For potato and vegetable producers, one of the biggest issues on their mind, apart from the weather, is how much to plant in the current season. Last year the acreage of both sectors continued to drop, and the inevitable happened -there wasn’t enough produce of most lines to meet market requirements, and prices responded accordingly.
That was then and this is now and imminent decisions, on an individual, sector and indeed National basis, will determine the profit from these sectors for the coming 18 months. Supply is driven by decisions that each and every grower will make in terms of planting, and growers are trying to read the tea leaves on the demand side to see what message the market is giving.
In a properly functioning market, the amount of produce available determines the price. With variable crops like potatoes and vegetables, its impossible to plant exactly the amount to meet exact market requirements, so there will always be some ebb and flow in terms of available produce for sale. That’s in a properly functioning market, and over the last few years, the one thing that the potato and vegetable market has not been is properly functioning.
If, like this year, we were left to our own devices to supply an internal market with internal produce, the market is giving back one message loud and clear: acreage has to increase. It could be argued we have not been levels to meet market requirements for years, which is strange thing to say given the amount of potatoes that were exported in 2010/2011. If yields were more normal in 2010, and imports not as high, supply would have been tight that year as well. Potato yields in 2011 were also high, but a cold spell in early summer of 2012 slowed down the earlies a little and increased demand a little. Stocks dwindled very quickly as a result of very small changes. So supply/demand has been on a knife edge for a while.
However, we’re not left to our own devices at all and we have to look at our nearest neighbour to see at what might happen over there. They are getting the same strong market signals to increase acreage, their contracts with the multiples probably will demand it. In 2008 after the shortages in 2007 in the UK, planting more ‘reserve’ was demanded by the multiples to address a problem which occurred the previous year. Most of this reserve was not required on the home market, as there was a good growing season, so a flood of imports was dumped onto an already weak market in Ireland, to devastating consequences. The question to ask now is that what will happen again in 2013?
With all that’s lacking in recent times : lack of credits, lack of good weather, lack of good prices, lack of profit, the 2 scarcest commodities in the vegetable and potato industries has been trust and loyalty. Many of the merchants who deal on a daily basis with growers have seen the difficulties growers experienced and were only delighted to pass on higher prices this year. However, they operate in a cut throat world where supply contracts are hard won but easily lost. If one gets access to a cheap load, faxes are circulated and prices can drop very quickly for everyone. This is the way of the market, its capitalism, but as we’ve seen in other markets, non-regulated markets don’t really work in the long term.
A few years ago there were moves to establish a round table dialogue between merchants and growers, but it was an initiative literally washed away with ‘events’. Should this dialogue be re-established to the long term benefit of both growers and merchants? Unless some moves are made, the market and previous experience is giving no consistent messages back to growers and given the difficulties growing and harvesting crops in 2012, an increase in acreage is the last thing that many growers want to contemplate.
Its not a good idea to consistently fail to meet market requirements: it’s a loss of potential turnover and also your customer doesn’t like not being able to meet their needs, so they will look elsewhere to meet demand. On the other hand, there is no point investing time money and effort into supplying a market if cheap produce, available a short back load away, becomes the price maker. The reality is that the acreage could be lower than last year and still prices could be floored from cheap imports. We have the ability to supply, we have the demand and we can supply this produce at a price that growers, merchants, retailers and consumers can live with. Ni neart go chur le cheile.
Dr. Richard Hackett established Hackett Agricultural Consultants in 2007 and the main focus of the business is to provide independent agronomy and agricultural services to growers, farmers, industry, public bodies, processors and retailers. Hackett Agricultural Consultants are based in North County and can be contacted at richard.hackett@itca.ie
Source: HortiTrends News Room
