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What’s going on with packing whites?

Publication Date: 
18 November 2016

Arthur Marshall, Analyst, arthur.marshall@ahdb.org.uk, 02476 478956

This year, GB average prices have got off to their second-highest season start, behind only the exceptional 2012/13 season. Within the overall picture, packing whites have been particularly firm – noticeably pricing higher than Maris Piper and higher than last year (see below). What’s going on?

The background

Much of this has been driven by the supply picture and the story starts from two seasons ago, when markets were especially weak. Following 2014/15, we know that the area reaction for 2015 plantings was relatively strong, with the total GB potato area down by over 7%. However, looking solely at packing whites, there was actually a 16% area cut (from over 20,000ha in 2014 to c.17,200ha in 2015).

After last year’s strong prices, with packing whites making some of the largest price gains in the second part of the season, plantings did increase once more in 2016. Even though packing whites also saw a larger scale gain than average (+6% compared to +4% overall), this still kept the area around 18,200ha – under 20,000ha for the second consecutive year.

Supply outlook this season

Reports widely suggest that yields this season are average at best, and in some cases below average. We expect to be able to release 2016 yield and production figures soon, but in the meantime we can look at the effect of average yields on the packing white supply picture.

Despite the higher area this year, a 10-year average pre-pack yield of 46.8t/ha would mean GB packing white production would fall again from last season (see below). Prior to last year, GB packing white output had only dipped below 1Mt once in 10 years, in the exceedingly unusual 2012. In 2015, production had fallen to around 878Kt and average yields would imply a lower figure again in 2016.

Tighter supply – and more concentrated in Scotland

As well as generally higher prices this season, looking at the relative English/Scottish prices on the graph earlier, the market is already pricing in a wider spread between English and Scottish prices than this time last season. As at w/e 4 November, Scottish whites reached an average discount of £28/t to English whites, compared to being at a £4/t premium a year before.

The gap has narrowed again a little in the latest weeks, but there are a number of drivers that could continue to support a widening differential.

Generally, the wider the spread gets, the higher the incentive for English buyers to look to bring potatoes south. In other words, a larger spread is more likely to cover haulage costs. There are of course other factors that influence the spread – difference in common payment basis between Scotland and England for example – but it is the direction of change that is particularly interesting here.

In 2014/15, the discount often reached over £40/t. Anecdotally, this generally allowed Scottish whites to competitively reach the Humber. Prices are most likely to open up this difference when Scottish supplies are relatively stronger than English.

The strongest gains in the packing white area in 2016 (and considering only ware crops) came in Scotland, with a c.800ha area gain out of a national c.1,000ha increase. On an area basis alone, 29% of GB packing whites were planted in Scotland this year, from 26% last year and very similar to 2014’s 30%.

Alongside reports of generally better yields and lower wastage in Scotland compared to England, an even greater proportion of actual production may well come from Scotland. It is likely that more buyers will have to look towards Scotland again to source packing whites this season – if English prices rise further compared to Scottish this would induce movement.

 

Concluding comments

What is going on with packing whites? The planted area remains disproportionately hit by the large potato area rationalisation last season and with yields looking lower this year supplies appear be tighter again. Naturally, this is supporting prices, which continue to trade at high levels historically.

With a larger concentration of those packing whites that are available located in Scotland this season, the price effect in England is additionally strong. If buyers south of the border need to look to Scotland, markets need to rise sufficiently to make this cost effective.

We have been seeing packing whites trade at higher prices than last year, above Maris Piper, so far this season. The outlook suggests price support may continue across the picture and furthermore, could continue to support English prices over and above Scottish this season. However, the key piece of the puzzle will be confirmation of 2016 production – keep an eye out in Potato Weekly and on potatoes.ahdb.org.uk in the coming weeks for when this is released.

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