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January potato stocks in detail: Diverging market implications

Publication Date: 
21 March 2019

Peter Collier, Analyst, Peter.Collier@AHDB.org.uk, 0247 647 8851

GB potato stock levels held by growers at the end of January were estimated by AHDB at 1.84Mt. This is higher than at the same point in 2012, but only slightly below 2016, another tighter supply season. The rate at which potatoes moved out of growers’ stores between harvest and the end of November was below average. This was largely the result of a lengthened marketing year for the 2017 crop.

Yet while the headline figure shows the general trend for potato drawdown rates (i.e. the rate that stocks move off farm), individual sectors have separate requirements with distinct market implications.

Bagged fresh and chipping sector

Our estimate for end of January stocks intended for the fresh bags and chipping market stood at c.289Kt. While down c.136Kt on the year, stocks are in line with the 2015 and 2016 crop marketing years. To give an indication of what end-March stocks could look like, we applied an average drawdown rate for the 2015 and 2016 seasons of 153Kt. As shown in figure 1, this suggests that March stocks could well be between the same level as recorded in 2015 and 2016.

Considering the current elevated market price but comparable stock levels to 2015 and 2016, price movement will now to a large extent depend on the development of earlies. Should good planting and development conditions continue, the bag market may continue to slide. Yet, should adverse weather prevent planting or harm development, an extension to the marketing season would support the bag market price (see figure 2). 

Prepack

Our data indicates prepack stocks at the end of January, while below the high stock levels recorded for the 2017 crop, are above the levels recorded for the 2015 and 2016 crop. Additionally, the drawdown rate from November to January was 22% down on the previous three year average in part due to the lengthened 2017 season. As such, January pre-pack stocks may appear higher than market expectations considering the summer drought. With a three year average drawdown rate applied, March stocks may well continue to be larger than the 2015 and 2016 crop stocks at the same point in the season. This can be seen in figure 3.

The reduced drawdown rate and available stocks has led to the free-buy market for grade 1 whites in England to have largely drifted sideways since the summer (see figure 4). However, free-buy grade 1 Scottish whites prices have been trending downward from the August peak, in part due to the availability of Scottish stocks.

Currently Scotland holds approximately 33% (c.607Kt) of the total Jan stocks figure according to our latest estimate. The rate that stocks are moving out of growers’ stores is also lower than for the rest of Great Britain. This larger availability of stocks relative to England, has consistently pressured prices in recent weeks. This has reportedly increased the movement of Scottish supplies within GB and to continental markets.

Given that January packing stocks are relatively ample at this stage, we may see this pattern continue moving forward with price competitive good quality Scottish supplies limiting upward price movement in the free-buy packing market.

Processing

According to our latest estimate, end of January stocks for the processing sector at c.486Kt are 18% below the 2015 and 2016 crop year average stock level for the same point in the season. This is a slightly tighter position compared to the end of November. Since November, movement of processing supplies out of grower ownership appears accelerated compared to previous years.

During the December and January period, growers reported issues with getting stores down to correct temperatures as a result of the unseasonably warm winter weather. In addition, a higher prevalence of rots and breakdown, particularly in frying varieties, was reported during this period. As a result, growers may have moved more at risk material before further deterioration.

The situation has now reportedly lessened for the most part and drawdown is unlikely to continue at the same pace for the rest of the season. However, if you apply the 2015 and 2016 average drawdown rate to the current situation, it indicates that March stocks may be below 2015 and 2016 levels. Figure 5 shows this. 

Conclusion

The summer drought impacted production and availability of supplies for all sectors, yet the extension of the 2017 crop has mitigated much of the tightening stocks and supply. With overall end of January stocks, and potential for the end of March stocks to be below previous seasons, the development and availability of the early crop will be important to prevent potential tightening toward the end of the season. As such, providing good planting and development conditions are realised, the potato prices in many sectors may continue to slide. However, should a weather event prevent the planting or harm development, an extension to the marketing season would be supportive of the free-buy market price.

However, despite a possible tighter stocks scenario, the impact on prices in some sectors may very well be restricted. For example, supplies from the packing market with adequate dry matters have already been purchased by processors earlier in the season. This has potentially limited the need for processors to purchase large volumes of free-buy supplies.

For market news and prices keep up to date with the latest Potato Weekly, released each Friday. Additionally, the latest industry facts, figures and statistics can be found on Potato Data Centre.  

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