Track trade metrics, growers told

Monitor business metrics to remain profitable, growers advised at Potato Council's BP2013 event.

Potatoes

Growers need to carefully watch all business metrics to remain profitable given the high level of risk, high capital investment and often low margins involved, the Potato Council's BP2013 conference in Harrogate (27-28 November) has heard.

Describing 2012 as "a wake-up call for all of us", Bidwells partner Neil Cameron said: "It made us think about risks in the industry. For some, 2012's losses will take a long time to get over, though others did very well."

But challenges go back further, he went on. "There's a big difference in the cost of producing a potato compared with five years ago. Fertiliser prices were on a five-year level until 2008, then tripled in a month. They tend to follow wheat prices globally, and these are now softening worldwide. Fertiliser costs have actually seen significant falls in recent months, with dealers struggling to get rid of stocks."

Meanwhile, fuel "has stabilised a bit in the last two years, but electricity prices have kept going up - that's a key factor if you are storing", he pointed out.

Benchmarking against other growers "tells you which area of your business you need to focus on", Cameron suggested. "Sold yield per hectare is your key performance indicator, but take an average over a number of years rather than just one year in isolation."

Stuart Thomson, partner at supply-chain consultancy EFFP, said: "Some people like the volatility, which is fine if you can manage it."

According to Dan Hewitt, managing director of Norfolk grower group Nelson County Potatoes: "We aren't growers, we are risk managers, and growing for crisping is high-risk - we have to be on the nail every time."

He added that within the group's 16 growers "we watch each others' backs" to mitigate risk. "We seem to get a lot of spikes. We have to work out with customers how to reduce those or I genuinely fear for where we go."

On current trends, Hewitt said: "There will be the same tonnage but fewer growers, each hoping that volume will get them there but who will be exposed to even greater risks."

Staffordshire grower James Daw said: "If there isn't the reward we shouldn't be doing it." But he added: "We are looking at things like soil mapping to reduce variability, which can be enormous even in one field. There are opportunities - the market is still growing."

Input - Steady prices

Despite the swings in yields and prices of the past two seasons, input prices have not changed greatly. That is set to continue in 2014, with only a slight overall rise of 0.7 per cent expected, according to the Potato Council.

Small forecast increases in the cost of labour, machinery, seed and electricity will be largely offset by lower fertiliser prices, the organisation explained.


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