Rising Production Costs Make for Uncertain Potato Market

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With production costs on the rise and the ongoing Russian invasion of Ukraine, uncertainty looms for the potato industry.

Even before Russia invaded Ukraine in February, production costs had been on the rise across the agriculture world and had potato growers wondering if planting potatoes this year was worth it.

Cedric Porter
Cedric Porter, editor of World Potato Markets

“Costs have risen substantially… the amount of money and nitro prices are up to about four times higher than they were a year or so ago. And diesel prices are doubling as well since the invasion, and supply chain issues as well have taken place — a real sort of period of uncertainty and volatility. Growers are sort of scared of planting potatoes,” Cedric Porter, editor of World Potato Markets, explains during the Potato Markets Overview session at the Canadian Spud Congress on March 22.

Porter is based in the United Kingdom and had been suspecting for a while that potato acres in Europe would be down this year, but the Russian invasion of Ukraine has just added to the worries growers across the pond are facing. He says while contract prices for spuds are higher this year, they aren’t high enough to make planting potatoes attractive over other crops.

“Contract prices have risen in Europe by between 20 and 25 per cent, but they were agreed before the Russian invasion of Ukraine. We are getting growers going back to processors to try and perhaps squeeze a little bit more money out of the contracts,” he explains.

There’s also uncertainty about if the Ukrainian potato crop will be planted and what size acreage will be. Russian and Ukraine are the third and fourth largest producers of potatoes globally, and most Ukrainian fertilizer is supplied by Russia. Availability of fuel for planting has also been disrupted by the invasion.

Ukraine is also one of the largest suppliers of sunflower oil to the European Union which is used in potato processing which has processors scrambling to find alternatives such as canola and palm oil.

Uncertainty Weighs on Canadian Potato Plans

In Canada, the rising production costs and uncertainty with the United States border for exports of Prince Edward Island potatoes is weighing on growers as they make spring planting plans.

“This is certainly the most expensive crop that I’ve ever seen to go and plant in the earth,” Kevin MacIsaac, general manager of the United Potato Growers of Canada, says during the Canadian Spud Congress session. “It’s being led by fertilizer, and of course by fuel, anything that’s used in the fuel process to create, or manufacture is all seeing major increases.”

Kevin MacIsaac
Kevin MacIsaac, general manager of the United Potato Growers of Canada

MacIsaac estimates Canadian potato production costs have risen by 20 to 30 per cent this year. He adds this estimate is before considering how the Russian invasion of Ukraine has influenced production costs globally.

Higher commodity prices for other crops such as wheat and soybeans are also making them more attractive to plant over high input potatoes, MacIsaac explains.

“There is some opportunity there, where a lot of years the opportunity is there, but growers still go back to planting additional potatoes. But I really think with the risks involved this year that these other crops are looking very attractive,” he says.

MacIsaac does expect there’s a need though to increase Canadian potato acreage to fill processing expansion needs and return to pre-pandemic demand. He expects processing acreage to increase, while chip and fresh acreage will be stable, adding that once trade issues are sorted out it will make planting decisions easier.

Editor’s note: On March 24, shortly after the Canadian Spud Congress markets presentation happened, the U.S. announced it would be reopening the border to fresh potato exports from P.E.I.

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