Is the potato market about to explode?

These are extraordinary times in the potato market, and that is an understatement. The exceptional circumstances have led to potato prices for both the old and new harvest reaching record highs. The upper limits have been constantly raised in recent seasons. It is difficult to predict where the ultimate 'breaking point' lies. This is closely related to the development of the french fry price, and that market is currently not very transparent.

First, let's go back to the current season of the 2023 harvest, which is in its final phase and, like the previous season, is full of tension. Once again this season, the market shows a trend where a strong upward price movement is initiated after week 17 (settlement of the April futures market contract).

Processors often have their positions well in hand up to week 17 in most seasons, but for the last months of the season, there are still gaps to be filled. Of course, the planting date and growth development of the new harvest are crucial.

Weather Market
It is a fact that for the second year in a row, the more than extraordinary weather conditions have had a significant impact on price development in the last months of the season. Late planting, extremely wet weather conditions, and very poor soil structure mean that one must expect a moderate and late supply of the first early potatoes.

However, it seems that it is mainly this sentiment that is driving the market. Looking at the processing of raw materials and export figures for french fries, this would suggest a larger stock of fries in cold stores and a less favorable demand for processed products.

Processors do not want to risk running out of potatoes and want to ensure a raw material supply for the final period of the 2023 harvest year, so they are buying the last potato cells at significant premiums. Prices are rising to over €50 per 100 kilograms, and for Agria, for example, heading towards a niche market like peeling, the market price is now approaching €60 and more, double what was paid in contract prices last season. It shows how volatile the potato market can be at times. This may become the new normal, which is difficult to hedge against through contracting.

No Shock Absorbers in the Market
In fact, if processors have good coverage, there will be a long stable price period. However, if a logistical bottleneck occurs, as happened last August during the off-land period, the market price can quickly drop back (Belgapom noted €10 in September 2023). In case of a shortage or expected shortage, the price can also rise quickly and significantly. In both cases (drop and rise), this often happens uncontrollably.

In the price development for the upcoming harvest (2024), a similar trend seems to be observable as in the 2023/24 season, although the starting position appears even worse with June on the horizon. The futures market quotation for the April 2025 contract is already above the €35 level, a price level that has not been reached around this time in the past on the futures market.

The current ingredients are there to further ignite the market, as not all potatoes are in the ground in the EU-4 countries, and summer is approaching! Many growers are concerned about the upcoming growing season. In a dry summer, the potatoes are not expected to reach a five-year average yield. In short, nothing is as it seems anymore!