibilities were far-reaching including the allocation of imported seed, which in turn enabled regulated production; and via a centralised grower-payment system, it could influence the range of potato varieties. Before April this year, a self-financing, price-stabilisation fund existed, supporting the local potato industry on a long-term basis - a levy was imposed on potatoes passing through the board’s sorting stations.
The CPMB has six grading stations in Larnaca, Vrisoulles, Frenaros and Liopetri, and two more in the Lefkosia region, all strategically placed within 30 minutes of most producers. The grading facilities will remain under the new board’s control and be one of the fee-paying services it will offer local growers.
Potatoes arriving daily at the packhouses are graded into small, medium and large sizes, packed into 20 and 25kg polypropylene sacks, and a portion of the harvest is packaged into smaller 12.5kg boxes. Additionally, the CPMB was also in charge of shipping the export volumes, from the port in Lanarca, on the growers’ behalf, and marketed the potatoes under the commission of the producers through its London office. The London office, managed by Savvas Pappasavvas, collaborates with specialist handlers and traders in the UK as well as other EU markets.
As of May 1, the potato sector is open to all, allowing private exporters to operate. “However this sector is in its infancy,” says Stavrou, “and not many private companies were ready or able to trade. Our government decided that until August this year, the board could remain in its existing format, and export in parallel to or to complement new traders. This will allow the private sector to develop and restructure, and allow new companies to form because existing companies can only handle between 60-1,000t of potatoes now.
“This season, 83,000t have been exported - 3,000t privately and 80,000t by the board, with 55,000t of the spring crop exported under the new free market regime to 17 countries, mainly within the EU15. Sendings to the UK have been steady with 18,000t exported in total - 17,000t was the spring crop and 1,450t from the winter production (November-February).”
New potatoes are the largest single export line from Cyprus. Potato production is concentrated in an area east of Larnaca known as the “villages of the red earth” by the locals. This area is a frost-free environment with deep, well-watered soil, and provides ideal growing conditions for 5,000 potato producers. New crop is continuously grown - seed is planted from November to June, and the winter crop is planted in the spring from March to the end June (see table).
“The spring crop continues to increase its market penetration in the UK, as do late-crop varieties and large size potato, particularly to UK supermarkets,” says Stavrou. “Baby potato supply is also improving, - 1,000t was taken up by Waitrose since last season. The variety Cara, preferred by the Scottish and Irish frozen produce sector, is growing annually but Spunta exports are decreasing. In the future, production will focus on baby potatoes because it is an annual crop, and late-season Bakers.” Currently 15 varieties are grown but future production will be customer-driven. Salad potatoes - Marabel and Filea - are patented to supply a German buyer, who supplies the seeds for production; these back-to back agreements will become standard for local growers. “Unlike other produce, there is no EU agricultural policy in place for potatoes and government subsidies ceased on May 1. The sector needs to become cost-efficient, improve yields and competitive strength. And the CPMB must become competitive in order to survive,” says Stavrou. “Cyprus-grown potatoes compete with tubers grown in Greece, Majorca, Italy, Israel and Egypt, who all export early-crop potatoes to the UK under a free market. Production patterns need to be adjusted to demand - for the UK, the variety/production mix must be altered.”
Stavrou says the biggest change under the free-market system will the introduction of back-to-back agreements between customers and farmers. “Local private entrepreneurs are now operating, collaborating with agents for seeds and mainly supplying table potatoes. The new system will make estimating total volumes difficult because it will depend on buyer demand. Farmers will use the variety seed supplied by the buyer and grow what they want, at the time of year they want.
“Local farmers formed an association in mid-July to operate under the free-market system. This assembly will receive some EU benefits, e100,000 to cover the organisation and to assist financially with subsidies to help cover operating costs over the next five years.
“The first change for the sector since joining the EU is from June to November, only 2,000-3,000t of the harvest can be exported without restrictions. The CPMB can continue to export for the 2004/05 season, under free-market agreements, but from the end of August 2005, the private sector should be ready to take over all export trade.”
After August 2005, the CPMB will become a consulting organisation for the Cypriot potato sector, set up like the British Potato Council (BPC), to provide services to farmers and handle government subsidies. The board management have met with the BPC to learn about its operations. “We will act as the BPC does to promote the image and increase consumption of Cypriot potatoes.”
The board will remain as a semi-government organisation, partially funded by the government but operating as a private consulting body and receive fees services to the sector. “The board will assist growers; under the free-market system producers now have three options; they can ask the board for help, market their harvest themselves or use a private company to negotiate with suppliers,” says Stavrou. “As a semi-government organisation, the board will collect consultancy fees for its services - conducting market studies, packhouse or transportation services, supply-side tenders, auditing, quality control checks or technical advice.”
