Do sums with care before signing potato contracts

Potato producers should account for rapidly rising growing costs before signing contracts for next year’s crops.

TAG potato agronomist Denis Buckley reckons many farmers risk big losses unless they do their sums beforehand.

“In my opinion, growers should not even dream of signing a processing contract unless they can see a real return of at least 200/acre,” he said.

“Underestimating the true costs of potato production is the road to ruin.”

Producers aiming at the pre-pack market should budget for an even higher return because, with skin finish being so important, the risk of failure is greater.

“You cannot expect to get more than about 75% into the top grade and the rest will have to take its chance in a secondary market.

As an example, just to break even you might be looking at 150/t on 14t/acre and 74/t on the remaining 5t/acre.”

As a guide for the season just ended, Mr Buckley estimates the average cost of growing set-skin chipping crops, either for bagging or processing and sold off the end of the grading line, at 75/t or 1,500/acre.

For pre-pack out of long-term cold store, it is 130/t or 2,470/acre.

Both figures include a management cost.

“Any other business would include management costs in its numbers, and I see no reason why potato production should be any different,” Mr Buckley said.

“But even if you have achieved these prices, the return to the grower for the capital he has employed and the risk he has taken is zero.”

Next season’s costs would be significantly higher, he warned.

“You can budget on fuel being significantly more expensive, fertiliser will be up 20%, labour 5%, water 2.5% and paperwork 2.5%.

All added together, I have heard estimates from growers of an additional 50-60/acre for crops sold off the field.

“Farmers need to bear this in mind before they sign up to lose money.

In the past, growers were happy to kid themselves if the average price they got for their potatoes wasn’t that clever.

But now, with few, if any, arable crops able to provide a buffer against a poor potato year, producers are becoming much more aware of the true costs involved in growing potatoes and the risks they take in doing so.”