The potato category has had its work cut out to make the most of its offer this season, with oversupply and concern over prices characterising the last three months.
As temperatures have continued to drop and consumers traditionally look for something hearty and filling, the potato category should have come into its own in recent weeks. However, the market has not been easy to negotiate and suppliers fear that the category could be heading for a “perfect storm” after the festive period.
Dry weather in the growing phase boosted production this year, bringing on increased yields so that, overall, volumes are up by some three per cent.
“The conditions up until the beginning of September, particularly in the East, did throw up some challenges,” says one insider. “There were high levels of dry matter at harvest, which leads to an increased risk of bruising.
“Movement is steady at best and the biggest demand is for the quality end of the market, while the lower tiers are proving difficult to sell. Supplies have been plentiful, but quality has been a talking point, with dry matter and bruising causing problems.
“The crop is pretty much as we expected in terms of volume, but we are in an oversupply situation,” he continues. “A two-tier market has formed and if you have really good packing material, the values are reasonable. If you have material that does not meet contract specifications, you will be struggling to find a home for it.”
Potatoes at the bottom end of the market are making as little as £30 a tonne, while the majority of packing material is selling at around £80/t and some premium lines are achieving as much as £150-180/t.
Stores are keeping well this year and the quality of stored potatoes has shown an improvement on last year, with any problems caused by bruising rather than breakdown.
For now, the category is gearing itself up for Christmas, when there is traditionally a volume uplift. Once again, the sector is preparing for its busiest period. “The majority of the packing sector will have pre-ordered its requirements over the festive period, but later on in the season we could see prices for the quality end of the market getting even higher. In fact, we could see exceptionally wide gaps between pricing this season.”
However, a bigger issue is looming above the category, with insiders claiming that it does not feel like there has been an increase in consumption this quarter and many fearing how this will work out given the oversupply.
“This will only compound the problems that we are having at this time of year,” says one supplier. “Of course, there will be winners and losers in the retail game. Morrisons, for example, is making gains, while Tesco is not in a good place and a lot of work is going into addressing that.
“But across fresh potato sales, it does not feel like there has been an increase - the last four to eight weeks do not reflect the rise in consumption that was being talked about. We could be heading for a perfect storm by the end of the storage season, when growers may still have material in store but no idea where to put it.”
At the same time, there are some wider factors affecting the industry and these will need to be addressed once the Christmas rush has subsided and the industry gets ready to make the most of 2010.
“I think one aspect is that the message about food waste is getting through to consumers and they are stepping back and thinking about how much they are throwing away,” says a supplier. “This is having more of an impact than we realise because pasta and rice last longer than a bag of potatoes and consumers may well be thinking about this when they make their purchasing decisions.
“But on the whole, the recession has increased demand for middle-range quality and with the increase in production this year, there are ample supplies to meet this. At the premium end, there is still demand and this has been picking up again.”
The way the maincrop market will shape up from now on will be dictated by a number of factors including how Christmas trading measures up and into next year, how early the first crops will be. Planting in Cornwall normally makes a token start before Christmas, but wet conditions have made this unlikely this year.
Across to the continent, and the main five European potato-producing countries are in a similar situation as the UK sector so there is little incentive to exchange material between countries. This has led to very limited imports across the board this season.
But growers and suppliers are focused on the domestic market and all eyes will be on the post-Christmas market to see how the rest of the UK season will pan out. “I think the market will be flat after Christmas, just as it normally is in January,” says an insider. “There will be some hard-hitting promotions to keep volume moving and prices won’t be anything to write home about.”
ICONIC CHIPS MARK 30TH BIRTHDAY
This year, the McCain Oven Chip celebrated its 30th birthday. The chips, made from made from 100 per cent British potatoes, revolutionised the way people cooked chips at home when they were launched in 1979, says Bill Bartlett, corporate affairs director at McCain Foods (GB).
They provide a healthy solution to one of the nation’s favourite foods and in the last 30 years, McCain has sold more than 200 billion chips, which if positioned end to end, would be enough to wrap around the world more than 350 times.
As British potato growers adapt to changing consumer demands and commercial pressures, we believe it is more important than ever that McCain continues to support the rural communities, which provide us with our raw ingredient - the British potato.
McCain has had a long and productive relationship with the UK farming industry, with the company investing more than £75 million a year in British agriculture and ancillary businesses. Buying around 13 per cent of the annual potato crop from more than 300 different farmers, we are proud to say that we have worked with some families for three generations. It is this shared heritage that is one of the reasons why McCain is so eager to play its part in ensuring a sustainable future for British potato farming.
We encourage our potato farmers to collaborate in grower groups, as it allows them to leverage their combined strength to drive efficiencies of scale and become more effective and competitive within the European marketplace. Assisting groups of between seven and 26 farmers to join together as registered limited companies, it allows them to pool expertise and resources, and benefit from more competitive rates on essential supplies, including equipment, fertiliser, fuel and even mobile phone tariffs. Together, the larger groups have a combined capability of producing more than 60,000 tonnes a year.
Our growing standards are high - we provide our growers with certified seed, helping to ensure a quality crop that meets the highest standards. Staggered potato crops can be harvested at different times, enabling the potential use of only one set of machinery and therefore reducing costs. Aiming to always produce the highest-quality crop, McCain works alongside our nine UK grower groups to provide financial support and expertise.
Successful grower groups speak for themselves - the Colton Potato Group was established for the 2005-06 season with 10 member growers to supply the McCain Scarborough factory with a contracted tonnage of 15,400t. After just four years, the group has 20 members and a contracted tonnage of 50,000t for 2009-2010, including a 27,000t storage and grading complex.
Through the groups, McCain can also make sure that our suppliers adopt best practice when it comes to environmental stewardship, leaving the edge of the field for wildlife, maintaining hedgerows and planting trees, following advice from stakeholders such as Farming and Wildlife Advisory group and Linking Environment and Farming, Sustainable Agriculture Initiative and the Assured Produce Scheme.
Understanding our reliance on a good-quality potato crop, the whole company is attuned to why we must secure long-term potato supplies to drive both our growth and expansion plans. By addressing key agricultural issues, we believe we can continually improve our own products and help our growers adapt to an increasingly competitive environment. This model is working well for McCain throughout the country and we believe that it offers us a unique point of difference in the British potato supply chain, creating confidence in our products from field to fork.
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