Potatoes are one of the most volatile crops grown in the UK, with prices easily shifting £50 a tonne and more within a season, never mind between seasons. There can be big profits to be made but also big risks, with returns in some years less than the cost of production.

When a grower considers what area to plant, there are many factors taken into account, not just the economics of it. Most will look at what land is available to them, what capacity their machinery has as well as what their storage and equipment can handle.

Many will also consider how profitable their potato enterprises have been in recent seasons. This is the starting point from which we can explore historical trends, and the impact of the previous season’s price on the next season’s planted area.

Historical data shows us that planted area is more likely to increase if particularly high prices have been achieved in the previous season. However, attempts by growers to capitalise on high prices by planting more can often result in lower free-buy prices. This is mainly because yields are weather dependent and lack predictability, while the potato market is fairly inflexible to over- and undersupply.

Yields for potato crops have largely plateaued in recent years (see chart below). Despite not climbing as they have done in previous years, there are still large year-on-year yield changes that can diminish the impact of increased plantings.

Comparing planting behaviour with price reactions during the season, we can see that large supplies in 2014/15 resulted in average prices falling by 17% (approximately £27 a tonne) when compared with a year earlier. Consequently, the lower-value 2014/15 crop offered less incentive to plant potatoes for 2015/16 and contributed to a reduction in planted area of 7% (around 9,000 hectares). Despite record yields to some extent alleviating the impact of lower area, supplies still became tight and prices increased to be the second highest on record by the end of the 2015/16 season.

After prices increased, 2016/17 saw growth in planted area to 116,800 hectares (from 112,000ha in 2015/16). Although planted area was higher, production fell once again due to yields being lower than average. This meant 2016/17 season prices started high and, aside from a brief seasonal decline, remained buoyant until around Easter time when confidence in the potential for a larger crop in 2017/18 caused a decline.

This season, as anticipated after higher prices, we have seen planted area increase again by 5% and this has been compounded by very high yields, delivering a very high overall production of 6.04m tonnes. The outcome has been a drop in free-buy prices of more than £150 a tonne (compared with end January 2017).

The chart above shows the historical relationship between the price difference compared with the previous year and area planted. This shows pictorially the positive effect an increase in prices in a season has upon planted area in the following season. Conversely, lower prices lead to lower areas. Looking at the results, 2010/11, 2012/13, 2015/16 and 2016/17 are all higher-priced seasons, following on from years of either reduced planted area or yield-driven reduced production.

Price-led area changes affect production directly; these changes are either alleviated or accentuated by year-on-year yield volatility. Although there is information out there that can help us to understand the volatile potato market, it’s still very hard to forecast what can happen from one year to the next.

There will always be speculation about what could happen, but without knowing what the weather will do it is very hard to see clearly what will happen. However, we know that growers will be making planting decisions in advance based upon current market signals.

As such, for the 2018/19 season, we can talk about a 5% decrease in planted area being a possibility, and this could bring production into a range of 5.2m – 5.8m tonnes (based on a low yield of 45t/ha or a high yield of 50t/ha).

Clearly, the most important aspect for any grower is to weigh up the options available to them. Whether it be to grow on contract, where price and returns can be reasonably secure, or to take on more risk and use the free-buy market to ride the tide of volatility. However, with contracts becoming more popular with buyers, the appetite for free-buy supplies will be diminishing, making it a potentially smaller and even more volatile market to operate in.

Using clear and concise market information, such as AHDB’s Potato Weekly report or the Potato Data Centre , can improve market awareness and inform future decision-making. In addition, understanding cost of production is essential; to help with this, AHDB has developed a bespoke online benchmarking tool, Farmbench .

Overall, having a clear marketing plan weighing up current market signals and all selling options against your personal business goals provides the best base for managing market volatility and other upcoming challenges.

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