UPGA working to improve national market
by Tad Thompson | January 07, 2010
As the Red River Valley red potato industry rolled toward 2010, prices were down dramatically from the pervious year's strong market.
In light of a crop volume that was down 15 percent from 2008-09, there was a sense of frustration on the part of the Red River Valley industry. The feeling was that no matter how well the crop was managed, there was downward market pressure from a huge overabundance of russet potatoes coming from other areas.
On Dec. 22, The Produce News asked Lee Frankel, president and chief executive officer of the Salt Lake City-based United Potato Growers Association of America, to comment on what the association plans to do to improve the national potato marketing situation.
First, Mr. Frankel confirmed, "Potato yields set new records in most major production regions."
He said, "The fresh market is seeing more potatoes than normal both from the impact of yields in addition to inflows from the processing sectors. Demand for frozen-processed is down, with sharp declines in export volumes compared to levels seen in the second half of 2008. Dehydrators appear to have contracted more potatoes than they needed."
Mr. Frankel said that the association "is utilizing our Capper-Volstead exemptions to find an orderly way to do what naturally happens when prices are low. That is to raise minimum quality standards to increase customer satisfaction and movement of our members' product. This program builds upon the success of growers in the Red River Valley in balancing supplies with current demand. The idea is to stay on top of inventories and know what's going on. The Red River Valley growers make sure that their packers increase the cull rates for product that cannot be readily sold and would otherwise end up as a distress sale with potential quality problems after sitting on the sales floor for several days."
Some potato-producing areas are already involved in this program. "This is something that has been happening and more regions will be joining in." This will be fully "in place by early January, once all of the regions are on board." He said that the industry has "plans and will be packing better quality going forward. It is a work in progress. We will have things going on a more national basis in the next few weeks."
Mr. Frankel added that the program requires "a bit of flexibility" to balance all the competing needs.
"Other growing areas will attempt to duplicate the success of the [Red River] Valley growers by being more aware of inventories - knowing how much to pack and what they will be able to sell so they do not have an inventory that no one wants to buy. The key is to fully utilize the resources of UPGA to make sure we can avoid creating inventories with product the market doesn't need or want that ends up deteriorating, ultimately raising costs to the buyers and creating dissatisfaction with consumers."
Mr. Frankel said that United will be using various market indicators "to assure we are doing what we intend to do, which is to have a higher-quality product to encourage repeat sales and try to generate demand-side momentum to match up with supplies. As we receive more feedback, we will zero in on what's happening to keep prices attractive to consumers and offer a product that helps increase pull-through on the demand side."
The advantage of this is that "as opposed to each grower, packer and region operating in a vacuum, our role is to have accurate information communicated between regions to avoid producing an inventory that doesn't have a home. Basically, United is working on a program that is to make sure that the consumer has a higher-quality product that will help increase the demand pull in a way that benefits consumers, retailers, wholesalers, foodservice operators, packers and growers."
He continued, "While the specific actions of the program are considered business confidential, it is designed to be flexible enough to allow for continued active promotion for the benefit of the trade and consumers." United chapters are generally individual states, but some also cross state regions, such as in the Red River Valley and the Columbia River region between Oregon and Washington, Mr. Frankel said.
He noted that the uses for product that does not make grade will vary region by region. Some will go into starch and dehydrated products and canned potato markets, displacing a product that was cull quality to begin with. So the processor also receives a higher grade.
He added that a challenging issue for the potato industry is making commitments for sales to dairies and cattle feeders. "Those businesses need steady feed supply sources, so sales for livestock feed can't be switched on and off. Potato growers can make contracts for several months, selling off- market products in a targeted way in a tough season. This opens up the cattle feed market for us."
(For more on Red River Valley potatoes, see the Jan. 11, 2009, issue of The Produce News.)