Several weeks ago we were discussing what would happen to the potato price, after Simplot first raised the potato price in Australia. We have an answer now. Prices go up everywhere, with percentages as high as 50% for potato harvest 2009.
French fry processors will pay significantly more for Northwest potatoes next year in a concession to higher input costs. The J.R. Simplot Co. and ConAgra Foods have both agreed to hefty price increases for 2009 crop spuds, representatives for Potato Growers of Washington and the Southern Idaho Potato Cooperative said. For growers, the new contracts mean an overall increase of about 33 percent in Washington and 50 percent in Idaho for field run potatoes compared with 2008 levels. The greater percentage gain in Idaho reflects lower average yields.
Growers expect similar terms with the other two major fry processors - McCain Foods and the H.J. Heinz Co., makers of Ore-Ida frozen potato products. Higher contract prices are a recognition by fry makers of the increased prices that potato growers are now paying for fuel, fertilizer and land rental. The cost of growing a full-season russet potato crop in the Columbia Basin is now more than $4,000 an acre, PGW Executive Director Dale Lathim said. "Our costs have gone up so much in the last two years that our heads are still spinning," he said.
The 2009 Simplot and ConAgra contracts should bring profit margins in line with the increased cost of production, Lathim said. "The increase that we got should restore the profitability of the potato contracts," he said.
Growers also received price increases in the 2008 fry contracts, but the pay raise was mostly eaten up by cost-of-production increases before the crop was even planted, grower representatives said. "There weren't a lot of happy campers over the 2008 contracts," SIPCO Executive Director Dan Hargraves said. "The 2009 values look much more encouraging."
The new Simplot and ConAgra contracts will pay Idaho growers a base price of $9 to a little more than $10 per hundredweight, depending on variety, Hargraves said. "It's a significant increase," he said.
Even so, growers aren't likely to make a killing. The cost of production in Idaho is nearly $8 per hundredweight, he said.
The new Idaho contracts include some protections against unexpected cost increases. "We've put some cost protection in there for some of our key variable costs like fuel and fertilizer," Hargraves said. "If we have another unanticipated runup in production costs, growers will be reimbursed for that."
Idaho growers have pushed for contract settlements early this fall so they can make decisions about ground preparation.
"Growers weren't going to put down fertilizer at these prices not knowing what the price of the contract was going to be," Hargraves said. "The processors, to their credit, recognized that in the nick of time and stepped up and got the deal done."
The 2009 Idaho contracts also include increases in compensation for long-term potato storage, reduce the risk of major deductions due to tuber defects and should boost growers' cash flow position with improvements in the timing of payments, Hargrave said.
"Overall, it's a contract that's more grower-friendly than what we've had in the past," he said.
Source: Dave Wilkins, Capital Press, Idaho.