Foodservice restrictions have processing potato suppliers unsure how to proceed
Potatoes have a long journey from breeding labs to restaurant fryers. Over a period of five years, or even longer, they’ll pass through greenhouses, seed farms, commercial farms and processing facilities before finally reaching their destinations.
Typically, farms and processors that make up that supply chain would be making plans for the 2021 growing cycle right now. Those folks are all doing something else, however. They’re waiting, uneasily.
With foodservice demand still well below normal due to schools, entertainment venues and many restaurants not operating at full capacity because of COVID-19 concerns, food producers really don’t know what the demand is going to look like next year.
Lake’s customers are commercial processing potato growers, many of which are Washington farms that typically work out contracts with processors before even planting their potatoes in the spring. When COVID restrictions came down in March, just as planting season was starting, processors informed commercial growers they wouldn’t need as many potatoes. Acreage in Washington was down about 12% from normal this year to 145,000 acres.“There are no real answers right now,” said Dan Lake, owner of Lake Seed in Western Montana.
Acreage reduction in Washington means demand reduction for seed growers like Lake, who wound up giving away 1.5 million pounds of unmovable seed potatoes leftover from 2019 — which he originally had contracts for — to be cattle feed. That excess was even after Lake’s 2019 crop was “short” due to less-than-ideal growing conditions.
Lake said he empathizes with the commercial growers and the processors, who were put in a tough spot. He said everyone is in limbo, but added the further down the supply line you are, the more uncertain it is.
“They don’t want to be in this position,” he said of commercial growers and processors. “It is a really sick feeling on the seed side, though.”
With the lack of foodservice and processing demand, the retail and tablestock markets elevated and remained have so as consumers ceased to eat out as often and cook at home more. After restrictions hit, some processing farmers who grow varieties also desirable in the retail market were able to pivot their stocks and sell to stores.
In spite of what most people outside the potato industry might assume, not all potatoes are desirable for produce departments in the grocery stores. In addition to some processing varieties, potatoes grown to be seed for the following year are not meant for retail.
Idaho Potato Commission President and CEO Frank Muir said Idaho’s high-volume growth of Russet Burbank proved beneficial in this case, but acknowledged versatility is not a high priority for growers that specialize to one market, which many do. In the case of seed potatoes, no matter the variety, finding a commercial buyer is extremely complicated.
“Idaho is known for the Russet Burbank and it is the most versatile potato, but it’s also difficult to grow,” said Muir, who later added: “Most of the stories you heard of people giving away potatoes were seed potatoes.”
In Washington, very few acres planted are not contracted when the seed goes in the ground. Growers plant the varieties their processing partners want, grow them to the size they want and store them how they want. This well-oiled system has provided stability for Washington growers over the years versus the growers who depend on “open acres,” i.e. potatoes planted without a buyer contract.
“Our growers were so heavily contracted in the past because that was the way of controlling the risk,” said Chris Voigt, executive director, Washington State Potato Commission. “It was a lot easier to go into a contract with a processor and have an expectation of what your profit was going to be, you don’t have huge swings. You’re not going to be able to take advantage if the price were to double, but you also don’t have to worry about the price being cut in half.
“In this situation, a contract didn’t cover your risk, so it was a lesson we all learned this year.”
In the case of Washington, 95% of state-grown potatoes go to processors. The freshpack infrastructure couldn’t handle the one billion extra pounds growers had in storage in a short amount of time, even if they could find retail buyers.
“It takes (Washington’s) fresh potato industry a year to move one billion pounds of potatoes,” Voigt said. “Now, you have an extra billion pounds and, oh, and you only have three months to move it (in addition to the 250 million pounds that normally moves during that time frame).
“Logistics is the challenge. How would you run that amount through our packing sheds? That’s 20,000 semi trucks.”
Ways to improve?
While everyone hopes the challenges presented by the pandemic are a once-in-a-lifetime occurrence, they do beg the question: has the situation revealed a need for changes?
When asked if he has considered adding varieties with more market versatility, Lake said he has, but added that he’s spent years developing growing techniques for a small number of varieties because, ultimately, the high-volume fry makers want certain characteristics in their potatoes. Growers also have to take disease risk in their particular region into consideration.
“You have to look at what fits your farm,” said Lake, who used potato virus Y threat in his seed-growing area as an example of a disease concern. “At our level, it’s a $250,000 to $350,000 commitment (to add a variety) to the level where (major processors) can do something with it.
“It’s a very expensive and risky venture.”
While open acres carry risk, perhaps the contracted-acre system within the processing and foodservice supply chain needs adjusting. Voigt said the crisis has demonstrated that growers currently carry the majority of the risk in the contracted-acres setup.
“I think there will be some conversations, particularly in contract negotiations, of how to mitigate this type of risk,” Voigt said. “I’m not exactly sure what that will look like yet.”
Muir, who noted that the commission represents all of the Idaho potato industry, processors included, said respect and fairness between suppliers and customers is key.
“That has to happen for the industry to be healthy,” Muir said. “I hope there have been some lessons learned.
“You certainly can’t take the profit out of the grower’s pocket, or else the processor doesn’t have a product.”
In terms of infrastructure changes, Voigt noted that even in the rarest of circumstances that we’ve experienced, consumers didn’t go without food.
“People say our food system is broken, it’s not,” he said. “We actually have the best food system ever. Can it handle a once-in-a-lifetime pandemic? Well, that’s difficult. There were some shortages early on, but people still got food.”
He added that the kind of flexibility required to weather a logistics storm like COVID-19 presented would be to maintain unused production capacity that isn’t realistic.
“The only way you can pivot like that is to have excess capacity,” Voigt said. “Is that financially viable? No, it’s not.
“I don’t think there is an easy solution.”
— By Zeke Jennings, managing editor