"That's not sustainable," said Paul Patterson, University of Idaho extension economist, "getting twenty-five to forty percent of your cost of production from your crop."
Unfortunately, the situation isn't likely to improve until next fall when growers begin to market their 2013 crop. That's because the low prices are simply a function of supply and demand.
Short crops the last few years, thanks to weather problems that led lower yields, kept prices relatively strong. Processors were forced to buy open market potatoes at prices above their pre-season contracts. Growers responded last spring by planting more acres.
Nationally, potato acres were up by 49,000 acres with Idaho accounting for nearly half of the total increase. Favorable weather put the crop back on a more normal yield trend-line - one that adds 4 sacks per acre annually to each acre - and larger yields combined with more acres sent prices plummeting.
"People aren't too happy with Idaho," Patterson said. "Everyone else gets to the pay the price."
Even though its the fresh market that is oversupplied, the effects are bleeding over to negotiations processors are holding now with growers. Most of the contracts focus on cost-of-production so price shouldn't come down as far, but with so many surplus potatoes available processors may choose to reduce contracted acres.
Yet growers were more interested in talking about costs of production for the coming year than how much they are getting paid during the annual University of Idaho Potato Conference that was held last week in Pocatello.
Patterson's best guess for 2013 is that total costs of production (both operating and ownership) will increase 2 to 4 percent. Depending on location and management practices, that means producing an one acre of Russet Burbanks could cost from $2,850 to $4,640.
Both overall chemical and custom application costs are likely to see the greatest increases, as much as 5 to 15 percent. It's not that custom rates or the price of chemical products will increase that much, but treating zebra chip is likely to change how growers apply chemicals.
Growers at the potato conference heard a lot of conflicting information about how treat for zebra chip. The first line of defense will be a soil-applied insecticide or seed treatments but how long will those treatments be effective? When should growers start applying foliar insecticides? How often do the products need to be applied? Can the insecticides be tank mixed with fungicides?
In the past, growers have tank mixed fungicides and insecticides, but there is some indication that that strategy isn't working. If growers need to apply fungicide and insecticide separately, custom application costs could increase. If products must be applied every 10 days versus every three weeks, total chemical costs will rise.
Patterson estimates that potato growers in the Treasure Valley could see costs increase by $154 an acre to treat for zebra chip while growers where the growing season is longer compared to the American Falls area where costs could go up $95 per acre.
In contrast, fuel and fertilizer costs could drop. Fuel prices could fall from 3 to 5 percent although Patterson thinks the low for the year may have already been set right after New Year's. Fertilizer prices should also be close to last year.
"Fertilizer demand will stay strong, there's no doubt out that," Patterson said, "but we won't see the spike like we did a few years ago when grain prices shot up."
