Growers profit by selling late-season fresh spuds
By JOHN O'CONNELL
REXBURG, Idaho -- Rhett Summers and some of his neighbors within eastern Idaho's Rexburg Bench are among the few fresh potato growers who will turn a profit on the 2012 crop.
The perception of a bumper crop drove fresh potato prices well below production costs throughout most of the marketing season. Then in June, prices began a steady climb, playing perfectly into the marketing strategy for which the bench's growers are known.
They typically hold onto their spuds, mostly Russet Burbanks, until just before the next harvest, hoping for thin supplies and price gains in excess of their added storage costs.
Rhett explained the bench's high elevation and volcanic soil produces especially dense spuds with thick skins -- ideal for long-term storage. The tradeoff is somewhat lower yields than valley farms.
Prior to the development of modern refrigeration equipment and storage techniques, bench growers filled a niche, supplying high-quality tubers from July into September. The Summers have held onto their spuds late since they built their first cellar in the early 1980s, hauling in ice during hot summer months. Technology has enabled other growers to try the same strategy, increasing the odds that more spuds will be available late in the season.
"It's not the home run that it used to be in the 1980s," said Rhett, who has taken to selling beginning in mid-June to reduce his risk. "The guys have caught on there's a niche there for late-market potatoes. I'm not going to put as many eggs in that basket as my father did."
University of Idaho Extension economist Paul Patterson estimates storing potatoes into June -- factoring in labor, shrinkage and loss, interest, depreciation of storage facilities and equipment and refrigeration -- may add up to $2.65 per hundredweight to a grower's production costs, which total about $6.69 per hundredweight in the Rexburg area. The 2011 crop is a case study in the risks of holding spuds late.
"Last year, the market peaked out in latter June, and we sold on a declining market," Rhett said. "More times than not, it's a stressful time of year. I've watched my dad grow gray hair marketing potatoes like this, and it makes me nervous to gamble because there are so many variables."
Rhett's father, Gary, believes he benefitted because 2012 crop reports omitted a key detail -- that quality was below par, and warehouses had to run a higher volume to fill demand for cartons of marketable, No. 1 bakers.
"We couldn't be happier really, but somebody suffered to get us there," Gary said.
Rhett was forced to sell one cellar of spuds in March, at $3.75 per hundredweight, because he was renting from another producer who needed the space. By June, he was hopeful that prices would reach $5. He's now selling in the $14-$15 range.
"This is the year I would call the black swan year. We did not see this coming," Rhett said, adding the industry lost hundreds of millions of dollars due to incomplete information.
Bench grower Joel Ashton attributes strong late-season prices to marginal crop quality, as well as yield and acreage estimates he suspects will prove to be inflated.
"We've still got cellars we're just starting to get into," Ashton said. "It's paid off this year."
Brad Early, an Idaho statistician with the USDA's National Agricultural Statistics Service, said his agency is now contacting growers for their final dispositions and will release a revised 2012 potato production report on Sept. 12.