Bruce Stevenson insights – Potato sector

Bruce Stevenson Insights

Potato sector

In the 2015 CAP reforms, potato growers will, for the first time, be eligible for subsidy.

As a crop, potatoes cannot be grown on the same ground in successive years due to disease issues. This means that potato farmers will often take land on a 1 year lease.

It is estimated that it costs a farmer over £2,000 per acre to grow potatoes.

The total Scottish income for 2014 dropped year on year from £275 million to only £105million.

This was as a result of several factors:

  • There was a bumper crop in 2014 due to the good weather and thus supply outstripped demand.
  • Russia banned EU imports.
  • There has been a fall in consumption of potatoes by the consumer.
  • The retailers are lowering prices as there is increased competition to win market share.
  • Also the storage and haulage costs have increased which also reduces profitability.

A retailer may sell potatoes for between £500 and £1,500 per tonne. The farm gate price that the grower receives is only £50 per tonne.

This equates to a 2.5kg bag of supermarket potatoes being sold for £3.00 but the farmer will only receive a payment of 12p for the same 2.5kg bag.

With the excess supply of cropped potatoes, there is a need to sell at any cost in order to clear storage space and reduce associated costs. Surplus potatoes may well be sold as animal feed. The price received for this is likely to only cover the cost of transporting the potatoes to the purchaser with no contribution to the actual growing costs.

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