A 'fair trade for producers' initiative is being undertaken by the IFA to harmonise the relationship between potato producers and merchants. Andy Doyle spoke to the IFA's Thomas Carpenter to discuss the new proposal, as well as prospects for the year ahead
Last week, I spoke to Thomas Carpenter, chairman of the IFA potato committee, to ask about the prospects for the coming year and also about the 'fair trade for potato producers' initiative that is currently been undertaken by IFA.
Thomas said that he has asked the potato merchants, who are the major suppliers to the big retailers, to come up with a common set of standards for dealing with potato producers.
There are no common standards for merchants dealing with growers and this gives rise to regular problems. Three major inconsistencies are evident:
Deduction levels for waste and tare and how these are calculated;
The specifics that relate to crop grading and subsequent value;
Payment terms for delivered product.
Thomas stated that merchants and retailers talk a lot about 'Fair Trade' when dealing with Third World countries and, now, IFA want fair trade for Irish producers as part of this new era of concern.
''Let the process of fair trade start at home,'' Thomas stated.
He told me that he has asked the merchants involved to respond with a set of proposals to harmonise matters relating to the points above, and others.
The absence of such standards has seen so-called tare potatoes, for which the grower was not paid, supplied to the peeling trade. ''This is grossly unfair,'' Thomas stated. And this is just one example of the kind of practices that occur which disadvantage growers.
''Basically, what we want is a common set of standards across all merchants,'' Thomas said. ''We do not seek to dictate these standards but they should be acceptable to IFA.'' Another example is with regard to the variety of credit terms within the sector.
From the time that seed is purchased in the winter preceding planting, it could be the following autumn 12 months before the crop is delivered for sale. After that, it could be months later before the grower is paid. In many instances, the retailer pays the merchant before the grower is paid. This will now give rise to a whole new set of problems as access to cash and credit gets even tighter.
This delay in payment exaggerates the need for cash, which forces sales and weakens the market. The process could be described as self-destructive over time. The credit cycle for the last of a potato crop coming out of store is up to two years and this deserves recognition in the credit terms and pricing arrangements.
The early planting season is giving rise to big expectations from crops here this year. Some of the early sown crops already harvested have produced high yields but, as of now, there is still no solid data on which to assume a big crop will emerge. Yields to date are certainly better, on average, in Meath, Louth and Dublin but they are not as good as last year further south.
Thomas said that tuber numbers are certainly good but getting the size up is proving to be a challenge.
Already, we know that some crops of second earlies, which are now harvested, did run out of steam at the end and did not deliver on their potential. This could prove to be a warning and an omen to maincrop producers. Still, the crop is likely to be more than adequate to meet Irish demand and, already, there is talk of possible exports.
When I asked Thomas about price levels, he was quite upbeat. ''Demand will consume our entire crop at a reasonable price to the grower,'' he stated. Current prices are lower than can be described as 'reasonable' because growers need cash to help them recover the trauma of last year's losses.
Prices could be higher at the moment if growers exercised more control over the market.
Supermarkets are not helping either because of their current purchasing activity and the promises of supply contracts to certain merchants.
''To put it into perspective,'' Thomas said, ''the farm gate value of the Irish potato crop is €80m to €85m but a conservative estimate of the consumer retail value is at least €300m to €325m.
''The important thing is that growers must value their product in this market and not have to take the price being offered. Imported potatoes ex Britain are currently costing between £166 and £332/t.
While the English price has eased slightly in the past two weeks, Thomas pointed out that we have already exported some British Queens to Britain but at the lower end of the value range.
Growers need to be aware that the production cost for most varieties is in the order of €230/t for the basic inputs. This cost does not include essential reinvestment costs like potato boxes, etc. These would add a minimum of €20/t and no such reinvestment has been done over the past three years.
On top of this will come a further €10 to €12/t monthly storage cost post Christmas and this gets bigger as the season progresses due to increased refrigeration costs and weight losses. Then there must be a margin to the grower because, without that, it's all for nothing.
While IFA's recent 20,000-acre grower survey might not be sufficiently comprehensive to be called a census, it does contain the message that overall acreage is down.
The overall drop of around 4% nationally contains a very significant 10% reduction in the area sown to Rooster. Nationally, British Queens are up 6% to 8% and Rooster is down 1%. But the drop in Rooster acreage is much greater than the increase in British Queens.
The drop in the area planted to Rooster is partially compensated for an increase in British Queens, Golden Wonder, Records and Pinks. However, these increases still left a 4% drop in national plantings, according to the IFA survey.
While the survey points to the possibility of reduced supplies to the market this year, it also helped explain what happened with regard to the supply of British Queens. A 27% increase in the area of this variety caused a significant hit on prices for growers.
Thomas explained that the British Queens acreage was increased by growers to partially fill a gap in the market from the previous season and partially to get faster access to cash. But the increased acreage combined with higher yields led to a rapid price drop with inevitable consequences.
''On the broader picture, the drop in acreage, combined with increased demand and lack of cheap imports, sees Irish potatoes supplying every market segment this year. So, if the crop is marketed properly there is scope to secure a better return from the market,'' Thomas stated.
Potato yields throughout Europe are back considerably this year as a result of the different weather problems. Drought was a particularly big problem further east but wet also caused its problems elsewhere. In East Anglia, yields are back by between 70% and 90% on last year's levels. Yields will be down within the EU also and the harvest there is considerably delayed.
Thomas told me that Russia has stated its intention to import four million tonnes of potatoes and production is also considerably reduced in Ukraine and Belarus.
''All in all, the situation in the European market is very uncertain and it will be some time before the consequences to supply levels will be known,'' he said.
Current estimates suggest that the crop will be at least two million tonnes lower in the EU five - Belgium, France, Germany, Britain and Holland.
The major processors are currently not buying, as they are using up existing contracts arranged at prices from €100 to €110/t.
Once these are used up there will have to be a significant increase in price levels. Potato prices are already up to €260 to €280/t in Western Russia. There are frequent enquiries for exports from Ireland.
As well as yield, the quality of potatoes on continental Europe is also lower this year, with substantial levels of secondary growth and scab
In summary, it looks like the European potato market will, at worst, be tight for the coming season and growers should see the benefit of this in price levels pertaining in the market. While our crop is not yet known, yields are expected to be a good average and quality should be good. This makes the Irish crop somewhat unique in Europe this year and it should see the benefit of this in prices and returns.
Source: newsroom - meattradenewsdaily.co.uk
Back to News Headlines