Washington Potato Growers agree to modify 2009 contracts with Simplot, Lamb Weston

Washington State Potato Farmers agreed to modifications in the 2009 potato contracts with potato processing companies Simplot and Lamb Weston.

Processing Companies agreed in September to give Northwest potato growers a hefty raise on their 2009 pre-season contracts. Potato Growers of Washington voted Feb. 13 to give some of it back.

Soon after the 2009 processing contracts were approved last fall, the global economy took a turn for the worse. After decades of strong growth, global demand for french fries and other frozen potato products has weakened, industry officials said. Processors are expected to cut contract acreage in the Columbia Basin by about 8 to 10 percent this year as a result.

"We feel very positive about what we've done,"said Dale Lathim, executive director of PGW. "We hope it's a good move for the industry, and we look forward to a very good 2009."

About 90 percent of the group's members voted in favor of revised contracts with J.R. Simplot Co. and Lamb-Weston, the potato division of food giant ConAgra.

Lathim said he expects a similar contract revision with McCain Foods.

The processors agreed to give Washington growers the same basic contract terms in 2010, so the revised contract is essentially a two-year deal, Lathim said.

"We're trying to stabilize the industry by giving growers a 20 percent profit margin in 2009 and 2010,"he said.

Volume commitments under the revised contract vary by company. "We did get some acreage guarantees, but not as much as we were looking for,"Lathim said.

If Washington growers had refused to budge, they would have reaped a one-year "windfall,"but perhaps have been worse off in the long run, Lathim said.

Several Simplot executives, including newly named CEO Bill Whitacre, made a special trip to Washington to appeal to growers before the vote. Their one-hour presentation was impressive, Lathim said.

Processors are also expected to ask Idaho growers to approve revised contracts, but that could be a tough sell since potato processors refused to adjust the 2008 contracts after farmers faced a huge run-up in fuel and fertilizer costs before planting.