Domestic market update - 07 August 2020

Friday, 7 August 2020

What's happened during July?

July trade has picked up slightly after a particularly quiet June. The foodservice sector has re-opened in England and Scotland, but demand has remained subdued as consumer confidence takes time to rebuild.

Increasingly, more 2020 new-crop has entered the market during the month. However, demand is yet to match this extra availability.

Weather

July’s weather was unsettled at the start of the month, with intermittent showers across most of the country and some periods of heavier rainfall. This weather did benefit crop conditions of earlies, which had previously been a concern.

By the middle of the month, the country was experiencing varied weather conditions, with Southern regions warmer and drier compared to Central and Northern areas. Towards the end of the month the temperature rose further, with a mini-heatwave peaking temperatures at 37.8C in the South East.

Overall, this has been beneficial for crop conditions, with high yields being recorded in some areas. While rainfall was higher than the average for the month (+122%), further rainfall would still be beneficial to crops in many areas.

Trade overview

Free-buy

Free-buy markets have been heavily impacted by the coronavirus pandemic. With new-crop bringing extra volume to an already well-supplied market, free-buy prices have felt the pressure.

Demand remains lacklustre. While the foodservice sector reopened in England and Scotland, reduced consumer confidence and social distancing measures have pressured trade. Fish and chip shop demand has quietened following initial support during the height of lockdown, with some citing increased competition from the re-opening of the quick service restaurants.

Contract

During July, contracted material continued to account for the majority of trade within the industry.

With more new-crop entering the market, the increased supply in the face of lacklustre demand has weighed on the WAPS price.

Minimal old-crop trade is now being reported, with volumes reducing weekly throughout the month

Sector overview

Packing

Compared with other potato sectors, the support from retail demand for the packing sector has kept the market relatively supported. However, demand has declined marginally in recent weeks and is beginning to be reflected in some prices.

Top quality packing material is still able to fetch a premium over the lower grade offerings.

As a result of the coronavirus pandemic diminishing trade in other sectors we saw material destined for chipping or processing entering the packing market. This pressured the low-end of the packing market somewhat.

Bags

Large proportions of the UK reportedly taking ‘staycations’ this year, coastal regions have been able to maintain some trade from holidaymakers. However, overall demand for chipping remains lacklustre.

With increased availability of new-crop, surplus old-crop is struggling to find a home, pressuring prices.

There is some hope that the new ‘eat out to help out’ scheme may help to re-energise the market, encourage more consumers to eat out of the home again and restore some confidence in the sector. Although this may bolster foodservice such as pubs and restaurants more rather than fish and chip shops due to eat-in restrictions.

Processing

The re-opening of foodservice outlets has helped to bring some trade back to the processing sector. However, the closure of schools during the summer months will remove some demand.

Looking forward, there is some speculation around further restrictions that may be imposed on pubs and restaurants in order to allow for the safe re-opening of schools. This could cause a shift in demand away from the foodservice sector and back towards school meals. However, these measures are far from confirmed.

Charlie Reeve

Trainee Analyst

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