New Brunswick potato growers are playing the waiting game as negotiations for their 2010 contracts continue with McCain Foods Ltd.
In mid March, growers learned the Florenceville-based company will cut the amount of potatoes it buys from them for processing by 20 to 30 per cent.
"Last year’s export market was softer than expected so we had carryover from last year and not as much need this year,"McCain spokesperson Calla Farn says, explaining other influences in the decision include the high Canadian dollar, the low cost of raw potato in Europe and the fact that people aren’t eating out as much. "This situation is affecting the entire North American market, not just McCain’s."
She adds it’s important to note that, for McCain Foods, this is just impacting its export market, which is approximately two thirds of what it produces. "The Canadian market is meeting our expectations."
For competitive reasons, Farn would not reveal the exact volume of potatoes they purchased from New Brunswick growers in the past or what they will purchase this year. And whether the number will be closer to 20 or 30 per cent is still up in the air. "Negotiations are ongoing right now,"Farn says.
Joe Brennan, chairman of Potatoes New Brunswick, says he hopes contracts will be settled before New Brunswick's 200-plus potato growers start planting in early May. He says half have contracts with McCain Foods. While he doesn't anticipate seeing any growers forced to eliminate their contracts, he says a 20 to 30 per cent cut in one year will be a huge number for growers to digest.
"I can see at least a $15 million reduction in farm gate sales,"Brennan says. "That’s in the value of potatoes alone. Seed farmers will be impacted as those farmers are requiring less seed and it will impact the suppliers of all products."
Brennan says he wasn’t surprised there were reductions coming. The magnitude was surprising, however, even though there were no cuts last year to New Brunswick growers’ contracts.
"We’re hearing in the United States 15 to 20 per cent reduction. Industry numbers show french fry sales are down, but not 20 per cent. Export sales are down some six and a half per cent,"Brennan says. "It’s the greatest we’ve heard, but we are playing catch up."
The next meeting to discuss the New Brunswick growers’ contracts is scheduled for April 5.