4 August 1995

Potato fears puts a shine on futures

By Tim Relf

FEARS that the potato harvest may be hit by prolonged dry weather are being reflected in the futures market, which rose sharply this week.

April futures leapt £35 to £185/t on Monday (July 31) and a further increase of £6 on Tuesday took prices to £191/t.

"Such large rises are fairly unusual but the weather has also been fairly unusual," says John Bull of BDF Commodities. The increases, he says, reflect the "general fear across Europe" as to the impact of the drought.

"The changes are clearly a red-light signal," agrees Robin Pooley, managing director of Anglian Produce. "But the futures market is made out of peoples opinions not real potatoes."

Despite increased plantings (Potato Marketing Board estimates put the European area up 3% on 1994), Mr Pooley stresses that main crop yields rather than acreage will be crucial in determining market movements. "And we wont be able to get an accurate view of that until late September," he says.

John Anderson at the Scottish Agricultural College, meanwhile, adds that there may be less export movement than last season, when quality problems on the Continent stimulated demand. "This could also have a dampening effect on prices," he says.

And unlike 1976, he adds, almost half of the potato crop is now irrigated, which makes the current lack of rain less of a factor.

The hot weather is also affecting demand, and traders report a slow trade. As such, average ex-farm prices in the week ending July 28 fell by £19 to £92/t.

&#8226 A report recently published by the University of Nottingham, highlights the volatility of returns from UK potato production. It shows average net margins in 1991 at £718/ha. The following year the figure plummeted to -£311/ha. &#42