Dutch potato sector is aging and deteriorating

In the past three years, the potato landscape has changed rapidly, but in the next five years, even more changes are on the horizon. The potato market was a vibrant and dynamic sector twenty years ago, where many people earned their living and growers still had choices. This has changed rapidly. Changes do not have to be wrong, and market developments, as Darwin indicated, are survived by those who adapt best.

Some game changers at a glance:

1. The growth of the processing industry and the demand for fries worldwide. In recent years, fry processors have significantly increased processing capacity due to the growing demand for fries worldwide, the cultivation climate in the Northwest European Delta, and the ideal location near world ports such as Antwerp and Rotterdam. These factors provided ample opportunities for growth, with processors in Belgium particularly meeting this need more effectively than their Dutch competitors. They have gone from leading to following in Europe.
2. Claiming and handing over licensed varieties to processors resulted in 'seed potato certainties' being linked to delivery contracts. This gave the processing industry more control over the market.
3. The increasing scale enlargement and cost structure of arable farms have led potato growers to exhibit different risk behavior. More certainty in balances, but also in logistical agreements. The rise of potato cultivation for fries in sandy areas also resulted in different risk behavior. Various surveys conducted by DCA among growers showed that potato growers on sandy soil exhibit different risk behavior and have a greater need to limit or avoid risks than their colleagues on clay soil.
4. The significant increase in potato prices in fixed price contracts has been the major change in the market in the last three years. Contract prices have risen so rapidly that almost no potato grower plants potatoes without having (partly) a contract in place. In 2018, a Fontane potato contract for delivery ex-farm (week 40) was €8.70, which has risen to €17.25 for the upcoming growing season. For potatoes from storage, an Innovator contract (week 17) has increased from €14.40 in 2018 to €27.50 for delivery in April 2025. These are not percentage increases, but doublings. Growers have started to look at their risks and marketing strategies differently. The significantly increased cultivation costs also mean that they can afford to have 'bad' years less and less. Whereas in the past, the input costs for a hectare (ha) of potatoes were €3,500 to €5,000, they have now risen to €7,500 to €10,000. This changes the risk perception among growers. Moreover, the upward potential in the market from a historical perspective is smaller than the downward potential. With a contract of €27.50 for dry potatoes from the shed in April, historically there is an upward potential of €8, but a downward potential of €23.
5. The decline in the intermediary trade of potatoes also makes the market less flexible. This means that there are no safety nets or shock absorbers in the market in case of surplus (or shortage). In the past, these were often absorbed by the intermediaries, as they had already taken positions or (re)parked their risks on the potato futures market. With the disappearance of these intermediaries, the number of transactions on both the physical and futures markets is rapidly decreasing. Processors are not a safety net in the market, as they have about 90% of their flows fixed and can move them as they wish. This has a dampening effect in an upward market, but in a downward market, it leads to huge fluctuations. The inability to create more demand at lower price levels makes the potato market very volatile, leading to higher risks. Where there were dozens of potato traders twenty years ago, many of them have largely ceased their activities in the following years. Traders have stopped or merged or have become agents for large processors.

Price risks are increasingly leveling off
While cultivation risks are increasing in the sector, it seems that price risk is becoming more level. Free trade has almost disappeared, and the futures market also leaves a deserted impression. Less physical activity leads to a decrease in the number of reported transactions. Even the PAT list (the transaction list where Dutch processors register all their free purchase transactions) is very limited compared to the volume of potatoes processed.

This poses a number of challenges for the future of the sector:

1. What is the reference framework for the different quotations when hardly any free potatoes are traded anymore?
2. What are the shock absorbers of the potato market when there is an oversupply of potatoes?
3. How is market sentiment translated into the price of potatoes?
4. Who determines what a good contract price is?
5. What mood indicator is left if the futures market were no longer there?

Who takes the lead?
Plenty of challenges for the coming years. But who or what takes the lead in this? Looking at the sector, a significant aging of the potato market is imminent. The average age of the head of procurement at Dutch processors is currently 61.5 years and in trade, it is 59 years. This means that in the next five years, an entirely new generation will take the lead in the sector. How do they view challenges such as risks, logistics, cultivation, and earning capacity? Will they manage things solely via a spreadsheet or sometimes also go out to the field?

The changes that have been initiated in recent years seem irreversible. However, they require adjustments for the future. The potato sector is facing tough challenges.