Colorado Potato Outlook 2007

1. Colorado Potato Outlook 2007 Prepared by Jennifer Bond, CSU-DARE

2. Outline Industry Overview Production projections, exports Colorado Focus Supply Factors Weather, Pests, Competition Demand Factors Dollar Deflation, Promotion, Min Size Increase Shipping Point Prices and Fresh Shipments Outlook Summary Management Applications What do changing market conditions mean for producers?

3. Current HarvestU.S. Potato Projections Highlights U.S. exports at highest level since �99 Heavy flake, processed (fry) shipments to Canada August fresh export up by 23.9% over �06 Exports to Europe also up France (up 15.85%), Germany (up 45.52%), UK (19.57%) Tight supply in fresh market Stocks of frozen potatoes likely to remain tight for several more months Data generally indicates a shift towards processing potatoes Potato Marketing Associates (leading fresh produce and floral trade association)and United Fresh Produce Associated (leading trade association) ended talks of a merger in July Early estimates find that the Idaho yields are down 6% from last year. Quality product but hot summer reduced size, yield of crop. Holiday production schedules will make it hard to maintain frozen inventories during Nov. and Dec.Potato Marketing Associates (leading fresh produce and floral trade association)and United Fresh Produce Associated (leading trade association) ended talks of a merger in July Early estimates find that the Idaho yields are down 6% from last year. Quality product but hot summer reduced size, yield of crop. Holiday production schedules will make it hard to maintain frozen inventories during Nov. and Dec.

4. U.S. Total Production Fairly consistent pattern of production. Estimated production for 2006 sets totals below those realized in 2003 and 2004 by nearly 30 million cwt despite gains over 2005�s relatively small crop. Canadian market should be watched-crop is projected to be 11% higher than in 2005. Likely to limit demand for new-crop U.S. potatoes. Fairly consistent pattern of production. Estimated production for 2006 sets totals below those realized in 2003 and 2004 by nearly 30 million cwt despite gains over 2005�s relatively small crop. Canadian market should be watched-crop is projected to be 11% higher than in 2005. Likely to limit demand for new-crop U.S. potatoes.

5. Colorado, Western, & U.S Summer Production Growth in the U.S. Total Summer production is driven by: A 63.3% increase in Virginia�s production, this year�s yield is a record 300 cwt per acres-exceeds the July forecast by 70 cwt/acre!! Overall increase of 15.4% Eastern total summer production and overall increase in Central total summer production of 12.6% Colorado�s 19.%% decline in summer potato production is the driver in the decline in total Western Potato production. Other western states: California, New Mexico and Texas all report at least minor percentage increases in summer production. Growth in the U.S. Total Summer production is driven by: A 63.3% increase in Virginia�s production, this year�s yield is a record 300 cwt per acres-exceeds the July forecast by 70 cwt/acre!! Overall increase of 15.4% Eastern total summer production and overall increase in Central total summer production of 12.6% Colorado�s 19.%% decline in summer potato production is the driver in the decline in total Western Potato production. Other western states: California, New Mexico and Texas all report at least minor percentage increases in summer production.

6. Colorado, Western, and U.S. Fall Production U.S. Fall potato production is expected to increase by less than 1%: Drivers: Western producers are going to fall short of �05 levels. Crops in Oregon, Colorado, and Washington are expected to be down. Central growing regions expected to produce 6.9 million cwt more than in �05 primarily due to yield not acreage increases Eastern growing regions will produce a bit more (1.9 million cwt) more potatoes than �05 though this expectation is somewhat dependent upon weather conditions in New York. U.S. Fall potato production is expected to increase by less than 1%: Drivers: Western producers are going to fall short of �05 levels. Crops in Oregon, Colorado, and Washington are expected to be down. Central growing regions expected to produce 6.9 million cwt more than in �05 primarily due to yield not acreage increases Eastern growing regions will produce a bit more (1.9 million cwt) more potatoes than �05 though this expectation is somewhat dependent upon weather conditions in New York.

7. Fall Potato Varieties (8 states reporting)

8. U.S. Potato Exports-POUNDS

9. U.S. Potato Exports-DOLLARS Fresh export to the world Down ~7% in first 8 months of �07 (rel. to �06)

10. U.S. Fresh Exports to Mexico Mexico (first 8 months of 2007) May be an important developing fresh market for U.S. & CO Barriers to trade still exist Mexico must uphold its end of the NAFTA agreement CO numbers may be deflated due to 3rd party transactions

11. Colorado Focus

12. Colorado Overview Highlights Adverse weather affected yields, quality of fresh Better year than expected water-wise Increased runoff helped to recharge the aquifer Change in minimum size profile 2� diameter via 1 7/8� PVY issues persistent, growing? Demand for clean seed, potential legislative involvement Exports for seed, fresh, and other are up across the board Several markets show potential, need attention Consumers demand fresh, healthy potatoes

13. Colorado Acres Harvested However, do have aggregate acres for Colorado from NASS which indicates a decline in acres planted to 59,900. Fewer acres of red potatoes are being planted, Differing maturity on same acres due to replanting has lead to later harvest than usual to allow crop time to �bulk up� However, do have aggregate acres for Colorado from NASS which indicates a decline in acres planted to 59,900. Fewer acres of red potatoes are being planted, Differing maturity on same acres due to replanting has lead to later harvest than usual to allow crop time to �bulk up�

14. Colorado Potato Yields Due to weather issues, the CO weighted average Russet yield is expected to be down relative to past years. Down significantly in fact-estimated to be as low as 330-340 cwt/acre-will update when the seminar gets closer. Due to weather issues, the CO weighted average Russet yield is expected to be down relative to past years. Down significantly in fact-estimated to be as low as 330-340 cwt/acre-will update when the seminar gets closer.

15. Colorado Variety Breakdown Changes are relatively small and may be due to sampling error Some changes that stand out are: decrease in Russet Norkota from 60.3 to 50% in the Russet category this change may be driven by the lack of available seed and/or buyers� demands PVY problem may have lead to Russet Norkota planting issues, no certified seed program, leads to problems controlling pests when not using cert seed-generally not an issue. Replanting of cert�d seed is common-climate facilitates it. But because of growing problems tough growers across the state (majority) voted to have a cert�d seed program-will be taking this to the legislature soon. PVY problems-Russets particularly susceptible because it is harder to see the expression of the disease.Changes are relatively small and may be due to sampling error Some changes that stand out are: decrease in Russet Norkota from 60.3 to 50% in the Russet category this change may be driven by the lack of available seed and/or buyers� demands PVY problem may have lead to Russet Norkota planting issues, no certified seed program, leads to problems controlling pests when not using cert seed-generally not an issue. Replanting of cert�d seed is common-climate facilitates it. But because of growing problems tough growers across the state (majority) voted to have a cert�d seed program-will be taking this to the legislature soon. PVY problems-Russets particularly susceptible because it is harder to see the expression of the disease.

16. Colorado Overview FWA $.56 lower than last year, $.96 lower than Idaho Burbank avg Lower shipping point prices and smaller size profile GRI $.34 higher than Idaho�s average Due to higher packout rate Gri only reflects potatoes shipped via states packing sheds 35% of Co�s fresh potatoes shipped bulk to repackers

17. Colorado Overview Unfavorable Summer Weather Wind damage Early-June storm injured emerged crops Cloudy, wet weather and hail storms Later harvest to let crop �bulk up� Supply gap By 10/20 95% of fall harvest out of field compare to 99% in 2006 October Freezes Oct 7-9th Damage to green ends, avoided major damage Potato Yield down Lower tuber count Pots. of different maturity on same acres Poor skin set in some cases

18. Colorado Overview PVY control a political �.. Potential legislative action to require use of cert�d seed Slight majority of growers approved of collective action Negative externalities exist This year PVY hit the seed industry hard �loss of second Generation of seed� Will be difficult to find seed stock, more com. growers likely to dip into own reserves May make PVY issues worse in long run PVY �epidemic� Knew it was coming as aphids were really prevalent last year and they spread the disease Said to be so bad that the certified seed growers lost a generation Gen 2 seed had nearly all above tolerances-downgraded to Gen 3 PVY has been shown to reduce potato quality via reducing weight, also reduced certified seed stock Commercial growers who would have bought cert�d seed but found that it wasn�t available PVY �epidemic� Knew it was coming as aphids were really prevalent last year and they spread the disease Said to be so bad that the certified seed growers lost a generation Gen 2 seed had nearly all above tolerances-downgraded to Gen 3 PVY has been shown to reduce potato quality via reducing weight, also reduced certified seed stock Commercial growers who would have bought cert�d seed but found that it wasn�t available

19. Colorado Overview Last year� Worries that supplies were backing up due to slow demand, competition from Kansas This year� Fear of running short if back shipments are not throttled (NAPMN) State raised min size (2 inches from 17/8) Change will reduce the supply of marketable potatoes Water Issues Remain But good runoff year has helped to recharge aquifer

20. Supply Factors New Varieties Gaining Steam ~10% decline in total Russet Norkota use Centennial Russet up Others up (Canela) Fewer reds, pos. due to issues w/powdery scab Labor Uncertainty Tightening labor market Disease PVY-Russets particularly sucp. Experts at APHIS warn: �Be on the lookout for Potato Cyst Nematode� Found in Idaho Untreated can cause up to 80% yield loss

21. Demand Factors-Foreign MarketsOverview

22. Demand Factors-Foreign Markets Asia Boost in demand for fresh, great prices Japan allowing some processing potatoes Taiwan particularly interested in seed, recent visit Top 4-8 seed importing countries are Asian Mexico Still considered to be market of �greatest opportunity� for CO However has not fully lived up to NAFTA CO growth in share, dollars of fresh mkt U.S. seed exports on the grow, CO�s share of sales falling, CA growing Hispanic�s, especially low-income unassimilated Hispanics represent an important source of growth in demand for low-priced, available-in-bulk commodities. No or Negative growth in fresh potato consumption among middle and high income groups. However, not true across all potato varieties-specially potatoes including reds and Yukons are experiencing growth in demand. Growth in demand for potato products including french fries and chips. New source of potato product growth: Fresh Prepared Market: The United Potato Board is excited about this possibility has conducted some research: discovered one problem-in different grocery stores, the fresh-prepared potatoes were located in different areas. Examples: in the produce section and in the dairy case-where will consumers look for the potatoes? Need to work with grocers to effectively market the new product. Hispanic�s, especially low-income unassimilated Hispanics represent an important source of growth in demand for low-priced, available-in-bulk commodities. No or Negative growth in fresh potato consumption among middle and high income groups. However, not true across all potato varieties-specially potatoes including reds and Yukons are experiencing growth in demand. Growth in demand for potato products including french fries and chips. New source of potato product growth: Fresh Prepared Market: The United Potato Board is excited about this possibility has conducted some research: discovered one problem-in different grocery stores, the fresh-prepared potatoes were located in different areas. Examples: in the produce section and in the dairy case-where will consumers look for the potatoes? Need to work with grocers to effectively market the new product.

23. Demand Factors-Foreign Markets Canada Canada, increase in fresh demand (+23.9%) CO share of seed market to Canada on the decline Down 48.5% 2005: $114,482, 2007: $55,549 Uruguay, Canada, & Chile largest CO seed markets Caveat-export numbers are estimates Out of state packing and re-packers likely downward bias estimates, may also skew

24. Demand Factors Fresh Domestic Market Consumers place greater value on health attributes Willing to pay for local and other value-added attributes Value-Added Organic production Is the organic bubble about to burst? Production on the rise in the valley-but still very small Fingerlings Mountain King is packing Whole foods, others selling Packaging matters

25. Demand Factors Domestic Promotion Programs UPSB, healthy potato Export Promotion Programs USPB program stimulates demand for frozen potatoes in Mexico New Products to address consumer trends Phoenix Fury Potato Chips Burger King Potato Chips Two studies declare: �Potatoes Healthy!� �May help dieters lose weight!� So long Atkins effect, hello healthy carbs (including potatoes) No or Negative growth in fresh potato consumption among middle and high income groups. However, not true across all potato varieties-specially potatoes including reds and Yukons are experiencing growth in demand. Growth in demand for potato products including french fries and chips. New source of potato product growth: Fresh Prepared Market: The United Potato Board is excited about this possibility has conducted some research: discovered one problem-in different grocery stores, the fresh-prepared potatoes were located in different areas. Examples: in the produce section and in the dairy case-where will consumers look for the potatoes? Need to work with grocers to effectively market the new product. No or Negative growth in fresh potato consumption among middle and high income groups. However, not true across all potato varieties-specially potatoes including reds and Yukons are experiencing growth in demand. Growth in demand for potato products including french fries and chips. New source of potato product growth: Fresh Prepared Market: The United Potato Board is excited about this possibility has conducted some research: discovered one problem-in different grocery stores, the fresh-prepared potatoes were located in different areas. Examples: in the produce section and in the dairy case-where will consumers look for the potatoes? Need to work with grocers to effectively market the new product.

27. Outlook Summary U.S. Crop Benefiting from low $ abroad Potato product exports up 11% across the board Fresh exports (in pounds) up 23.9% thru Aug. Dollar value of exports is down 7.38% thru Aug. Colorado Crop Slow start to the harvest Lead to decline in Sept., Oct. shipments Production down by ~3 mil cwt PVY continues to be an issue Water concerns somewhat lessened-for now Continue to produce exciting new varieties Opportunities domestically and abroad Norm, I think this one�s pretty self-explanatory and just a simple summary. Let me know if you�d like any additional information. Thanks!JenniferNorm, I think this one�s pretty self-explanatory and just a simple summary. Let me know if you�d like any additional information. Thanks!Jennifer

28. Management Applications Budget Exercise to illustrate the financial implications of this year�s prices Sensitivity analysis to be conducted to illustrate effects of� Different cropping decisions Fresh vs. Seed Russet only vs. Russet and �other� mix Different management, irrigation, acreage, land rent assumption Variability in output prices Info from NASS, WA State Extn, AgroEngineer, SLV Research Center, CO-CPGA

29. Thank you! Questions?