RUSSET POTATO IN TIGHT SUPPLY

Potato Market Update

Tuesday, June 3rd, 2008

Russets                                                                                                                                                                            

This report is intended to be informational about the state of the russet potato industry nationwide and let you know about the coming crops start dates, expected quality, and associated topics that have impact on our industry.

The North American russet market has been very active over the last few weeks and projections are that this will continue throughout the summer months due to very low supplies of US #1 product in all growing areas.  The market has increased nearly 35% and looks to continue trending upward as demand exceeds supply in all the major areas. 

Idaho

The pack-out in Idaho has been at near record lows, averaging below 50%, mainly due to shape.  The previous summer was extremely hot and the heat stress caused the crop to grow poorly, resulting in a lower yield per acre than a normal year (5-8% less per acre).  Acreage was also down last year slightly.  The heat also caused overall size profile to be down approximately 10% than we have seen in the two previous years.  The combination of these factors has limited Idaho shipments and demand has been higher than supply every day for the state.

The crop is expected to last into mid-July at the pace we are packing now.  Early estimates for new crop are mid-August.  The weather pattern has been extremely cool and the potatoes are way behind in their growth cycle.  Overall acreage in Idaho is expected to be down by 6-10% this season as many farmers were convinced to switch land to wheat as the two-year contracts were at the highest point they have been at in a decade.  Variable costs for the Idaho farming community have risen 19-24% from last season due to the higher cost of petroleum and natural gas, two key components in fertilizer and agricultural chemical applications. Fertilizer costs are up nearly 300%.

Summary

The Russet market will be tight over the summer months and prices will be higher than most of us have seen in many, many years.  Most russet areas are down in acreage for the fall crop, so the long-term dynamics of the potato market could be changed for the future.  Prices are up on all inputs to the potato growing process and other commodities are offering better returns to the farmer.  Bio-fuel crops are also making an impact on the fresh market and land rents are skyrocketing.  Bear with us for this difficult period in the russet industry and thanks for your continued support.

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