Potato farming a 'bright light' in UK ag, says Produce Investments

29.09.2016

The potato sector will prove a "bright light" of a UK agriculture sector facing weak prices of the likes of grains and dairy, leading packer Produce Investments said, as it unveiled a rise in its own underlying profits.

While the main UK potato harvest is still in its early stages - with 38,000 hectares cleared as of last weekend, according to the AHDB bureau - "growing conditions experienced so far… would point to an average quality crop and yield", Angus Armstrong, the Produce Investments chief executive.

He noted "a wet and late spring followed by reasonable summer temperatures".

While planted area has risen by an estimated 4.3% from 2015-16, when UK potato output eased by 5.4% to 5.43m tonnes, "we are looking at a balanced market", Mr Armstrong told Agrimoney.com.

According to Kantar, UK potato volumes rose by 1.4% last season, albeit declining 0.7% by value.

'One of the bright lights'

"We have got supply and demand pretty well adjusted," Mr Armstrong said.

"We do not see a great oversupply, but there is enough crop to go around."

The dynamics suggest "returns will be OK for farmers. Growers will be OK this year," he said.

"The potato sector will be one of the bright lights in [UK] agri this season," which has been blighted for many other parts of the industry by low prices for, for example, milk wheat – albeit with some support to values of exported produce provided by the dent to sterling from the UK's decision to leave the European Union.

Many farmers are still smarting from dismal 2015, when total income from the sector in the UK tumbled by 29% to £3.77bn, according to data from farm ministry Defra, which blamed the decline largely on agricultural commodity price weakness.

Price prospects

Potato prices have actually risen somewhat over the last year, estimated by the AHDB at an average of £166.73 a tonne as of last week, a rise of 10.7% year on year.

Free-buy potatoes - that is, those not grown under contract – are achieving £183.48 a tonne, a rise of 18.4% year on year.

Still, given the balanced market, growers should not bank on free-buy prices showing a hefty premium.

"Whilst it is still early in the season and therefore difficult to make predictions, we would expect prices for non-contracted free-buy potatoes to be in line with those that have been contracted," Mr Armstrong said.


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