Steve Molnar, the chief potato buyer for Wise Foods Inc, is worried he may have a hard time next year getting some of the spuds his company uses annually to make US$210 million worth of potato chips.
US farmers planted fewer potatoes this year, and dry weather damaged tubers in Idaho, the biggest growing state. The government forecast a 12 percent drop in production and the smallest harvest in six years. Prices are up, boosting costs for the US$35 billion US chip and french-fry industries.
"Whoever has extra potatoes this year is going to be sitting in the driver's seat," said Molnar, who last year bought about US$23 million of potatoes from his office in Berwick, Pennsylvania, for Wise, a private company that sells chips from Maine to Texas.
"I'm telling our management we've got to be pretty cautious." Chipmakers such as Wise, Herr's Inc and the Frito-Lay snack food business of PepsiCo Inc use about 10 percent of the US potato crop to make US$5 billion a year of their salty, wafer-thin snacks. About 30 percent of the crop is used to make US$30 billion of fries by companies such as McCain Foods Ltd, the top producer and a supplier to McDonalds Corp and Wendy's International Inc.
"The processors' costs probably will be higher -- not enormous, but measurable," said Frank van Schaayk, president of McCain's food service group.
Consumers may also feel the pinch. Supermarket prices for fresh potatoes may jump 50 percent by next spring or summer, said University of Idaho economist Joseph F. Guenthner. A five-pound bag (2.27kg) of white potatoes may rise to US$2.99 from US$1.99 by next spring, Guenthner said.
"The price is going to rise, no doubt about it," said Charles Plummer, the USDA's potato forecaster. "It's going to be big." The average American eats about 144 pounds of potatoes a year, 60 percent of it in the form of chips, fries or other processed products, according to USDA estimates. About 26 percent is baked or boiled potatoes. Only China, Russia and India grow more potatoes than the US.
The root of this year's tuber shortfall can be traced to last year, when the nation's 8,000 potato farmers harvested 23.31 million tonnes. The record haul swamped the market and drove prices down for a crop valued at US$2.6 billion.
Ron Olsen says he lost about US$5 million on the 2833 hectares of potatoes he planted last year on his Rexburg, Idaho, farm. This year, he planted 2024 hectares. He's selling 45kg bags of Russets for US$6, double the year-ago average and well above the US$4 to US$5 break-even price.
"Last year just devastated everything we ever did, so we cut back," said Olsen, who expects a US$2 million profit this year.
After farmers cut potato acreage 8.4 percent this year, production fell even more because of damaging weather, including too much rain in Michigan, and droughts in New York and Maine.
The US crop probably will total 20.41 million metric tonnes, or the equivalent of 450 million bags of 45kg each, Plummer said.
Average on-the-farm prices may climb to US$7 per 45kg bag, up 38 percent from last year and the second-highest price ever, the USDA said.
With the harvest almost complete, the next crop of new potatoes won't be available until April, when California and Florida farmers collect winter crops that account for just 3 percent of US production. Idaho, Oregon and Washington produce about 56 percent.
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