Washington potato farmers have rejected pre-season contract offers from the three major processing companies.
"They each gave us what they considered their final offer, which we rejected but is going to be on the contracts that go out to the growers," said Dale Lathim, executive director of Potato Growers of Washington. "Each individual grower can decide for themselves whether they want to sign it or not."
The organization negotiates contracts with the potato processors on behalf of more than 60 farmers representing 85% of the region's volume, Lathim said.
The organization reports a weighted average instead of any individual contract prices.
Representatives of McCain Foods, Lamb Weston and the J.R. Simplot Co. did not respond to requests for comment.
Growers face at least a 4% increase in their cost of production this year, but the processors have dropped their price 3%, Lathim said.
"That 7% swing is a very big blow to the growers and one that many of them cannot afford," he said.
Growers typically commit to grow in September of the year prior, either renting land or preparing land they own with fertilizer and ordering seed as soon as they're done with the previous year's crop, Lathim said.
"Growers had pretty well committed more than $1,000 an acre to what they were going to grow this year," Lathim said. "That would be sunk cost if they went to another crop. So unfortunately, many of them really don't have a lot of choice."
Some farmers had not fully prepared all of their acreage, in case such a situation arose, he said. Those farmers have the option of raising other crops, including dry beans, peas and field corn, which will provide a higher return per acre with less risk compared to potatoes.
Last year, Washington potato farmers planted 145,000 acres.
Growers aren't likely to put in more potato acres, but processors are looking for more production than last year. A new processing line will start production at McCain Foods in December, Lathim said.
"The number will be up over the 2020 crop, but ... it's not going to be as high as it would have been if the price had been better," Lathim said.
Farmers who own their land likely won't see a loss, but the lower price will reduce their returns, Lathim said. Growers who rent land will risk $5,000 an acre to make roughly $100 to $200 an acre, he said.
"It's a sad commentary on the state of this industry," he said, adding that the frozen potato product sector is "amazingly profitable."
"To have this happen at this time is a real blow to the growers," he said.
While they were profitable last year, processors are trying to recoup revenue they lost in 2020 because of the COVID-19 outbreak that shut down many restaurants, Lathim believes.
"The processors had a tough year this last year because of COVID," he said. "Growers did, too, but we can't pass that along to anybody else."
Growers have a "known model" in place with processors to project the cost of production for the coming year. Negotiating into spring gave more time to establish what the actual price might be, based off a strong projection, he said.
The state's Agricultural Fair Practices Act requires growers and processors to negotiate in good faith up to 30 days before planting, he said.
"This year, they threw that system out — there is no longer that known trust there," he said. In the future, "growers are not going to get land ready and make arrangements for the crop until they know what the price is."
Negotiations for 2022 crop year contracts will begin this summer, Lathim said.
"If we don't have them done by the first of September, you will definitely see a pretty strong reduction in acres for 2022," he said.