Potato co-op protecting profits in a difficult year

Driven by the frustration at having no power over the marketing of their crop, 16 Scottish potato growers set up their own co-operative two years ago and now control a £13.5 million trade with contracts already secured for 85% of next year’s output.

“We didn’t believe we had a sustainable model as individual growers,” said Russell Brown, chairman of Scottish Potato Co-op (SPC), a ware growers’ business whose membership is now up to 19 farmers, generating a combined annual output of 70,000 tonnes.

“There was a lot of frustration among growers before SPC was created, largely due to the challenge of finding alternative markets for potatoes that didn’t quite make the premium packing grade.”

In fact, any tubers which didn’t get accepted for front line packing were effectively discarded under the old arrangement, a process which obviously hit total crop returns for the disgruntled growers.

“Our priority objective in setting up SPC was to get a decent price for all our potatoes and not have some that were left unsold,” said Mr Brown, who farms Inverdovat, Newport of Tay.

“You can have a potato crop that is generally doing well and then hit a problem with internals that prevent a percentage of your output being cleared for packing. It was important to address that issue.”

Knowing that alternative outlets existed for nonpacking tubers, such as through the use of optical sorting techniques to select those which were still perfectly suitable for processing, a group of core growers started to explore the co-op option.

The 16 founder members all previously sold ware to IPL (International Procurement & Logistics), part of the ASDA group, working closely with marketing agent Fraser Malcolm, who subsequently became SPC’s marketing specialist.

“We all knew and trusted Fraser, which certainly helped during the recruitment of our initial members,” said Mr Brown.

“Basically, everyone who was involved in the pre-SPC trade with IPL was offered the chance of joining the new co-op, which some did, and others didn’t. Some farmers aren’t co-op minded.”

Another pre-SPC factor which bothered the founding members was the risk they constantly faced as individuals of ending up with the wrong packer. Recent experience for some had included supplying a major potato buyer at the time the company lost its main contract with Tesco.

“Getting caught up in that sort of development can prove critical for individual growers,” said Mr Brown.

“Working together and having 70,000 tonnes to trade certainly makes it easier to find a way out of such difficulties.”

Mindful that not all co-ops are successful, however, SPC’s creation was carefully planned and managed, with substantial input being provided by Jim Booth at SAOS.

“His first word of advice to us was to apply good governance to the co-op and to always be upfront with members about what’s going on,” said Mr Brown. “And, if something goes wrong, get the information out to members as quickly as possible.”

Thankfully, that hasn’t been necessary for SPC, so far. The past year, for example, has been good for members with the co-op’s forward contracts protecting growers on both volume and values during a time when the open market saw significant dumping of potatoes and generally poor prices.

“It might be tougher for us during years when the market is the other way round with short supplies and big prices,” said the chairman.

“Members are well aware though that we’re set up to deliver a more level income stream over time, based on decent returns every year and with all saleable potatoes being marketed.”

The co-op’s range of current outlets is impressive, with IPL still leading the way in terms of premium packing potatoes, managed under a two-year forward contract.

SPC also sells to three other major buyers, each taking about 10% of their annual tonnage, ensuring that all members’ saleable potatoes find a market during the season with no wasteful discards.