Supermarket price wars hit potato sector as costs rise

Published on Saturday 26 November 2011 00:00

The headline figures may claim that the Great British potato industry last year had an annual sales value of close to £1 billion for the 2,500 producers in the sector but this season there is a great deal of financial pain, particularly for those supplying the fresh market.

While the average ware price from the 2010 crop ended up at £161 per tonne – the highest figure for well over a decade and above the cost of production – this year returns are well below the break-even point and over the past three months have been gradually squeezed down.

Part of this comes from pressure from the pre-packers who are in turn under pressure from the major retailers who are discounting to gain market share.

None of the pre-packers attending the annual industry event at Harrogate this week were willing to discuss the issue openly but it is known that one major packer is currently paying his growers well under £100 per tonne and another stated that the practice of discounting did nothing to increase overall sales.

The chairman of the Potato Council, Allan Stevenson, would only talk about the general situation but he said he was very concerned about it.

“The immediate problem in the industry is a lack of profitability,” he said. “That is the number one issue.”

He admitted the potato sector had always been one of “feast or famine” but said that cost predictions for next year were quite frightening. “Growers need to ask if they can make a profit at these levels before they plant,” he said after listening to Jay Wooton, of consultants Andersons, put the break-even cost of production at £124 per tonne for a 45 tonne per hectare crop next year.

Wooton added that figure would rise if land rent and finance were added to the equation and he warned that a range of factors including continued volatility in input costs might push the sums up even further.

The problems faced by growers are less acute in the processing sector and in the seed industry. In the former, long-term cost tracker schemes are in place adjusting to input price hikes.

And although it is unlikely that Scotland will break last year’s seed potato record export trade when 100,000 tonnes left these shores, the season has started well with substantial tonnages already despatched to Egypt.

l The winner of the Dr Jim Hardie award for services to the Scottish seed potato industry this year is Sandra Goodfellow who is in charge of the nuclear stock at the Science and Advice for Scottish Agriculture headquarters at Gogar Bank, Edinburgh.

Her work involves providing the healthy virus-free core stock to producers, a task she has carried out for 30 years. At the presentation, Goodfellow was described as one of the unsung heroes of the industry.