The potato industry has been a close reflection of the lockdown, given the entrenched role of potatoes and its particular vulnerability to the closure of restaurants and food service outlets.
At the moment the potato price, especially on large sizes, on the South African fresh produce market is very low. Sales are much down in comparison to the normal pace, not solely because of the lockdown, but following the usual middle of the month trend.
“On Wednesday and Thursday during the past week volumes were slightly lower, possibly because of the recent rain, but potato supplies are currently sufficient on the local market due to low purchasing power,” says Dr André Jooste, CEO of Potatoes South Africa.
The black line shows the potato price on a downward trend (graphic supplied by Potatoes SA)
“This past week the price fell through the floor. The problem is that, depending on where a producer is, he needs between R35 (1.7 euros) per 10kg bag and R45 (2.2 euros) per 10kg bag to break even, and this week the price fell from R39 (1.9 euros) to R31 (1.5 euros) per 10kg bag. This could be catastrophic for many potato producers if one considers the high production and marketing cost of potatoes ranging from R160,000 (7,870 euros) to R240,000 (11,800 euros) per hectare for potatoes planted under irrigation.”
During the first full week of lockdown there were hindrances on the supply side as producers felt their way along the new regulations, but sales weren’t abnormally low during the week of 30 March to 3 April.
“It was the end of the month, people have more money in their pockets, and sales were very similar to a normal week. Given all the disruptions, potato sales were in actual fact quite normal,” he notes.
There was a lot of uncertainty among producers on how the logistics under the newly implemented rules would work, causing some disruption to harvesting and packing that week and supply to the market that, uncharacteristically, only picked up by Thursday.
Welfare organisations contact Potatoes SA for food aid
During the second week of lockdown a lot of supply flowed to the markets as difficulties were sorted out and the situation normalised on the supply side. Only 1.48 million 10kg bags of potatoes were sold during that week (compared to more than a million bags over the two days prior to lockdown). Dr Jooste notes that people don’t have piecemeal jobs, or are sitting at home without an income, definitely playing a role and Potatoes SA are being regularly asked for food by welfare organisations at the moment.
Large sizes especially affected
Quick Service Restaurants (QSRs), informal food services and restaurants usually buy large quantities of large potatoes for chips (French fries) on the markets, but they are all closed. Large potatoes are a premium product for these buyers and compose 20% of the total potato supply on the market.
“This already affects 20% of a typical harvest whose price is very weak. Large potatoes are moving but at much lower prices than usual because that market segment is closed because of regulations. Smaller sized potatoes are selling at a more normal level.”
Informal trade re-allowed
On the fresh produce markets informal buyers are responsible for 66% of national potato sales, and when they fall away it leaves a big gap.
Initially regulations didn’t allow informal traders (street hawkers) to continue trading (a stipulation with very serious food security consequences), but fortunately there was a change to regulations.
“Contrary to belief,” Dr Jooste says, “informal buyers are very serious about high quality product and value for money (as part of the basket of goods they sell), product that will last for two, three days on the corner where they are selling their product.”
Lockdown regulations ring up costs
Potatoes SA has compiled a protocol on compliance with lockdown regulations for its members. “Producers have had to improvise to obtain face masks and hand sanitizers. For the safety of themselves and their workers many farms put themselves in lockdown, which has in turn affected informal sales from the farm [the bakkie trade].”
To maintain the requisite physical distancing, many aspects of farming operations have altered: the carrying capacity of buses and trucks are reduced, necessitating many more trips to transport workers to and from the farm. Every worker needs to be identified as working on the farm and the driver needs to be able to produce a passenger list, certified by the farmer. This increases fuel costs, travelling time and administration.
Some farmers have appointed a person dedicated to overseeing that regulations are followed: break times are staggered, that workers wash their hands regularly, wear face masks and don’t cluster together.
“It’s a whole different framework and everything brings with it additional costs, besides the farmer’s ability to send volumes to the market which is affected. Productivity is also influenced and together with higher costs, it creates significant problems for producers.”
The Western and Eastern Free State, the Sandveld in the Western Cape and Northwest Province are currently the main regions harvesting potatoes.
For more information
Dr André Jooste
Potatoes SA
Tel: +27 12 349 1906
Email: [email protected]
http://www.potatoes.co.za/