Analysis of Economic forces Affecting the Potato Industry (FY 2010)
The potato industry operates in an increasingly competitive global marketplace. Important issues that affect the competitive position of the potato industry in both Idaho and the US include: consumer demand shifts, organic potatoes, biotechnology and zebra chip disease. Demand for frozen fries appears to be declining. Possible reasons include (1) an anti-obesity campaign that targets oils used to cook frozen fries in quick service restaurants and (2) rapid growth of fast-casual restaurants and sandwich shops that do not serve fries. Demand for fresh potatoes has also been declining. Market analysts suggest that consumers view fresh potatoes as healthy, but are substituting foods that are more convenient to prepare. Health concerns lead some consumers to purchase organic potatoes. They have been willing to pay higher prices for potatoes grown
without pesticides and chemical fertilizer. Organic potato producers have been selling for higher-than-conventional prices, but production costs are also higher. Planting certified seed potatoes is a recommended practice to control many potato pests, but organic seed potatoes have been scarce due partly to the difficulty of meeting certification standards. Since it takes three years to transition from conventional to organic, growers are reluctant to make investments to produce organic seed potatoes without an understanding of long-term demand for organics. Biotechnology is another force that impacts potato markets. Anti-biotechnology activists shut down the market for genetically-modified (GM) potatoes in the 1990s. Monsanto, the main GM potato player, abandoned the product but researchers continue to use GM technology to develop new potato varieties. Some of these varieties have been
tested in developing countries where GM regulations and approval are in early stages. If GM potatoes become accepted in developing countries, they may then become accepted in the US, Europe and other developed countries. The U.S potato industry has recently been dealing with a new pest - Zebra Chip (ZC) - which causes serious quality problems in chip and frozen potato processing. Industry experts have suggested that infestations of ZC could affect up to 40% of potato acreage in some regions. The impact of ZC losses not only jeopardizes the financial viability of potato growers but has a rippling effect throughout the rest of the potato industry and regional economies. A better understanding of these four categories of market forces would enable people in the potato industry to make better-informed decisions. The project leader has a network of industry contacts, and writes a column for a
potato industry trade magazine. He intends to disseminate results of this project at industry meetings, in the trade press and in academic journals.