Washington potato farmers and processing companies will meet in early March to continue contract negotiations for the 2014 spring planting season.
Dale Lathim, executive director of Potato Growers of Washington, is negotiating on behalf of farmers with the four processing companies that make frozen potato products out of the Columbia Basin — ConAgra Lamb Weston, the J.R. Simplot Company, McCain Foods and Heinz.
Contracts are negotiated every year.
“We anticipate we will have an agreement soon, we just don’t have one yet,” Lathim said.
“We have a meeting scheduled in March and hope to reach an agreement that is fair for both growers and McCain,” said Calla Farn, vice president of government/public relations and corporate affairs for McCain.
Shelby Stoolman, spokesperson for ConAgra Foods, which owns Lamb Weston, declined to discuss details regarding ongoing contract negotiations.
“We are proud to have a significant presence in the Columbia Basin and of the relationships we’ve built with our local growers,” Stoolman said. “We look forward to additional conversations as we work with them to negotiate fair contract values for the upcoming year, keeping our industry strong and viable.”
David Cuoio, public relations manager at Simplot, and Michael Mullen, senior vice president of corporate and government affairs at Heinz, declined to comment.
Negotiations are normally concluded in January, occasionally in February and have gone into March only two other times, Lathim said.
Planting typically begins at the end of February, he said. Farmers will start planting before contracts are finished.
In the last six years, the change in the cost of production has been used as a price-setting model to maintain a profit margin, Lathim said.
Last year, some companies in the eastern United States didn’t follow that model, and some western companies feel those companies have an advantage, Lathim said.
Some offers in areas outside the Columbia Basin – the Midwest and the East – are “well below” the cost of growing the potatoes, said Lathim, also the president of the Potato Marketing Association of North America.
The processing companies are trying to fill excess capacity by lowering price, Lathim said.
“They’re looking for some price concessions,” he said. “Growers are not wanting to do that, they’re wanting to stick with the existing model and not address these additional issues at this time.”
Columbia Basin potato farmers usually contract for 120,000 acres, Lathim said.
He estimates the volume grown on contract to be hundreds of millions of dollars worth of potatoes, which becomes more than $1 billion worth of processed potato products.
“We have a very symbiotic relationship,” he said. “Without the potato processors, we wouldn’t have anywhere near the potato market we have here, we wouldn’t have the need for nearly as many acres. Without the potatoes, the processors have committed hundreds of millions of dollars per plant that they won’t be able to operate.”
Potato yields and quality have been down in recent years due to weather stresses on the crop, so growers haven’t been as profitable as they would like.
“They’re not in a position where they’re hoping to give money back, they were hoping to recoup some money this year,” Lathim said.
If there’s no agreement, growers would likely plant 80 percent of potatoes regardless, Lathim said. They could sell potatoes to anybody at any price without commitment.
“Then it’s just a matter of who’s the better marketer,” he said. “It’s not a good situation because it creates a lot of volatility, and it’s something we want to avoid at all cost, but it is a possibility.”
Going without a contract isn’t desired by either side and would be a last resort, Lathim said.
Lathim is optimistic about the chances of reaching an equitable agreement.
“It’s a situation where both sides are needing the other one to give,” he said. I’m sure there’s some middle ground there we can find that will work for both sides.”
Potato Growers of Washington: http://www.pmana.org/pgw.htm
Potato Marketing Association of North America: http://www.pmana.org/