Courtesy J.R. Simplot, Co.
EAGLE, Idaho — Any processor planning to build a new frozen fry plant would be wise to locate it in Idaho, according to a recently completed economics study funded by the Idaho Potato Commission.
Joe Guenthner, an emeritus University of Idaho economics professor, and Amanda Jaeger, a consultant contracted to help him, compared costs of building and operating a fry plant in eight different locations, as well as transportation costs from those locations to major fry markets.
The list included Idaho, Washington, North Dakota, Wisconsin and Maine in the U.S., and Alberta, Manitoba and New Brunswick in Canada.
The study, which the economists started in March and presented to the IPC on Oct. 25, analyzed a hypothetical plant with a capacity of 50 tons per hour of finished product. The economists determined Alberta would have the cheapest potato processing cost at 27 cents per pound, followed by Idaho at 27.5 cents and Washington at 27.8 cents.
Guenthner explained Alberta benefits from lower costs due to a weak currency relative to the U.S. dollar. Though Washington can produce raw potatoes cheaper than Idaho, the Gem State comes out ahead in the report with its construction costs, labor costs and taxes.
However, Guenthner explained, Idaho’s advantage is clear when costs of shipping to the major markets are considered. The study evaluated truck and rail freight costs to 21 U.S. destinations and four destinations in Canada, as well as truck, rail and boat shipping to four foreign markets outside of Canada. Alberta had a freight advantage to one major market, Washington’s costs were lowest when exporting to the four foreign markets, and Idaho had the lowest shipping costs to 24 markets. “Idaho can put fries cheaper into Seattle than Washington can because its processing costs are lower,” Guenthner said.
One processor, McCain Foods, is already undertaking an Idaho expansion, investing $200 million to boost production at its Burley plant. Guenthner believes the industry is poised for further growth.
“I understand most or all processing plants in North America are running at full capacity, and growth in demand is coming from overseas,” Guenthner said. “The industry is growing, and there will be expansion somewhere.”
IPC President and CEO Frank Muir plans to present the report to the major processors soon. He’ll also show it to the Idaho Department of Commerce, and will urge officials to prepare an economics package to offer processors mulling an Idaho expansion.
The report also listed some “intangible” advantages Idaho enjoys over other locations that weren’t financially quantified.
“We have more flexibility with land, no problems with water and we also have a better labor pool, with less contract labor prices going up as is happening in Washington and Oregon,” Muir said. “And in Idaho, we have a brand, and no other state or Canadian province can even talk about having a brand.”