Potato Industry Seeks Changes to USDA Payments

The National Potato Council urged its members to apply this week for COVID-19 aid while it works to increase USDA payments to potato growers and tries to sell Congress on a plan to buy $300 million of surplus spuds.

The USDA began taking applications Tuesday for $16 billion in direct payments to farmers and ranchers adversely affected by disruptions to the economy related to the pandemic. Kam Quarles, CEO of the National Potato Council, said his association told members to sign up "to keep their options open" while the organization makes the case to the USDA to change its assessment of the impact COVID-19 has had on the industry.

Quarles said one glaring oversight in the current USDA payment program is the exclusion of seed potatoes that are used to start potato crops.

"Seed potato growers are the tip of the spear on every crop. Our seed potato producers are being told they are ineligible and can't sign up," Quarles said. 

About 40 percent of farmers who raise white potatoes supply retailers like grocery stores with chips and fresh potatoes, while 60 percent grow for processors who sell French fries, tater tots and dehydrated potatoes to institutional buyers, Quarles said. In 2018, farmers grew 44 billion pounds of the popular vegetable.

The association wants to see payment bumped up from 1 cent per pound for potatoes that growers could not ship to commercial customers. Those buyers were contending with an oversupply of potatoes caused by a sharp drop in demand by restaurants and other food service outlets as business declined because of public health stay-at-home orders.

Quarles said the association thinks at least 4 cents per pound, which would be comparable to the rate for sweet potatoes, would be fairer.

The association also wants potatoes made eligible for direct payments under a category that recognizes market price declines of 5 percent or more tied to COVID-19's effects on the economy.

Even with a higher payment rate, Quarles said the National Potato Council calculates that the industry needs $300 million in USDA potato purchases to help reduce the backlog and stabilize market prices. The association would like to see the funding included in the next economic relief bill.

The 2019 crop was harvested in October and would usually last processors until August, but Quarles said buyers are telling his members that they believe they will need far less of the 2020 harvest. Most potato farmers plant from late March through April, although planting continues in Maine and North Dakota.

The USDA's Economic Research Service noted in its outlook for various crops that the potato industry could be challenged.

"Because potatoes are closely linked to the foodservice sector, the industry could struggle with a messy end to the 2019/20 season and a sluggish start to the 2020/21 season. This is because foodservice demand for both fresh and frozen product is sharply lower this spring quarter as schools and cafeterias have closed and most restaurants have moved to takeout and delivery," the Economic Research Service wrote in an April 17 report.

As restaurants and other traditional potato buyers reopen, demand will increase. But Quarles argued that a farmer growing for processors who have indicated they will need fewer potatoes could be in a bind "if demand comes back strong three months from now. You as a grower are stuck because decisions had to be made right now."