Uncertainty pushes futures market interest up

INTEREST IN new-crop potato futures is increasing as predictions of a smaller crop area in the UK and northern Europe fuel expectations of higher prices.

Steve Burke, of Mann Financial, said that the market was picking up strongly after a flat 2004/05 season when prices had scarcely moved.

 “The open interest is over 100 lots for April 2006 compared with 12 lots for the same month last year,” he said. “It”s a very different commodity – prices are up to 18.1/100kg (126/t), a 15/t rise in two weeks, and the market is attracting people who have never traded before.”

Ray Hayes, of ADM Investor Services, said the current season had been dire. “Prices hardly moved so there has been little need to hedge.” But new-crop trades were running at four to five times the volume, he added.

Rob Burrow, of the British Potato Council, said futures were responding to expectations that growers would plant less due to this season”s high stocks and low prices in northern Europe.

“And, with about 30% of potato land rented, uncertainty over some single farm payment issues may also influence the area planted in England,” he added.

 Both brokers were keen to point out that their firms and a clutch of others were continuing to trade potato futures. They said recent reports claiming that BDF, which recently ceased trading, was the last specialist potato futures broker were untrue.

Mr Burke said: “Market participants need to be aware of their ability to fulfil contracts especially with adverse weather conditions when futures will come into their own as a hedging tool.”

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