The New York Times
March 17, 2001

Misery Is Abundant for Potato Farmers

IDAHO FALLS, Idaho — Standing in ankle-deep snow in his potato field, James Hoff knelt down and unearthed one of the large russet potatoes he had reluctantly dumped here earlier this winter so that it would freeze and then turn to mush.

"This is the first time I've ever had to dump my spuds," Mr. Hoff said sourly. "I hope I never have to do anything like this again."

Discarding fresh potatoes by spreading them back onto the fields like fertilizer is what Mr. Hoff and hundreds of farmers here in Idaho are doing this winter in response to a record harvest that has produced far too many potatoes and sent prices plummeting to their lowest levels in decades.

Desperate growers are also giving away millions of pounds of potatoes to food banks and hunger drives. But the stocks of potatoes are still so huge, and farm prices so depressed, that many of the 7,000 farmers nationwide say they are on the verge of bankruptcy. By some estimates as many as a third of this state's nearly 900 potato growers could go broke within a year.

"It's pretty bleak," said Keith Esplin, president of the Potato Growers of Idaho, based in Blackfoot. "We've lost almost half the growers who were in business in 1995. And the feeling is if we don't change things, there'll just be corporate-type farms left."

Potato growers are the latest victims of a nasty recession that hit the nation's agricultural sector four years ago, when weakening demand from Asia and excellent weather created an oversupply of crops that sent farm prices tumbling.

Everyone from corn and soybean farmers to hog producers and apple and cranberry growers has been feeling the effects of a global downturn in agricultural commodities. "Farm prices are at their lowest level in 15 to 20 years," said Keith Collins, the chief economist at the Agriculture Department.

Yet few groups are as desperate as potato growers. While some deals are made at higher prices or under older contracts, the price many are being paid for 100-pound sacks of fresh potatoes has fallen from $8 to less than $1 today. That is far below the typical cost of production of about $5, which is climbing because of rising energy and fuel costs.

"This is certainly the worst I remember," said Tom Cooper, who has tracked potato prices for the Agriculture Department for 25 years. And even though the most recent figures from the U.S.D.A., for January, still show an average price for bags of fresh potatoes of about $2, lots of "growers are getting 75 cents to a dollar a hundredweight; we've never heard of numbers this low," he said.

The reasons for the calamity are now clear. Excellent weather and planting conditions combined with better farm technology yielded a bumper crop in 2000 — a potato harvest that at 52 billion pounds was nearly 2 percent more than the record crop in 1996.

Though the prices paid to farmers have been falling since 1996, when supply levels began to bulge, many growers continued to plant big crops in the hopes of profiting from a rebound in prices. Instead, they helped bring the crisis on themselves by producing exceptionally large harvests year after year.

"The root of our problem," said Wade Chapman, the operations manager of Idaho Supreme Potatoes, a big potato processor, "is the American potato farmer is too darn efficient."

Potato growers are also complaining that the strong American dollar has led to a flood of imports from Canada, forcing prices even lower.

Here in Idaho, the largest potato state with more than a quarter of the nation's production, the downturn is rippling through the Snake River Valley and depressing cities like Idaho Falls and Blackfoot, where storage cellars are still jammed with mounds of unsold potatoes.

"Right now, everybody's on the edge," said Gary Ball, 67, who farms 400 acres of the region's light volcanic soil just northeast of here with his 31-year-old son, Brian. "Even the good growers, the well-established growers, are on the edge."

A grower who got about $2,100 early in 2000 for a truckload of 420 sacks of fresh potatoes, enough money to just about break even, is now getting $400 for the same load, according to industry officials. Multiply that loss by the scores of truckloads a typical farmer ships each year and growers say it looks like a recipe for bankruptcy.

Farmers who grow potatoes primarily for processors are somewhat better off, because they were contracted to grow at a fixed price that is well above the price of fresh potatoes on the open market. But with a potato glut, good contracts are much harder to come by.

The downturn is also taking its toll on potato shippers, who wash, inspect and package the fresh potatoes sold to grocers. A series of big mergers in the supermarket and food service industry means that the bigger companies can leverage their power and demand even lower prices from shippers.

John Taylor, the owner of TG&T Produce, a small potato shipper here in Idaho Falls, was at his shop surveying his workers as they boxed fresh potatoes tumbling down a conveyor belt. A few workers were counting potatoes, others sorting the big from the small, the good from the bad. Still others were sealing boxes to be shipped to a big supermarket chain in Ohio.

"A few years ago you used to have little chains that everyone dealt with, but now that the big supermarket chains are buying everyone out, it's cut the amount of people we go to in half," Mr. Taylor said over the din and clanking of the potato conveyor belts. "And these companies demand such high quantities and low prices. They have a lot of leverage that way."

Processing plants, which turn fresh potatoes into frozen or dehydrated products, are also suffering because of higher energy costs and weakening demand.

Idaho Supreme, one of the biggest dehydrating processors in Idaho, was forced to shut down its giant plant here in Idaho Falls for 30 days last winter. About 350 employees were laid off around Christmastime.

"Our fuel prices got way out of line," Mr. Chapman said. "Some plants went from $100,000 a month in energy costs to $1 million."

Washington State, the nation's second-biggest producer of potatoes and the dominant exporter of frozen French fries, is also struggling with a downturn. Because growers in Washington sell most of their crop to companies that process potatoes into frozen or dehydrated products, the problem is not so much with surpluses and plunging market prices, but with processors building up large inventories for 2002.

"Every year the price on contracts is incrementally reduced," said Pat Boss, executive director of the Washington State Potato Commission. "You're probably wondering why if prices are going down our growers plant more potatoes. Well, potatoes are a rotational crop and other crops like wheat were doing worse than potatoes. So they were trying to take the lesser of two evils."

Higher up the food chain, there are fewer problems. The world's leading French fry makers, who buy fresh potatoes under contract with growers each year, are doing better than farmers and shippers. But many say they are also being squeezed by food makers and fast-food restaurants.

Big supermarkets are probably benefiting the most from the downturn. Although the price of fresh potatoes has dropped to about a penny a pound at the farm level, major grocers are still charging 39 cents to 69 cents a pound for russets.

Many growers have complained about the disparity, saying retailers and fast-food restaurants are reaping huge profits while farmers are suffering.

Some potato industry officials, however, say that their own studies indicate that consumers do not tend to buy more potatoes as prices fall. And the supermarket chains say they are offering some specials but are reluctant to lower prices because later, when the prices climb, consumers can have a negative reaction.

McDonald's, one of the nation's largest buyers of frozen french fries, declined to comment on the price disparities, saying only that "McDonald's has been the potato's best friend for the past 50 years."

The J. R. Simplot Company, based in Boise and one of the nation's biggest potato processors, said it did not expect to increase the value of its contracts.

"We recognize there will be significant cost increases to growers," said Fred Zerza, a company spokesman. But "we don't see the market being able to pass on additional prices."

To remedy the situation, potato growers are trying to band together to cut production levels for the 2001 crop. And the Potato Marketing Association is asking growers to reject "undervalued contracts."

Time, however, is running out. Because potato growers are not eligible for federal farm assistance, bankruptcies are expected to rise during spring planting. And more and more potatoes are being ground up as slop and fed to cattle. The federal government might buy some potatoes, but whether that would really make a dent in the supply is doubtful.

Mr. Hoff, who has a storage cellar with 3.6 million pounds of fresh potatoes stacked nearly 20 feet high, climbed a small ladder and made his way to the top, where small fans were helping circulate the chilled air.

He said many growers were facing losses of $1,500 an acre. Despite the diversion — the food banks, charity drives, cow slop and field dumpings — there are still far too many potatoes in Idaho. And while he is hoping for the price to rebound, he is not too sure it will.

"It still looks grim," he said. "Even if the market moves it looks like it won't even get close to break- even." Less than a dollar for a hundred pounds of potatoes, he added, is just "a slap in the face to me."

Copyright 2001 The New York Times Company