• Ag-inflation fuels cost of storage
• Energy among biggest increases
• Correct cost structure important
Potato storage costs are under the spotlight for the coming season, with agri-inflation driving up the price of farm inputs.
Storage costs are being forced up by rising energy prices, says the 2023 edition of the Andersons Outlook report. But boxes too are becoming more expensive at £100-130 each delivered depending on capacity.
The recent increase in demand for on farm commercial/industrial storage means there is a significant opportunity cost of these buildings, says the Outlook report. Recent analysis suggests this could be as much as £20-25 per tonne based on non-farming rents.
“Adding box cost, plant maintenance, labour for management and outloading costs, comfortably brings the cost up to £40 per tonne. Weight loss, sprout control and the cost of capital are all further additional costs to factor in, before energy.
Energy cost varies according to store efficiency, electricity price and length of time in store, says the report. “The range here is significant, but as a grower, factoring in all of the above, storage could cost in excess of £75 per tonne for the season.”
Clearly the impact on third party storage will depend on the component parts of individual arrangements.
Discussions on contracts for the 2023 crop commenced early, with many growers unable to reach an agreement. This means a reduction in the UK potato area is both necessary and inevitable, says the Outlook report.
“A number of growers are choosing to exit – faced with the demand for additional capital to grow the crop, restructure for a permanent reduction, or take a temporary holiday/short term reduction.”
Getting the resulting cost structure right is vital. In previous years, one option to help the numbers add up has been to let land to third parties. But there may not be so many takers for 2023.
“For many growers with irrigated crops, the standout memory of the 2022 season, after the overall dramatic increase in cost, was the unrelenting drought, and consequent demand on irrigation.”
This commenced early in the season and continued almost without break, through to harvest. For those with water available, the warm sunny weather produced some respectable yields. But others were not so lucky.
Last year was been saw irrigation costs escalate to record levels – well about £200/ha in some parts of the country. Labour, energy, equipment, underground infrastructure and licence fees have all increased.
The creation of GB Potatoes as a successor to the AHDB Potatoes is in its infancy. But other than headline goals and a proposed levy rate of £10/a – significantly less than the AHDB levy – it is unclear how it will benefit growers, says the report.