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More Losses Appear in Store for Potato Growers

PULLMAN, Wash. — As Northwest potato growers contemplate spring planting, economists say early indications are that many will lose money on their 1998 crop, the second unprofitable crop in a row.

Joseph F. Guenthner, University of Idaho extension economist, says it’s too early to tell whether the pattern of the last two years will continue for the 1999 crop. He advises farmers to keep an eye on purchases by potato fryers on the open market in relationship to the amount of potatoes in storage and on movement in international markets.

Guenthner’s report was part of the 1999 Pacific Northwest Agricultural Situation and Outlook Report released Wednesday (Dec. 30) by Washington State University, University of Idaho and Oregon State University economists.

Despite low prices for the 1997 crop, Northwest farmers increased plantings last year, harvesting 27,000 more acres in 1998. National acreage also was up 41,000 acres. This produced a national crop of 429 million hundredweight, up 1.5 percent.

Weather and pest problems reduced Northwest potato yields 5 percent. Washington growers, who have the highest yields in the world, harvested an average 560 hundredweight per acre, compared with 580 a year ago. Idaho and Oregon yields also were lower. Nationally, yields were down 2 percent.

Many growers also experienced a lower quality crop. Guenthner said Northwest potato storage quality is generally good, as it is throughout the United States.

Northwest potato producers face increased Canadian competition under the North American Free Trade Agreement, and Canadian production was up 3 percent in 1998. This was Canada’s fifth consecutive record crop.

U.S. growers may benefit some from excessive rain followed by hard frost that destroyed much of Holland’s crop in the field. “Although the United States does not normally export many potato products to Europe, that could change with this crop,” Guenthner said. “The lack of European competition also allows U.S. processors to gain market share in other parts of the world.”

If there is a bright spot for Northwest growers, it lies in the relative stability of the frozen potato processing market which produces fries for fast food restaurants. This is the largest market for Northwest potatoes. Guenthner said market analyst Bruce Huffaker expects U.S. frozen potato processors to use 10 percent more potatoes from the 1998-99 crop.

Despite the financial crisis in Asian markets, frozen potato exports continue to increase, Guenthner said. If Europe produces another small crop in 1999, U.S. processors will have more global marketing opportunities.

Guenthner also sees demand for dehydrated potatoes as a key factor in the 1998-99 potato market. Dehydrators use potatoes that don’t meet grade standards for the fresh market. Potato shippers’ sales of off- grade potatoes to dehydrators strongly influence the price they pay growers for fresh potatoes.

In the Northwest dehydrated potato flakes are used to make some potato snacks. The U.S. demand for Frito-Lay’s Baked Lays and Proctor & Gamble’s Fat Free Pringles has fallen behind company projections, reducing demand for PNW dehydrated potatoes, Guenthner says. Increased exports of potato snacks would help bolster the market.

“With little change in supply, we can expect little change in average prices for Pacific Northwest growers,” Guenthner says. Open-market prices for the 1997-98 crop were about $4 per hundredweight for most of the season. “Fall prices for the 1998-99 crop are lower than a year ago, leading some to expect another year of prices below production costs,” Guenthner says.

Although costs vary from farm-to-farm and from area-to-area, $4 per hundredweight is almost $1 below the cost of producing and storing potatoes in the Northwest.

Growers who sell on the open market are hoping for another year like 1994-1995 when prices paid in the Idaho open market increased from $3.50 per hundred weight during fall harvest to $10 by summer.

Guenthner said open-market prices normally increase between October and the following July, but that price pattern hasn’t occured since the 1994 crop.

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