The evolution of potato supply towards a contract-focused sector is resulting in some significant changes in the market, and has proven a welcome buffer in a season of imbalanced supply and demand.
The days of operators being purely focused on the free-buy market would appear to be numbered, as more and more suppliers are sending their products to customers on annual contracts.
That’s helping to take some of the unpredictability out of the market in a sector that is notoriously at the mercy of the weather and peaks and troughs in production. The latest AHDB Potatoes estimates for total British production in 2017 put the crop at 6.04 million tonnes, its highest level since 2011. That represents a 15.2 per cent increase on the year before, a rise predominantly put down to growers switching to higher-yielding varieties, though benign weather always helps.
While in the past such a high production level could spell low prices for suppliers, with much now procured on contract it gives more stability and guarantee of profitability. “We have a real sense that as a consequence of increased planting and high yields we have an imbalance at the moment, with more supply than demand,” says Rob Clayton, senior strategy director at AHDB Potatoes. “There’s a better mood though because of the higher ratios on contract. We are seeing quite pragmatic responses [from growers] as they are able to fulfil contracts then use the open market for any surplus. But the situation will pinch anyone entirely on the free-buy market.”
That view is echoed by Alex Godfrey, chairman of the NFU Potato Forum, who sells substantial amounts from his own farm on the free-buy market. “It’s considerably tougher [in free-buy] than in the last couple of years,” he says. “There are about half a million tonnes more potatoes available than last year.”
Having supply on contract is a win-win for both sides, according to Clayton, who says buyers can count on continuity of supply at a reasonable cost while suppliers have the certainty that hasn’t always been there before.
Godfrey notes the same trend: “I am observing an increasing pressure from the market to have contracts. And people will go to the people they have contracts with for their free-buy tonnage. If you don’t have any contracts at all it will get quite tough. Retailers want to have back-to-back contracts for 100 per cent of their products, which is a laudable aim, [but] it will make the free-buy market more volatile.”
From a production point of view, Godfrey describes it as the “kindest lifting season in my career”, though he adds that there have been a few more quality issues. Indeed, writing in the latest AHDB report, acting senior analyst Amber Cottingham says: “It is clear that there is a much larger crop this season and if previous seasons tell us anything in terms of price, it is that years with higher production tend to have lower average prices. However, there is still a long way to go to the end of the season and there have already been reports of crop losses from stores, especially in areas where potatoes were harvested wet.”
The potato sector continues to grapple with changing consumer habits, with the latest Kantar figures showing that while sales of both old and new potatoes are in decline, baby new potatoes (+10.7 per cent) and bakers (+5 per cent) are doing well. It suggests a further move towards convenient formats and those that can provide a quick and convenient snack.
Britain was praised in a recent Australian report into innovators in the potato sector, with the analysis saying that this country is a torchbearer for creating new and imaginative formats.
In these days of enlightened consumer knowledge of nutrition, it has also become all the more important that the potato sector is able to transmit its health credentials to the public, and a new report is set to help. Written by Professor Derek Stewart and Dr Mark Taylor of The James Hutton Institute, Potato – A Basis for Human Nutrition and Health Benefits aims to give the industry the ammunition it needs to combat any criticism over health that comes its way.
Fundamentally, the freely available report concludes that the potato has a definite place in the nation’s dietary mix and should be associated with good nutrition and health. Backed by a new push by AHDB to focus on key ‘influencers’ across government, medicine and social media, the industry is doing its bit to make sure sales go in the right direction.
