Opinion Jurphaas Lugtenburg

Even Greenpeace criticizes potato pricing

July 4, 2024 - Jurphaas Lugtenburg

Greenpeace Belgium has launched an attack on the Belgian potato processing industry. With the report 'Record profits for the industry, peanuts for the farmers', the environmental organization makes clear how they view the potato sector. From the agricultural sector, the environmental movement is not seen as a natural ally and there are also considerable criticisms to be made of the report. However, at its core, a very valid point is made: the farmer is not getting out what is potentially there.

Seven players (Clarebout Potatoes, Agristo, Lutosa (part of McCain), Mydibel (now owned by Clarebout), Ecofrost, Farm Frites Belgium, and Aviko Belgium) together hold about 90% of the Belgian potato market according to Greenpeace. There are still some remarks to be made about the key figures on the processors in the report summary. A comparison is made between 2021 and 2022. It may seem like a while ago, but in 2021 we were still dealing with plenty of COVID-19 measures. Don't get me wrong, the processors have been able to present impressive figures in recent years, but it seems that they are taking the cream of the crop.

What the environmental organization conveniently leaves out is that potato prices for farmers have also risen significantly in recent years. Contract prices have increased by tens of percentages in the last two years. For free potatoes, records are being set for the second year in a row. Costs for farmers have also risen sharply. Especially for farmers who did not harvest everything last season and are now struggling to get all the seed potatoes in the ground, it is not all gold that glitters. Overall, there doesn't seem to be the greatest dissatisfaction among fryers about how the potato market is currently functioning. Compare it to wheat, where the selling price in a good year has dropped much more than the cost price, or onions, which are a bit of a lottery.

Belgapom under fire
Where Greenpeace, in my opinion, hits the nail on the head is that processors have a very strong influence on the formation of the potato price. 70% to 75% of the turnover is through contracts. In Belgium, this is mainly done with tonnage contracts instead of hectare contracts as is customary in the Netherlands. If the farmer cannot deliver the contractually agreed quantity, he may end up paying the difference between the contract price and the price on the free market if things go wrong. The price on the free market is largely determined by the Belgapom quotation. Farmers do not have a voice in that pricing committee. It consists of three members from trade and three from processing. Ultimately, trade and processing determine which prices are included and which are not. It is not surprising that Belgapom reacts as if bitten by a snake to the report in Vilt.

Strengthening the bargaining position of the farmer in the potato chain is not a crazy suggestion from Greenpeace from that perspective. The idea of proper controls and sanctions on unfair (trade) practices will also appeal to farmers. One of Greenpeace's solutions is to unite farmers. However, it has been shown in the past that this is very difficult. Initiatives in that area have rarely succeeded. Greenpeace calls on the government and cooperatives to take a leading role. This could help in contract negotiations. However, those agreements are mainly concluded directly between the farmer and the processor. A trade organization or farmers' association seems to be a better party for that.

Strengthening cooperatives does not solve the underlying problem in the free market. As a 'mediator' in the free market, traditional potato cooperatives face the same problem as farmers. If the potatoes are not there, almost anything can be sold to the processors at almost any price. If it even seems that there are enough potatoes, buyers slam on the brakes. Just think back to what happened during the harvest last autumn.

Market protection
Another recommendation from Greenpeace to abolish the Belgapom quotation and replace it 'with price mechanisms that reflect the actual market conditions and production costs' sounds nice, but how do you implement that? The idea that prices for potatoes and agricultural products in general should never fall below the cost price of sustainable production, as Greenpeace argues, sounds sympathetic, regardless of what is meant by sustainable production. Advocating for the phasing out of 'pesticides and synthetic fertilizers' and putting organic farming on a pedestal this season does raise questions about how well the environmental organization has delved into the technical aspects of cultivation. In Europe, we have experience with the original Common Agricultural Policy (CAP) system of market protection and guaranteed prices. It was not a success, or maybe it was too successful, depending on how you look at it. That system was drastically reformed in the early 1990s for a reason.

The question of how it should be done remains a difficult one. As farmers, we should be scratching our heads that even an organization like Greenpeace is raising concerns about the distribution of profits in the potato chain. Initiatives such as the Potato Consumption Producers Organization (POC) or attempts to revive the futures market are being taken to give farmers a stronger voice. However, it is difficult to get enough farmers on board. Apparently, potato farmers are quite content after a few financially good years.

Jurphaas Lugtenburg

Jurphaas Lugtenburg is a market specialist in onions, carrots, and commodities such as wheat, corn, and soybeans at DCA Market Intelligence. He combines his degree in business administration with a passion for farming.
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