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What do Scottish and English prices tell us about packing supplies?

Publication Date: 
26 February 2016

Arthur Marshall, Analyst, arthur.marshall@ahdb.org.uk, 02476 478 956

The potatoes pre-pack market is the second largest market in Scotland, with over 40% of intended area grown, second only to the area grown for seed. Typically, Scotland produces more packing potatoes than are used locally and ‘exports’ those surplus to requirements to England. There are many reasons why a surplus would occur including the balance of production and packhouse requirements, and seed tops being sold for packing.

One of the main reasons that Scottish ex-farm packing prices are usually lower than comparable packing prices in England is due to the need to take larger haulage costs into consideration for these additional stocks. However this season, the difference between Scottish and English packing prices has generally been less pronounced than usual (averaging under £20/t compared to around £30/t last year). This suggests that there is not as much of a surplus of free-buy packing supplies in Scotland as in some previous years and that there is confidence that the Scottish crop can meet much of the local packing requirements. However, the difference has been widening in the last few weeks, which could indicate this position is changing.

 

Regional price relationships

Understanding regional ex-farm price differences can be important for understanding how regional supply and demand are evolving. There are a whole host of factors that affect regional pricing, a key example being the payment basis of local buyers (e.g. weighbridge weight or paid on packout), but a lower ex-farm price in one region compared to another encourages supplies to move from over to under supplied regions. In other words, if there is a surplus in an area, the market needs to find a level where those supplies can reach buyers elsewhere at a comparable cost to supplies nearer that buyer – resulting in a lower ex-farm price after haulage is taken into account.

This means that the changes in regional price relationships within and between seasons can be a good indicator of how local supply and demand are evolving. In this analysis, we are using the price series produced for the new look Potato Weekly to illustrate dynamics between Scottish and English free-buy packing prices.

 

So what can we see this season…?

With the evidence we have available, although Scottish free-buy whites prices have been lower than English samples on average, the difference has not generally been as wide as last season (as narrow as £11/t in November and January). In addition the differential has not been large enough to result in as many supplies heading to English buyers as normal according to market participants for much of the season so far. Could this mean that there is not as large a surplus of free-buy packing supplies in Scotland as in other years?

Possibly, but the last few weeks this has been changing. As shown above, the difference has widened noticeably throughout February, now reaching similar levels to last year around £30/t. Recent reports suggest that movement into England has started to increase. Nonetheless, this has happened much later than last season.

A broadly similar trend applies when looking specifically at Maris Piper. For King Edward however, there does not appear to be any real price differential between England and Scotland this season, which shows how the picture can vary when considering individual varieties.

One potential contributor to the fall in the differential between packing prices in Scotland and those in England this season is likely to be the greater drop in Scottish production compared to English production. A major driver of this was the even greater cut in Scottish pre-pack plantings compared to English – the Scottish pre-pack area for 2015 was down 15% year-on-year compared to 9% for England. As shown below, Scottish production as a whole fell 9% into 2015 while the English crop was only 5% lower.

 

Looking ahead

The difference between Scottish and English packing prices has been smaller than usual so far this season but looks to be changing. This will be partly driven by the extent to which Scotland has a surplus of free-buy packing supplies that need to head into England to find demand.

Planted area trends will be the first indication of how this might pan out next season, although yields will clearly be important too. In addition, it is important to consider the other factors that might affect regional supply and demand, including local packhouse requirements and import/export progress. As soon as information becomes available for the 2016 crop, it will be reported in the new-style Potato Weekly.

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