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When do old crop prices start being driven by new crop?

Publication Date: 
29 July 2016

Amber Cottingham, Analyst, amber.cottingham@ahdb.org.uk, 02476 478698

Knowing when to sell (or buy) in a season where prices are continuing to climb can be difficult, and if left too late can be challenging. In 2015/16 we have seen prices increase since February, with few weeks showing declines. The Weekly Average Free-buy price reached a peak of nearly £300/t in mid-June (the highest price on records outside of the 2012/13 season) before dropping slightly towards the end of June.

Below we look at the period when both 2015 and 2016 crop has been available on the market for packing, fresh chipping and processing fries in turn. This can begin to tell us if and when old crop prices were affected by the arrival of new crop. 

 

Packing – Grade 1

As shown below, new crop free-buy grade 1 packing whites (early Marfona) have been picked up in Potato Weekly since early July. Old crop grade 1 packing prices began to decrease two weeks after this, likely due to the extra competition as new crop volumes increased. In the week to Friday 22 July, however, there were minimal old crop prices reported, reflecting limited old crop volumes left to sell on the free-buy market. This may have also affected the average grade 1 price as Scottish supplies made up a greater proportion of prices quoted that week.

Prior to the first grade 1 whites being traced, there had been six weeks of new season pre-pack salad potatoes on the free-buy market. During this time, 2015 crop free-buy grade 1 prices continued to rise, suggesting that the salads on the market had little effect on these. This may well be due to the different demand for these – grade 1 whites are unlikely to be substituted for salads in the majority of cases.

 

Fresh Chipping

Interestingly in the last week that 2015 crop fresh chipping supplies were traced, we saw the average price for old season chipping potatoes fetch a premium to new season crops. This was most likely because of the known quality for old season supplies compared with new season supplies reportedly struggling to meet requirements for dry matters. This meant that the arrival of new crop on the market did not have any noticeable impact on the upward trend in average old crop fresh chipping prices this year.

Clearly 2015/16 has been challenging, particularly in the chipping sector because of the warmer than average winter making storage difficult. This was likely a major driver of the high prices for chipping potatoes, on average at an ex-farm price of £196/t compared to the five-year average of £179/t. Alongside this, lower overall production and early clearance of some stocks buoyed end of season prices this year. This may have played a part in dampening the impact of new crop supplies on old crop prices in addition to issues reported with new crop quality and lifting restrictions.

 

Processing – Fries

Processing potatoes for the fries market had begun to see a decline in price into the beginning of July, though with new crop looking to be a little way off, prices made a recovery into the season end of approximately £30/t. With no further old crop free-buy quotes for frying samples reported after the first week in July, when new crop free-buy supplies began to be seen, it’s clear just how tight the supply situation had become. This also meant there was no recorded overlap in free-buy prices in the processing market, making it difficult to assess whether there was (or would have been) any impact on old crop prices as a result of new crop arrival.

 

Concluding comments

By being able to assess the point at which old season prices start to decline and new season crops make a significant appearance in the market, the risk of knowing when to extract the value from any remaining old crop supplies left to sell can be lessened to some extent. In the 2015/16 season, where production was at the fifth-lowest level on record, prices for old crop potatoes remained bolstered into the new crop season. This was related to tight old crop stocks and, anecdotally, a lack of new crop availability in some cases. Subsequently, old crop prices haven’t generally seen large declines as new season crops have entered the free-buy market this year.

Essentially, it comes down to identifying the point when the new crop overtakes the old crop as the main driver of the spot price. With markets moving rapidly at this time of year, opportunities can come and go in a matter of days.  Keep an eye out in Potato Weekly for further analysis to come, where we will look at the same period in previous years to see how old crop prices are affected by the arrival of new crop. This will begin to tell us whether there any patterns to look out for that might indicate trends for future seasons.

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