Contracts for processing potatoes still in negotiations

Victoria Stamper

With demand for processed potatoes, both potato chips and frozen French fries, outstripping supply this season, it is making for very interesting contract negotiations as we head into planting season. Input costs such as fertilizer and other crop applications as well as fuel and transport have been on the rise since the spring of 2021. So as much as growers are always eager to secure contracts for their potatoes, they also want to ensure it is at the right price to cover a more expensive crop!

As of mid-February 2023, not much can be said about potato processing contracts because four major buyers – McCain, Lamb Weston, Simplot, and Cavendish – are still in negotiations in most areas. In the Columbia Basin, grower contracts were settled last fall. In Ontario, strict February deadlines loom for the chip contracts in that province and negotiations seem to be gong well. In the Midwest most parties are in negotiations now -- making headway -- and some have offers out for vote week of February 13. However, most contract talks in the east have not been started yet. Quiet expansion of processing plants across the U.S. and Canada – such as a new chip plant in Alberta and the purchase of the Heinz/Kraft plant in Ontario -continues to drive demand for raw product across the continent at a time when the pipeline is at its emptiest.

It is unknown today what potato buyers will project for the next year due to several barriers to expansion such as labour shortages, water issues, land costs along with the rest of the increased input costs. Right now, we’re in a very tight market for the second year in a row and the demand for processing potatoes is greater than the current planted acres. Some will continue to be supplied from the fresh sector, however that is not a viable option long term. Overall tightness in the North American market is pushing even the dehy sector to secure contracts early and at price levels not seen in the past in this sector.

If you speak with most potato growers that have been in the business for a long time, they would never have thought that the availability of seed would be a limiting factor to growth.

However, for the first time we are seeing a very tight seed market, regionally and by variety. There was growth in seed sector production when compared to last year, however the demand for certain varieties in certain regions seems to be outstripping this pace of growth.

Growers are already receiving and cutting seed potatoes in preparation for planting; and seed growers continue to receive calls asking about the availability of more seed.

Although barriers may be different from region to region based on soil type and other growing conditions, the overall sentiment remains the same. Costs are on the rise, labour shortages abound pushing growers and packers to invest more in automation and the processors continue to look for more raw product to fill global demand, particularly frozen fries. With the sharp increases in input costs last spring, and although the growing season in 2022 was a bit of a roller coaster with Mother Nature, most growers were happy with the crop that came out of the ground and it has been storing very well so far. With demand so evenly matched with supply, and in the case of the processing sector actually surpassing current supply, we have seen stable pricing and good shipments of potatoes since the harvest last fall. Despite inflation, potatoes are still the best value per pound in the grocery store. So even with the current uncertainty about planting intentions moving forward, all of these factors have combined to make it a very good time to be in potatoes!