IFA: Potato growers get just 30% of consumer price in retail squeeze

POTATO growers are taking just 30% of the consumer price, and are coming under severe price pressure from retailers, according to a new IFA membership survey.

Like all other food producers, potato growers are adding their voice to calls for the Government to introduce a statutory Code of Practice for the retail sector, the IFA’s Trends and Challenges in Irish Potato Production report argues.

The report singles out the shop window use of cut-price potatoes as a promotional ploy as being a particular problem for the sector. This practice undermines the retail value of potatoes, because all players in the chain are required to supply at a price that “fits” this price model. In most cases, reductions are passed back to growers, often leaving them with prices below the cost of production.

IFA national potato chairman, Thomas Carpenter, said: “There is pronounced downward pressure on farmgate prices with the concentration of buying power of the top three retailers, which control nearly 80% of the market.

“The grower share of the final retail price is 30%, because the aggressive tactics employed by the multiples for market share are weakening the bargaining power of the grower and the loss-leader approach is undermining the retail value of potatoes.

“We have to see a statutory code of practice for the retail sector that will ensure that costs of production and a margin are covered,” he said.

Mr Carpenter said there was also an urgent need for more effective market structures, including consolidation and the establishment of producer groups.

The results of the survey are based on information from potato growers from 2009-2011. The survey identifies the main varieties grown in Ireland, county breakdown for planting and the costs for growers. Growers spend over €3,100 to produce an acre of potatoes. Fertiliser prices are up 25% and field operations are 8% more expensive because of higher fuel prices.

The IFA report also draws attention to a growing competition between growers and merchants/packers at the retail supply stage of the chain, as in many cases both now offer washing and packing facilities.