The Truth About the 2009 Crop

By Lee Frankel 
United Potato Growers of America President/CEO

Growers who heeded United’s advice to create contingency plans for the 2009 fall storage crop did significantly better than those growers who ignored United’s advice and increased acres to chase after returns from their 2008 crop. Specifically, United stated in this column last year, “You must determine if you can survive a market with returns similar to 2003 levels. You must determine if you believe it is cheaper to not plant a portion of your acres, even if you have already fumigated, than to destroy a portion of your crop in late 2009 or 2010 if there is no market for the product of your labor that even covers the cost of packing and marketing.”

While many will incorrectly attribute this year’s prices to increases in yields in 2009 compared to 2008, United had forecasted nearly all of the actual yield increases in its planting recommendations. Significant acreage increases by non-members wiped out the impact of United acreage cuts made to help balance the market.

It is important in 2010 that growers do not repeat the same mistakes as last year when making their planting decisions. United has compiled significant analysis for both out of field growers as well as storage growers to give them the information necessary to understand where the market may be when it is time to market their crop.

A critical skill is to understand trend line yields. Growers become more efficient each year at producing more fresh market quality potatoes per acre. In short, the yields of 2009 are within a few percentage points of where yields are likely to be in 2010 and marketable production will likely be close to the same levels if acreage remains the same.

United growers who market their product directly out of the field can use United’s week-by-week forecasts to understand just how much storage crop from 2009 will still be present when it is time to market their crop. United growers in Central California and the Southwest properly incorporated the data into their production plans and were successfully able to market their crop at reasonable prices in 2009. Growers, whether they be in Florida or Western Idaho and the Columbia Basin, would be well advised to consider this data to better understand the quantity and location of potatoes from other areas. After all, their potatoes will compete with potatoes across the country. 

Storage growers can also factor into their decisions the amount of storage potatoes that will be carried into the 2010 season. Growers must speak with their sales agencies to learn if the crop will have a shorter number of weeks to be marketed given this carry-over from previous crops and from out of field growers. In 2010, growers will be best served by coordinating with their sales agencies to make sure that they are truly planting to known demand from solid customers.
 

Learning from the past year

By Lee Frankel
President/CEO
United Potato Growers of America

In 2009 U.S. fresh and seed potato growers experienced one of the best years for grower returns, but are staring at what could be among the worst in 2010. United Potato Growers of America has helped give the industry the forum to better analyze the total demand for potatoes and the necessary acres to balance the market at prices that lead to sustainability for growers. However, when planting their 2009 crop, non-United growers chose to do the opposite of United recommendations, increasing their acreage by more than 24,000 acres for the fresh market.

Let’s take a look back to see how the industry got here. The 2008-09 crop was planted with the expectation of robust production close to trend line yields to meet the demand for fresh potatoes. Lower than average stocks in many of the major storage areas in the summer of 2008 lead to increased shipping point prices. Delayed plantings and storm damage in many areas in the summer of 2008 led to fewer potatoes being available for the fresh market in the early months of the 2008-09 shipping season. These market conditions led to strong grower returns, but also had the negative effect of significantly increased retail prices. 

The slowdown in restaurant business combined with high retail prices reduced the movement of potatoes significantly during the middle portion of the 2008-09 marketing year. The more typical pattern during a recession of increased demand at the retail level and continued weakness in the foodservice sector as consumers looked to economize in the face of economic uncertainty began to take hold.
United undertook an extensive educational outreach campaign to growers throughout the country to guide growers to understand that the causes of the higher returns in 2008-09 were a result of lower than trend line yields in many areas and marketing issues from the previous crop. Strong returns were not the result of too few acres planted to potatoes.  

While yields were up over three percent from the previous year in the fall of 2009, if all growers held to United’s recommendation of freezing their acres at the 2008 levels, the 2009-10 marketing year would have been at or slightly below break-even levels for growers. But those levels of production and shipping would not have risked the financial health of hundreds of growers. Unfortunately, non-United members increased their acreage significantly. 

United’s recommendation for 2010 of planting 75 percent of 2004 base acreage takes into account the significant carryover that will accompany the industry into the fall harvest of 2010. As a result of the carryover, growers producing for the out of field market in 2010 will likely need to cut beyond the United recommendations. It should be noted that the United recommendations are still based on the assumption of non-members following the same guidelines as United members for their operations as well. Please consult with your United chapter for the latest information before you plant in 2010.

United is the answer to managing supply

By Dave Warsh
Chairman
United Potato Growers of America

Like the great American cowboy who is much admired in art and literature, American farmers are individualists. Our individualism and independence are probably key reasons why we dare to take on the risks that come with farming. While praiseworthy, these characteristics can also be obstacles to our success, because, no matter what, in the United States, as a group, farmers can always over-produce crops.

Potato growers have been told for decades not to over produce because that brings their prices down, sometimes below the cost of production, but unwieldy crop size continues to trouble the industry. Acting independently is not the answer to this dilemma. My years in the potato industry have taught me that managing the overall crop is best handled through farmers’ cooperatives that are organized pursuant to the Capper-Volstead Act of 1922. This piece of legislation allows the existence of United Potato Growers of America and its chapters so that potato growers can work together, communicate with each other about the national and local crop, discuss important issues including the obvious need to receive a reasonable price for our potatoes and creating strategies to manage the crop size while bringing the crop to market.

United has made good progress managing supplies since its inception five years ago. As evidence of our success, many of our cooperatives report four good years in a row for their growers. Four consecutive years of potato grower success anywhere was unheard of before United formed. I definitely believe United and working together under the United umbrella is the answer to managing the crop. The last man standing model does not work in this industry due to having so many players.

Here is what I would like to see in 2010:
1. Recruit more chapters and continue to build membership in each existing United chapter.
2. Create more awareness between the chapters and growing regions about the issues unique to each area. As members, together we can identify creative and intelligent solutions to meet each region’s challenges.
3. Heighten the involvement with the United States Potato Board to build demand for fresh potatoes.
4. Increase the cooperation and support of the National Potato Council as it works on market access issues.

Let’s not make the mistake of complacency. Let’s support our United chapters – by the way, several growing regions are already working together admirably under the United umbrella – let’s be team players and openly communicate as allowed under the Capper-Volstead Act. We have proven it can work, let’s push harder for potato grower success in 2010.

United adds value in 2009

By Allen Floyd
Past Chairman
United Potato Growers of America

As we close out 2009, I gratefully thank all of the fresh potato growers who heeded the advice from United Potato Growers of America to hold their 2009 plantings to 2008 levels. While I acknowledge and praise the growers’ efforts, I would not be candid if I didn’t say that even with acreage wisely held in check it has still been a challenging year for fresh potato growers.

Even when acreage is held to expected demand, the intensity of year-long, active strategic crop management and marketing can be overwhelming. That’s why United continues to emphasize communication under the United umbrella that is provisioned by the Capper-Volstead Act of 1922. Potato grower members who get involved, access United’s data and analysis, log in to our web site and read our newsletters are better able to run their business operations successfully.

Frankly, when I travel to U.S. growing regions to meet with potato growers, it amazes me what growers don’t know about the overall, nationwide crop. Too often, growers only focus on themselves, their neighbors or their state growing area. Growers would do better if they would, through United, consistently keep themselves aware of the full, national crop. This is the only way a modern potato grower can keep on top of the game.

I’m proud of United’s accomplishments in 2009. Communication continues to be our emphasis. We launched a new web site that is easy and quick to use with a password protected area offering data for members only and created a new communication vehicle – the United News Brief – a weekly electronic bulletin delivered via e-mail for members that is a companion to our printed newsletter. We also hosted new strategic conference calls that support our members in their work to better market their crop week-by-week, year-round.

We again negotiated a successful United Potato Partners program that benefitted our members by reducing the cost of developing and maintaining United databases and providing free educational seminars in the major growing regions. United’s annual industry information meetings are becoming a mainstay for grower education. In 2009, we hosted two red potato crop conferences, a North American seed potato growers’ conference and the annual North American Potato Growers Summit. All are examples of United’s investment in industry growth and stability.

I thank the United board of directors and membership for trusting me to serve as chairman for a second year. As I close out this year and hand off to the new chairman, I am proud when I think of the progress we have made teaching United members to work together under the Capper-Volstead Act. I believe many growers have taken steps to stop blaming each other for frustrations in the marketplace and start focusing on the bigger picture – the United picture. 

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