Process potato industry struggles

Dave Wilkins/Capital Press Ranger Russet potatoes are loaded for planting May 1 near Rupert, Idaho. Farmers in the nationÕs No. 1 potato state are planting the new crop as they struggle to sell the remainder of the 2009 crop in a down market.

Processors cut back on shifts, facilities to limit costs

By DAVE WILKINS

Capital Press

Potato farmers have been hit with a spate of negative trends lately: Flat consumption, increasing supply, declining open-market prices and cutbacks by processors.

The ConAgra Lamb Weston plant at Prosser, Wash., is scheduled for closure May 30.

The company has also announced plans to shut down one of its french fry lines in Twin Falls, Idaho, this fall.

McCain Foods has plans to eliminate one shift at plants in Prince Edward Island, Canada, and Plover, Wis., according to industry officials.

Dale Lathim, executive director of Potato Growers of Washington, doesn't see a turnaround for the industry anytime soon.

If process potato growers can't make it under existing contract prices, it's probably time to look for an exit plan, he said.

"Things probably aren't going to get dramatically better anytime soon," he said. "I think what you see now is what we're going to have for the next year or two."

Frozen potato products are no longer in the dynamic growth phase they once were, said Lathim, who also serves as president of the Potato Marketing Association of North America, a trade association that represents process potato growers.

With the global recession, demand has fallen off and processors have found they have excess capacity.

Unable to push french fry prices higher, processors have been forced to cut costs, Lathim said.

"They are taking their least efficient plants, their least efficient shifts and eliminating them to focus on the more efficient ones," he said.

In the long run, the elimination of excess processing capacity will help everyone in the industry, Lathim said. It's far better than the industry continuing to produce more fries than the market needs.

Processors have cut contracted potato acreage in the Pacific Northwest this year by an estimated 10 to 15 percent.

Growers who plant more than their contracts call for -- in the hope of selling the excess on the open market -- are taking a big risk, Lathim said.

It's likely that those excess spuds will further depress fresh market prices, he said.

"You find that nine times out of 10 those potatoes will sell at or less than the contract price," he said. "It really doesn't do any good to plant them."

The recent cutbacks aren't entirely due to sluggish demand, industry officials said. Farmers and processors have both become more efficient.

Growers are producing more pounds of potatoes per acre than ever before, and processors are utilizing a greater percentage of raw product coming into their plants through higher "recovery" rates.

The result: Fewer acres are needed to produce the same amount of finished product.

Links

Potato Growers of Washington: www.potatoes.com

Potato Marketing Association of North America: www.pmana.org

Lamb Weston: www.lambweston.com

McCain Foods: www.mccain.com

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