Domestic market update - 06 November 2020

Friday, 6 November 2020

What happened throughout October?

October has seen lift in overall tonnage traded, increasing 17% from September based on material moving through our weekly average price survey (WAPS) sample. Yet, the tonnage traded still lags 9% from the same period last year.

This month has also seen a greater proportion of trade on a free-buy basis from September specifically, with the average split 23% on free-buy and 77% on contract throughout October.  September averaged 19% on free-buy to 81% on contract.

With maincrop lifting underway throughout September and into October boosting supply to the market, both the WAPS average and free-buy prices have fallen this month from last, which follows the seasonal trend too. Persistent uncertainty within the foodservice sector has reportedly caused reluctance to forward buy. This week England entered a second national lockdown, so it seems buyers were right to remain uncertain of future restrictions. However, educational establishments, takeaways, and delivery services are all to remain open this time round; this remains an important string in the potato industry’s bow and will hopefully provide the much-needed support to the bags sector.

Weather/lifting

Up to week ending 20 October, the latest lifting report suggests that 77% of the total GB potato area has been lifted. However, regional disparities are clear in lifting progress with the North East and North West only 40% and 59% complete, respectively.

With storm Alex passing through, and many growers experiencing heavy rains, lifting has been described as stop-start for many regions across October. A few dry days have enabled some growers to resume lifting towards the end of October and into November. Yet some growers face waterlogged fields that are simply too wet to lift. In hope of a good forecast coming to fruition in the coming few weeks, this may dry up conditions to see more growers complete lifting for 2020/21.

The next lifting report is due out on Friday 13 November and will cover up to week ending Tuesday 10 November. This can be found on our Potato Lifting Progress webpage.

Trade overview

Free-buy

As mentioned previously, free-buy has been accounting for a higher proportion of tonnage traded week-on-week throughout October compared with September: an increase of 4%.

Following seasonal trends, free-buy prices remained low throughout October as lifting for many growers progressed and demand remained dampened across the sectors through lack of certainty and reluctance to forward buy due to impending Covid restrictions. Lifting into store is happening, although this doesn’t seem to have supported free-buy prices hugely at this stage; with the emergence of some quality issues as a result of the wet weather, this may be pushing more material onto the market.

Contract

For the week ending 31 October, the WAPS average price (including free-buy and contract) took a knock. This price fell to £132.36/t, down £18.20/t from the end of September but does follow seasonal trends. This signifies the narrowing of price premiums for contract trade, alongside the reduction of traded volume of tonnage on contract, dropping 5% compared to September trade.

Sector overview

Packing

Throughout October, a high proportion of packing trade has been reportedly fulfilled on contract; free-buy trade has been lagging due to Covid causing a fall in consumer confidence. Yet, positive gains can be seen as prices have seen a small lift; Grade 1 packing whites median price gained £10/t from the 2 to 30 October, to equal £90/t at the end of October.

Maris Piper has been reportedly fetching a continued and increasing premium over Grade 1 whites last month, especially where samples had a top-quality skin finish. Prices for Maris Piper (median) have also increased from £110/t to £150/t from the 2 to 30 October.

 

Bags

Demand has been lacking for the bags sector throughout October, with the continued uncertainty of increased restrictions causing a reluctance of food outlets to forward buy. Yet as we enter November, takeaways and chip shops know they can continue to trade throughout the second lockdown which should offer some support to forward planning.

Top quality samples have benefited from a price premium last month, over samples that have displayed signs of bruising and rot.

 

Processing

Processing trade has also been reportedly quiet last month, covered mostly by contracted material. Free-buy trade has been reportedly slow on the back of weakened confidence in the market from tightening Covid restrictions.

Peeling prices have gained a little momentum through October for Maris Piper though, with the median increasing from £55/t to £70/t from the 2 to 30 October, but general whites only increasing from £40/t to £50/t over the same period.

 

Outlook for a second lockdown

Tighter restrictions seeing the onset of a second lockdown in England have yet again curbed the opportunity for consumers to eat out of home. English foodservice operators have been told to close this week as England embarks on a second national lockdown; combined with Scotland facing ongoing curfews and Wales under a 2 week ‘firebreak’, this provides a rather negative outlook for November.

Yet a glimmer of hope remains with Wales to end their firebreak on Monday and educational establishments, takeaways, and delivery services to remain open – a stark difference to the first lockdown which could offer some optimism that demand won’t be hampered in the same way as before. As consumers stay home, my colleague in Strategic Insight, highlights the possibility that an uplift in retail market sales as a response to changing habits could occur, in similarity to the previous lockdown.

Although takeaways/delivery could continue last time, the main difference from the previous lockdown in March is that many food outlets that did not provide takeaways have already adapted. For those already providing take-out food pre-lockdown number 1, have had six months to put in place Covid secure measures to facilitate trading in a safe environment. As a result, takeaway volumes traded should not take a large hit, unlike in March where outlets were forced to close – good news for chip shops.

Image of staff member Megan Hesketh

Megan Hesketh

Analyst

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