Manitoba potato producers are pricing themselves out of the market.
Christine Wentworth, McCain Foods’ vice-president of agriculture for North America, said the province is becoming a high-cost producer, sounding alarms that further cuts could be headed the industry’s way.
"Manitoba, like other areas in Canada, is not competitive with the (United States) Pacific Northwest," Wentworth said.
Increasing yields in the province is paramount to the continued success of the industry.
Wentworth said potato producers in Manitoba get about 320 CWT per acre, with one CWT representing 100 pounds of potatoes. In areas of the U.S. those yields can balloon to between 450 to 500 CWT, with the Pacific Northwest leading the way as the highest yielding, lowest-cost region in North America.
"It’s not that costs are going up (in Manitoba), it is that in the past the low Canadian dollar masked the inefficiencies," she said. "Increasing yields is essential for the long-term viability of the Canadian potato industry, regardless of foreign exchange."
Another catalyst for contract cuts is the declining consumption of french fries in the North American diet, according to Wentworth.
According to Statistics Canada there was a decline in planted potatoes across the country from 2012, when more than 370,000 acres were planted, to 2013, when 355,000 acres were planted.
At the moment, the Keystone Potato Growers Association is negotiating contracts for the 2014 growing season with McCain, Cavendish Farms and Simplot.
KPGA president Dan Sawatzky said the industry did suffer some challenges when the Canadian dollar was at parity with the United States, but has stabilized since then.
Manitoba is rich with land and water that combine to produce high quality potatoes.
"That means that the factories have a higher recovery from our potatoes, which is a cost advantage for them," Sawatzky said.
However, like every agricultural industry, the potato market is cyclical.
"When volumes are cut it’s a concern," he said. "When they ask us to move on price it cuts into profitability. The climate is maybe not as healthy as it has been but it can always come back the other way as well."
It’s also an industry that has a major impact within the province.
"The economic benefits and spinoffs that the potato industry has, especially in central region and Westman are tremendous and we’re fortunate to have this sector in the province and we want to keep it healthy," he said.
Sawatzky has a meeting with officials from McCain’s next week. He expects once an agreement with them is finalized that the other agreements will follow quickly.
Ron Tidsbury, who was named McCain’s champion grower in 2009, said after seeing his contract get slashed over recent years and margins fall, he plans on planting zero acres of potatoes this year.
"We’re getting out of the potato business," said Tidsbury, who farms with his two sons Keith and Grant near High Bluff, northeast of Portage la Prairie.
"The bottom line wasn’t right. We got cut back on acres every year and the price always went down. It had come to point where it was costing us to be in potatoes."
Tidsbury got into potatoes in 1978 when the McCain plant first came to Portage.
Throughout the years, there has been whispers that the company might pick up and leave Manitoba, but Tidsbury said he’s not hearing that today.
The shorter Manitoba growing season means the province isn’t as competitive as other markets, according to Tidsbury, and he expects companies will shift priorities to where yields are the highest.
In the meantime, his family is focusing on planting more cereals such as wheat, barley and oats and they continue to seed a lot of canola, although due to their crop rotation schedule they will seed less this year compared to last.
The shift should help the farm’s profitability and reduce input costs.
"Potatoes are very resource intense," Tidsbury said, adding the price of machinery and inputs such as fertilizer and fuel have increased. "It’s an expensive crop to grow compared to wheat or barley."
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