ViewpointsFrom our DeskHolding the Line on Potato Prices

Holding the Line on Potato Prices

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[deck]The status quo.[/deck]

That’s the price situation for processing potato growers in most regions across the country this year following some sticky contract talks with Canada’s major french fry and chip processors this past spring.

According to Kevin MacIsaac, general manager for United Potato Growers of Canada, growers in most areas — including Manitoba, Prince Edward Island and New Brunswick — accepted offers for the same amount they received for their product one year ago. One exception is Alberta, where growers negotiated a slight price increase for their processed potato crop.

Considering that first offers from some processors were below last year’s price, the consequent price rollover could be seen as progress. But that view doesn’t take into account the cost of potato production – which farmers will tell you, isn’t going down. Any cost increases are coming straight out of producers’ pockets.

“I don’t know of any area where the cost of production has gone down this year, compared to a year ago,” says MacIsaac. “The initial offer for growers in most areas was 50-cents down, so if you look at a rollover it looks positive compared to what the first offer was, but yet it’s not truly a rollover in my opinion.”

If one considers price pressures such as oversupply, stagnant demand and a relatively strong Canadian dollar, it’s understandable why the major processing companies may feel they had no choice but to hold the line on potato prices this year.

The president of McCain Foods Canada, for instance, insists the industry has to cut costs wherever it can just to stay competitive. “In Canada, one of the biggest challenges we have to address is the cost structure of the industry,” says Darryl Rowe. “The cost of raw is not competitive with the United States, and with the strength of the Canadian dollar, we are facing more pressure on our ability to export.”

“The Canadian potato industry has to become more competitive. We have to compete not just in Canada, or even North America. We have to be able to compete on a global scale and that means changing the cost structure of the entire potato supply chain,” he says.

“Potato growers have to increase yields, reduce costs and adopt best practices to become more competitive.  In fact, all participants in the value chain will have to reduce costs to improve our long-term viability.  I am confident we can do this, and this makes me feel very optimistic about the future; however, we have to take action now.”

Given the significant challenges facing the industry right now, MacIsaac agrees it’s a crucial time and that everybody throughout the supply chain needs to step up: “We all need to be as cost-effective as we can and to be as efficient as we can.”

MacIsaac believes communication is key and that processing companies could help increase efficiencies by presenting growers with a longer-range picture of their future needs. New ideas for improving competitiveness would also be welcomed.

“We’re always open to suggestions as to what the processing companies think we can do to be more efficient,” he says. “Growers themselves are very open to change, very open to improving the situation, and we need to work together [with processors] on how to do that.”

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