Commodities outlook 2015: Potatoes

Good growing conditions and lacklustre demand resulted in depressed market prices in 2014, leaving many producers reassessing their appetite for potato production in the year ahead.

According to Andersons director Jay Wootton, one the main drivers in the UK potato industry is changing consumer habits.

“Ironically the humble potato can feature at either end of the convenience scale,” he says. “Fresh retail volumes continue to fall, yet the baking potato is seeing an increase in use, driven by product innovation. The future will increasingly be in the processing sector.”

See also: Potato virus warning in home-saved seed

High European yields boosted imports to the UK this season, aided by the strong pound and the Russian import ban. There is little sign of European production reducing significantly in the year ahead, which will maintain pressure on prices.

“For some people, contract prices will be below cost of production,” says Mr Wootton.

“There is a temptation to contract nothing in the hope that prices improve, but the risk is that losses are simply amplified as markets fall further. There is a serious need for the industry to reduce production and focus on markets that can deliver a realistic return.”

Some growers may be better off considering alternative crops or letting land and storage to larger potato growers. Those who continue in production must ensure an economic return on investment.

“Understanding your costs of production is absolutely vital, as is the relationship with your buyer,” he says.

Outlook

• Consumer buying habits are changing
• Supplies still exceeding demand
• Lower fuel prices should cut production costs, but not dramatically

Business pointers

• Keep abreast of water reforms and likely impact on your business
• Calculate your own cost of production – not industry averages
• Work closely with your customer to manage risk