An economics study funded by the Idaho Potato Commission concludes that Alberta and Idaho would be the best location for the next fry processing plant.
The research shows that any processor planning to build a new frozen fry plant would be wise to locate it in Alberta or Idaho, according to a recently completed economics study funded by the Idaho Potato Commission.
Joe Guenthner, an emeritus University of Idaho economics professor, and Amanda Jaeger, a consultant contracted to help him, compared costs of building and operating a fry plant in eight different locations, as well as transportation costs from those locations to major fry markets, according to capitalpress.com.
The list included Idaho, Washington, North Dakota, Wisconsin and Maine in the U.S., and Alberta, Manitoba and New Brunswick in Canada.
The study, which the economists started in March and presented to the IPC on Oct. 25, analyzed a hypothetical plant with a capacity of 50 tons per hour of finished product.
The economists determined Alberta would have the cheapest potato processing cost at 27 per cent per pound, followed by Idaho at 27.5 per cent and Washington at 27.8 per cent.
Guenthner explained Alberta benefits from lower costs due to a weak currency relative to the U.S. dollar. Though Washington can produce raw potatoes cheaper than Idaho, the Gem State comes out ahead in the report with its construction costs, labour costs and taxes.
However, Guenthner explained, Idaho’s advantage is clear when costs of shipping to the major markets are considered. The study evaluated truck and rail freight costs to 21 U.S. destinations and four destinations in Canada, as well as truck, rail and boat shipping to four foreign markets outside of Canada. Alberta had a freight advantage to one major market, Washington’s costs were lowest when exporting to the four foreign markets, and Idaho had the lowest shipping costs to 24 markets. “Idaho can put fries cheaper into Seattle than Washington can because its processing costs are lower,” Guenthner said.
One processor, McCain Foods, is already undertaking an Idaho expansion, investing US$200 million to boost production at its Burley plant. Guenthner believes the industry is poised for further growth.
On the other hand, Cavendish Farms has recently announced the expansion of its business in Lethbridge, Alta., with the construction of a new frozen potato processing plant.
Source: Potato Business