How the Brits do it

‘Five buyers for an entire industry simply doesn’t add up in a free market scenario,’ writes Mike Cordes.

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One of the keynote speakers at the recent Potatoes South Africa (PSA) bi-annual congress in Cape Town was Dr Robert Clayton, director of the British Potato Council (BPC), who gave an insightful overview of communication and technology transfer in Britain’s industry.

I was particularly interested in his comments on price formation. The British don’t have commission markets like we do, where prices are set on a daily basis.

Their system, which seems to work for them, is interesting. Britain has 2 300 potato farmers on 130 000ha. As potatoes are a summer crop, they put around 4 million tons a year into storage for winter – and farmers do a lot of that storage themselves.

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Dr Clayton said farmers’ have two selling options: Contracts and free buy on farm. Farmers sell around 80% of their production via contracts.

Britain also imports potatoes from some of its European neighbours. To establish weekly average prices, a BPC team conducts weekly tele-surveys with both growers and buyers. These tele-agents are usually senior people who have both the experience of the industry and the contacts among farmers and buyers. They collect data on both upper and lower prices, volumes available, varieties on offer and other relevant production data.

The BPC collates this information, which is made available to role players and put on the BPC website every week. Volumes in storage and the weather are key factors determining these weekly averages. The BPC is levy-funded and it was interesting to hear how it uses the levies to best advantage. It seems to be closely involved with its growers and buyers and has several initiatives to gather and disseminate information or provide statistical support for the industry.

It was alarming to hear that there are just five supermarket groups who buy 90% of the crop. My first instinct was that this isn’t healthy and potentially lets buyers manipulate the market. Five buyers for an entire industry simply doesn’t add up in a free market scenario. I’m not suggesting it doesn’t work for British potato farmers but would have liked to hear more.

The way the British establish potato prices clearly works for them. The potato sector – through the fully representative BPC – runs its own show with minimal government interference. That’s how I like to see it done!

Email Mike Cordes at [email protected].