Surplus spuds: Coronavirus upends potato industry
Demand for Mid-Columbia potatoes was growing every year — until coronavirus.
Area potato growers specialize in varieties that taste great after freezing, while most Idaho potatoes wind up in the grocery store produce section. Southeast Washington potatoes head to processing facilities like those owned by Lamb Weston or the J.R. Simplot Co.
“The majority of our potato products are for restaurants, schools and other food service operations, rather than retail,” said Josh Jordan, senior manager of communications for Simplot.
When Taco Bell introduced the Spicy Potato Soft Taco and Nacho Fries, that was good for business. So was McDonald’s all-day breakfast with hash browns.
Whenever restaurants offer new potato items, the demand for frozen potatoes rises, and Mid-Columbia farmers plant more, said Dale Lathim, executive director of Potato Growers of Washington.
“What we have is a situation where the industry has been on a rapid growth curve where we’ve had a hard time keeping up with demand for frozen potato products,” he said.
And the foreign market was booming as Asian customers developed a taste for french fries.
“We export 70 percent of what we grow. That’s $300 million worth of french fries to Japan,” said Chris Voigt, executive director of the Washington State Potato Commission. “Demand has been growing every year for the past six or seven years.”
That all changed in March.
“Because the virus has resulted in dine-in locations and schools closing or to operate on a limited basis, it has caused a reduced demand for those products,” Jordan said.
There was no one to watch the Tri-City Americans play hockey — or eat fries at Kennewick’s Toyota Center, which typically serves up 350 pounds of fries during a game, said Rob Chaplin, food and beverage director for the event center. No one in sports bars munching jojos while cheering on March Madness. No one baking Tater Tots at home while tuning into spring training.
“As a result of that, our potato inventory and that of other processors is higher than it would be and our forecasted need against future demand is significantly different than it was prior to the pandemic,” Jordan said. “Those inventories will now go farther to meet or exceed expected demand, which requires us to adjust our forecasted product use and our ultimate purchase from farmers.”
Farmers no longer have a guarantee the potatoes in the ground now will have a buyer for the early-harvest varieties that mature in July and August. Since it costs thousands of dollars per acre to water and tend to those plants, some farmers consider it safer to just plow them under and plant a different crop.
“About 20 percent of acreage has been cut,” Voigt estimated in mid-May. Final numbers won’t be available until July 2020.
That’s about 3,200 acres. Some growers cut 10 percent of acreage, and at least one cut 100 percent, he said. Some are cutting none, hoping the situation improves by July. Varieties that mature in September and October are seeing less of a reduction, but farmers growing July potatoes have cut half or more, he said.
Lathim estimates processing facilities have canceled about 23 percent of contracts for new potatoes. Most farmers will rebound, he said. But Voigt expressed concern for small or young operations.
“If a smaller- or medium-sized grower borrowed $2 million, they hope they’ll have $100,000 to $150,000 left over for their family,” Voigt said. “So if a grower can’t sell half their crop, they just lost $1 million. If they make $100,000 a year, that’s 10 years of income — that’s devastating.”
And insurance to cover “adjusted growth revenue” is expensive and rarely needed. Most growers don’t buy it.
Even if most Mid-Columbia potato farms survive, the industry is responsible for 36,000 jobs in Washington. A 20 percent decline in demand hurts employees at farms, processing facilities, cold storage warehouses, truck drivers, fertilizer dealers, irrigation companies and others, Voigt said.
Jordan said there is optimism as restaurants in various states slowly resume dine-in service, but it has been hard for the food-service industry.
“We echo the calls from the National Potato Council that we must do everything we can at the local, state and federal levels to support the potato industry, including our grower partners, during this difficult time,” he said.
Were all businesses and sporting venues to open immediately and begin serving fries again, there would still be a problem at the cold-storage warehouses.
“Every April 1 we have 3 billion pounds in storage. Processors continue to take those… and run out by early July knowing new ones are coming,” Voigt said. “We’ll never get through those
3 billion pounds by early July.”
The canceled contracts equal about half a billion pounds.
“It likely will be October before the old crop is used up. Half a billion pounds don’t have a home at all. There is no market for them. It’s up to growers to figure out what to do with them,” Voigt said.
The best-case scenario is to donate them to cattle lots, but even that is an expense the farmers must bear, Lathim said.
As of mid-May, most processing facilities shut down and the few operating ones were producing about half of their full capacity, Lathim said. The contract releases equal about $15 million spread across several farms. Those farmers are out there planting, watering and tending costs and must invest in replacement crops now.
“So about a $40 million hit to the growing community,” Lathim said.
Optimism means most potatoes in the ground will be harvested, but what should farmers do next year? Past experience does not help forecast the new normal.
“What is the consumer demand?” Voigt wondered aloud. “No one understands anymore. … They used to know how many potatoes and french fries per week get eaten.”
How long will it take for China to return to its previous consumption levels? Will Americans eat out as often as they did before? Farmers don’t know how much to plant, he said. “There’s no good data.”
And then there are all the familiar factors farmers fret about: weather, yield, quality and regional competition, Lathim said.
Cindy Cooper is worried about something entirely different. She is the plant services program manager for the Washington State Department of Agriculture, specializing in the regulation of seed potatoes, the small tubers farmers buy to seed their fields.
As growers pivot in response to the current challenges and plant new varieties, will they remember all the regulations to protect the region from diseases and blights that may catch a ride on the new varieties?
“Our biggest concern is the stability of the industry,” she said. “As contracts are canceled, will the seed potatoes still be brought in from the usual places?”
Growers are in a demanding situation, she acknowledged. “No one is sure what will happen next,” she said.