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Costs of potato production trends revealed at BP2015

There may be a small decrease in the costs of potato production this year for the second year running, but the long-term trend is for them to increase.

 

This is partly because the price of red diesel has gone down by almost 25 per cent, and fertiliser costs are benefiting from a 4 per cent drop in the cost of nitrogen.



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Speaking at BP2015, Bidwells partner Neil Cameron said the downturn in profitability in the arable sector also means machinery prices are not going up so quickly, with second-hand models cheaper to buy.

 

Nevertheless, smaller growers are still tending to sell-out to bigger enterprises as the industry continues consolidating, he said.

 

“We are seeing an increasing scale of potato operations which is resulting in higher professional standards.

 

“However, although these businesses are benefitting from some economies of scale, they are seeing cash costs go up. This includes working capital for rented land and storage, and they have additional labour costs as they replace any unpaid family labour in small businesses.”

 

Growers considering exiting the sector should give careful consideration to replacement cropping, how they plan to use their existing facilities such as buildings and whether they can implement the changes in a cost effective way, he added.

 

“Impacts of not being able to rent the land and storage facilities out must be carefully considered before going ahead.”

 

There is good news too, he said. New potatoes, packaged potatoes, and organics appear to be the on the up.

 

Specialist small sector potatoes, such as heritage, are also enjoying growth, and the frozen sector is also doing well, with McCain’s Foods reported to be planning for significant growth.

 

“Shoppers are taking increasing interest in provenance and are prepared to pay for it, which is good news for our industry. We also need to continue to identify, capture and exploit value-added whenever opportunities occur,” said Mr Cameron.


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