Potato and vegetable firms in dark this year
The weather is weighing on everybody's minds at the moment but potato and vegetable producers are also wondering how much to plant this year.
As the acreage of both sectors continues to drop, last year the inevitable happened – there wasn't enough of most lines to meet market requirements. Prices took a hike as a result.
However, that was then and this is now. Imminent decisions, on an individual and national basis, will determine the profit from these sectors for the coming 18 months.
Growers are attempting to read the tea leaves on the demand side to see what message the market is giving.
In a properly functioning market, the amount of produce available determines the price. With variable yields, it's impossible to plant exactly the amount to meet exact market requirements.
This means that there will always be some ebb and flow in terms of available produce for sale. However, the potato and vegetable market has not been properly functioning for a number of years.
If, like this year, we were left to our own devices to supply an internal market with internal produce, the market is giving back one message loud and clear: acreage has to increase.
Even in 2010, when we exported thousands of tonnes, it could be argued the acreage was low. If yields had been more normal in 2010, and imports not as high, supply would have been tight that year as well.
Potato yields in 2011 were also high, but a cold spell in early summer of 2012 slowed down the earlies a little and increased demand a little. Stocks dwindled very quickly as a result of very small changes. So supply and demand has been on a knife edge for a while.
However, we're rarely left to our own devices and therefore we have to look at our nearest neighbour to see at what might happen over there.
British farmers are also getting strong market signals to increase acreage and their contracts with the multiples probably will demand it. After the shortages there in 2007, supermarkets demanded that farmers plant more 'reserve' acres.
Most of this reserve is usually not required on the home market when there is a good growing season, so a flood of imports is dumped onto the Irish market with devastating consequences.
So what will happen in 2013?
Credit, good weather, good prices and profit have all been lacking in recent times. As a result, the scarcest commodities in the vegetable and potato sectors have been trust and loyalty.
Many of the merchants who saw the difficulties growers experienced were only delighted to pass on higher prices this year.
However, they operate in a cut-throat world where supply contracts are hard won but easily lost. If one gets access to a cheap load, faxes are circulated and prices can drop very quickly for everyone.
This is capitalism, but as we now know non-regulated markets don't really work in the long term.
A few years ago there were moves to establish a round table dialogue between merchants and growers, but it was an initiative literally washed away with 'events'. Should this dialogue be re-established to the long-term benefit of both growers and merchants?
Unless some moves are made, everyone will be keep in the dark and an over-supply is a real risk. The flip-side is not good either. Consistently failing to meet market requirements is a loss of potential turnover. Buyers don't like not being able to meet their needs, so they end up looking elsewhere to meet demand.
Equally, there is no point investing time, money and effort into supplying a market if cheap produce, available a short backload away, becomes the price maker. In this scenario, prices could be floored by cheap imports regardless of how low the acreage goes.
We need to focus on what we can do. We have the ability to supply, we have the demand and we can supply this produce at a price that growers, merchants, retailers and consumers can live with.
Ní neart go chur le cheile.
Dr Richard Hackett is a crop consultant and member of the ACA and ITCA email: firstname.lastname@example.org
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