So Far, So Good
Potato co-op
achieving mission
to bring some
stability to market
By Stephen Thompson,
Assistant Editor
n the fourth
anniversary of its
founding, United
Potato Growers of
America is successfully
carrying out its mandate. It is
protecting its growers from market
volatility — not by focusing exclusively
on restricting their production, but
most importantly by giving them the
information they need to make good
decisions.
In 2004, potato farmers were facing a
crisis. They were used to a rather
unique way of doing business: an
average of three out of five years they
would lose money on their crops. Two
of those years they’d make enough
money to make up their losses and turn
a profit.
Although it wasn’t an ideal way to do
business, many producers managed to
prosper. But then things started to go
south. Potato consumption fell, in part
because of the popularity of low-carb
diets. Prices fell, too. Potato farmers
started looking for a way to stabilize the
market.
The result was a new national
growers’ cooperative (featured in Rural
Cooperatives in the March/April 2004
issue, shortly after it was formally
organized at a meeting in Washington,
D.C.). Idaho potato grower Albert
Wada, the founding board chairman of
the co-op, had started United Fresh
Potato Growers of Idaho the year
before. He thought the best remedy for
the huge market fluctuations was to
form a federation of state co-ops that
would work to better balance supply to
demand.
Wada’s idea was embodied in the
“United We Stand” program, which
sought to better target production for
market demand much the same way
U.S. dairy farmers have achieved.
Central to the plan was improving
communications regarding market
conditions and local growing conditions
between members and their state coops,
and between the state
organizations and the national
cooperative.
Using the information gathered, the
program called for withdrawing a
calculated percentage of acreage from
production, if necessary. If that didn’t
do the trick, the next step would be
restricting harvests. To make the
program work, the cooperative would
need a “critical mass” of farmers in each
potato-growing region of the country.
Substantial progress
Today, United Potato Growers has
succeeded in making potato growing
profitable again, but it has managed to
avoid taking formal post-planting
actions to decrease supply. Instead, says
current President and CEO Lee
Frankel, most of its success is the result
of educating growers to be better
businessmen and giving them the
market information they need to make
the right decisions.
“Our plan has shifted from
exclusively reducing acreage to defining
the market,” says Frankel.
Board Chairman Allan Floyd helped
found the co-op’s Pacific Northwest
affiliate, United Fresh Potato Growers
of Washington/Oregon. He puts it
another way: “It used to be people just
planted the crop and hoped for the best.
Nobody knew what the total
consumption of potatoes was.”
Now, he says, for the first time
growers have an accurate idea of supply
and demand, and can choose how much
to plant using that information. “We’ve
all dropped acres, because we were just
growing too many potatoes,” he says.
Key to the co-op’s success is its
ability to gather and analyze potato
market information. This data is
gathered from growers, government
agencies (such as the USDA National
Agricultural Statistics Service), potato
shippers, the food industry and other
sources. The national co-op then
generates a market analysis.
Using these data and the analysis
developed by the national co-op,
members meet and decide informally
on how many acres to plant that year.
Frankel says that some of the acreage
reduction has come about through
buyouts and mergers, some of which
combine different customer bases and
thus allow for more marketing
flexibility. He notes that members of
state co-ops sometimes informally trade
planting “rights.”
Gauging the market accurately
Having accurate market information
also allows the co-op to use surpluses in
one area to fill needs in others. “Last
fall we identified in advance an excess of
red potatoes in one region,” says
Frankel. “We were able to find a home
for those potatoes with other growers
who had contractual obligations they
needed to fill.”
In some cases, delaying shipments to
market by a week or two can make the
difference between having an
oversupply and getting a satisfactory
price. At other times, when prices are
low, members have access to additional
data to help them determine if prices
will be more favorable later, allowing
farmers to reap profits.
The point is to ensure predictable
income without wild pricing swings.
Frankel says, “Our goal is normal
profits, making sure prices are even. We
want sustainable pricing levels.”
The cooperative’s effectiveness is
enhanced by its continued growth.
Membership in the affiliated regional
co-ops keeps increasing, and recently
farmers in Minnesota’s Red River Valley
and in the Southwest came on board
with their own affiliated co-ops.
There’s still room for growth,
however. “I guess the definition of
‘critical mass’ is different for
everybody,” says Floyd. “We’re not as
big as I’d like us to be, but we’re getting
bigger, and our members are happy.”
Frankel says it is possible that an
oversupply at some future time could
require formally withdrawing product
from the market, according to the
original blueprint.
“We’ve had luck on our side for the
last four years,” he says. “The weather
has cooperated in keeping things on the
trend lines. We may get a year with 10-
percent higher yields, and then we’d
have to fall back on other methods.”
The current economic downturn
may bring new challenges, too. But, he
says, “So far, so good.”
