As a result of the coronavirus crisis, Wilhelm Weuthen GmbH (one of Europe's largest suppliers of seed and table potatoes, as well as varieties for processing), was unable to host the annual Potato Festival (Weuthen Kartoffeltag) - for the first time in 31 years. However, the head of the company Ferdi Buffen still gave his traditional speech on the market valuation of the 2020 crop:
Dear customers, farmers, suppliers of goods and services in the field of potato growing. We would like to personally congratulate you today, Potato Day. But like all other big events, the 31st Potato Day fell victim to the coronavirus crisis.
Last year at this time in the world everything went according to the usual scenario. The potato industry developed more and more actively. There was no limit to growth, especially in processing. Today everything is different, and this situation has persisted since February. We will probably have to get used to fighting the virus and living in a new reality.
What if there were no coronavirus?
One thing is for sure: we would have a completely different cash market than we do today. We are experiencing a third consecutive year of drought, and with normal sales before the pandemic - in terms of processing - today we would be concerned about the supply of raw materials. But it turned out differently. Due to the blockage of the global economy, the potato industry, which produces refined products, most of which is sold in the catering sector, has lost its resilience.
Nevertheless, today I can say that we, together with our clients and farmers, have coped with the consequences of the pandemic, and will continue to do so. The coronavirus has caused massive financial losses across the entire value chain. But surplus potatoes can be used as an alternative in the starch, flake, granulate, biogas or feed market.
What about the new harvest?
Since the start of the pandemic, the market has been split in two. In particular, sellers of ware potatoes, selling their products through retail stores, benefited from purchases of hamsters. This positive trend continues: freshly prepared, tasty table potatoes are again becoming more popular with consumers. Chips are doing well, too. However, with no major events, fairs, travel restrictions and heightened catering requirements, french fries sales are still well below last year's levels. Producers of relevant potatoes this year, following the US, wanted to limit crop acreage, but planning and delivery of seed potatoes for sowing this year were largely completed at the start of the pandemic.
Despite all measures, there was a slight increase in plantings in important agricultural regions of Europe (by 2%).
In general, by the end of August, we see the following picture in the market:
- The season for importing early potatoes was only half as planned.
- Sales of early potatoes from German regions continued until the end of July with a satisfactory income. Since each region has been able to supply its own products since the beginning of August, early varieties are now also on sale, especially in the Palatinate and Lower Saxony. Prices for this product are clearly below quotes.
- Sales of potato chips are still going according to plan. The situation in this segment is encouragingly positive.
- In the area of free processing, the marketing of raw materials was mainly completed in early September. This was due to the fact that the potato yield was below average due to drought and then early frosts. However, non-contractual produce could only be sold for alternative purposes at very low prices.
- The excellent infrastructure of the Rhineland has played a big role this year. By using powerful sorting plants, we were able to precisely match the needs of the market, which gave us a huge advantage.
Our strategy to meet the needs of the fast food industry worked: in addition to the standard high-yielding varieties, we grew Zorbu and Innovator from pre-germinated seed, receiving an earlier product, and this turned out to be a recipe for success.
And thanks to the irrigation facilities, we, together with the farmers, were able to guarantee the reliability of supplies and safety of quality.
In our opinion, the types of the main crop are as follows:
Trial results were obtained from all important growing regions. But if at the beginning of July we predicted a record harvest, now everything is different: the last hot and dry weeks have left their mark. Although not everything is so simple. Particularly in the Netherlands, in areas with heavy clay soils, potatoes are much more viable (than in the arid Rhineland) and still have growth potential.
The quality of potatoes of the 2020 harvest and their suitability for long-term storage raises many questions, especially in the context of Europe's abandonment of CIPC.
Overall, current estimates suggest that the increase in acreage is partially offset by mediocre yields. However, Bavaria in particular can expect good harvests and eastern Germany a slightly better harvest than in previous years.
We currently estimate the volume of the harvest as follows:
- Germany: 10.75 - 11.50 million tonnes
- EU 4+ UK: 26.00 - 28.00 million tonnes
Without the coronavirus crisis and the associated loss of processing sales, the market would be balanced, or rather scarce, and we would also have an adequate market price level for uncontrolled volumes of processed potatoes.
The bulk of the cleanup has not started yet. But the evidence suggests that supply will clearly exceed demand.
Due to the great uncertainty in the world markets for french fries, a realistic price prediction is hardly possible. Any speculation on this topic today would be pure speculation.
In our opinion, the regional market for table potatoes is balanced. We hope that prices will remain in the double-digit range during the harvest phase. When using marketing media, the price difference between premium and standard quality will be greater.
We do not expect significant export impulses in the coming months. The price level for foreign products will be much lower than the prices of regional packers, because early intermediate storage varieties and large-caliber planting material are being promoted on this market.
In terms of available potatoes for processing, we expect an increase in demand for alternative uses (such as starch, biogas and livestock feed) only by the end of the year. At the same time, the price level will fluctuate from 1.50 euros to a maximum of 3.00 euros.
Currently, the volume of production of varieties for processing on fries does not exceed 80-85% of last year's level, and almost all of these products are grown under contracts. By the end of the year, the need for acquisitions will disappear. Businesses are saddled with fears over impending import duties and uncertainty in important markets in Asia and South America, where the coronavirus pandemic has yet to reach its peak. Whether the market looks different again in the spring depends largely on the further development of the corona pandemic. Only the supply of the vaccine across the country will make big events, sporting events, folk festivals, etc. possible. Thus, today's April futures market is the only reflection of spring expectations.
Prospection
For planting in 2021, we are preparing a good amount of high-quality planting material. In addition to our tried and tested range of reliable, high-yielding varieties, we are introducing promising innovations.
I will note that potato breeding today also faces serious problems due to the changed conditions for the use of fertilizers and pesticides.
We will have to adjust our plans for 2021, taking into account fluctuations in demand, and adapt the size of the planted area. At the same time, regions that are far from cargo and non-competitive regions are attacked.
A challenging time awaits us: our company - as an enterprise operating in a highly specialized agricultural sector - and the entire potato industry at home and abroad, will face the expected fierce competition and, as a result, pressure on prices and margins along the entire value chain. We will have to go through a deep valley together, but in the medium term, the potato industry in Northwest Europe, with its excellent potato products, will remain “afloat”, remain competitive, and emerge from this crisis stronger than it was.
We will continue to adhere to our core contract grower system, which has been proven effective over the years.
It remains to be seen how far the deadline for stopping the production of processed products will have to be postponed (for now, we forecast a shift in the dates from late July to June) due to the significant increase in the cost of potato inhibition. But, of course, farmers specializing in growing early potatoes will benefit in this situation.
Over the past months, the dedicated team of Weuthen and all of the RWZ potato subsidiaries have established themselves as a reliable partner for the agriculture and potato industry. We will continue to be your safe, reliable and flexible partner in the future.
Cheers and we hope to see you all again next year for the 31st Weuthen Day Potato Day.