1. eFarmer.us Potatoes Production, Market, and Expected Return December 2008 copyright eStudy.us 2008 michael.roberson@eStudy.us

2. eFarmer.us Overview Originated in Andean Mountains The USDA first included potatoes in crop production statistic in 1866 The potato plant is a herbaceous annual Optimum temperature for growth is 64°F to 68°F, but can range between 50°F to 86°F The 4 th most consumed food crop in the world behind rice, wheat and corn 446.8 million cwt produced in 2007 copyright eStudy.us 2008 michael.roberson@eStudy.us

3. eFarmer.us Market Opportunities Potato Chip Companies for Chipping Restaurants and Local/Area Wholesalers – Small “new” potatoes – Russets – Specialty or “gourmet” – Very small “mini” or “creamer” potatoes Command premium prices in some markets Fresh Market Options – Farmers’ Market – Produce Auctions – Cooperatives – Roadside Stands copyright eStudy.us 2008 michael.roberson@eStudy.us

4. eFarmer.us Market Opportunities Average Price per unit in the past 2007 U.S. 407,51721,5473,89927,796375,823 7.05 2,879,2472,649,705 2006 U.S. 398,92123,3374,48228,576365,863 6.65 2,668,2872,442,474 Production Used for Seed Farm Disposition Sold Price per cwt. Value of Used on Farm Seed, feed, household use Shrinkage and LossProductionSales 1,000 cwt. Dollars 1,000 dollars

5. eFarmer.us Health and Nutrition The Potato is a good source of dietary energy Source: United States Department of Agriculture, National Nutrient Database http://www.potato2008.org/en/potato/factsheets.html

6. eFarmer.us Production Characteristics Loam soils are most desirable for good potato yields; however potatoes can be grown on wide range of well- drained soil types Extensive ground preparation is necessary before planting 15-18 100-pound bags of seed potatoes are needed to plant an acre – Only certified seed stock should be purchased Seed potatoes should be planted 4 - 5 inches deep and should be spaced 10 - 14 inches apart with rows 24 - 36 inches apart copyright eStudy.us 2008 michael.roberson@eStudy.us

7. eFarmer.us Production Characteristics Can be grown on raised beds with black plastic and drip irrigation Irrigation (1-1.5 inches a week) Soil with a pH range of 5.2-6.4 is considered ideal 90% of US potatoes are planted in the spring (March 15 to April 10) and harvested in the fall Potatoes are harvested between 120 - 150 days Labor needs are approximately 25 hours per acre; – fresh market potatoes which require approx. 50 hours per acre and then additional 25 hrs for washing, etc. – Potatoes for chipping require approx. 20 hours per acre for harvesting and marketing

8. eFarmer.us Production Characteristics Yellowing of the potato plant's leaves indicates that the crop has reached maturity – If the potatoes are to be stored rather than consumed immediately, they are left in the soil to allow their skins to thicken The potato vines should be removed 2 weeks before the potatoes are dug up Potatoes are harvested using a spading fork, a plough or commercial potato harvesters Tubers should be stored in a humid area ( 90 to 95 % relative humidity) – 40°F if the tubers are for eating or to be used for seed potatoes – Processing tubers used for french fries are typically stored at 45°F – Tubers for potato chips are stored at temperatures of 50 to 55 °F copyright eStudy.us 2008 michael.roberson@eStudy.us

9. eFarmer.us Production Characteristics Weed Management – 3 plowings and frequent use of a mechanical cultivator are needed before the soil reaches a suitable condition: soft, well-drained and well-aerated – Herbicides, A three- or four- year rotation system Disease Management Pest Management – A pre-plant broadcast application of a soil insecticide copyright eStudy.us 2008 michael.roberson@eStudy.us Wireworms White Grubs Potato Leafhoppers Colorado Potato Beetle Aphids Nematodes Back leg or soft rot Rhizoctonia stem canker Scurf, scab and viruses Early blight Other Occasional Pest

10. eFarmer.us Production Opportunity Cost Capital Requirements (Land, Building, Equipment) – Mechanical Cultivator – Potato Harvester (for large production) – Installation of an irrigation system – Plastic Mulch installation – Potato Storage Areas (only for chipping production) Labor Requirements – Minimum wage rate for minimal trained laborer in Kentucky is $9.13 Competitive Crops for Land Resource – Top 5 Kentucky Crops by Value of Production Tobacco, Hay, Corn, Soybean & Wheat copyright eStudy.us 2008 michael.roberson@eStudy.us

11. eFarmer.us Revenue Revenue sources – Revenue may vary with price and yield – Seed Production (increase variable and fixed costs) Production incentives from the government – Revenue Assistant – Agriculture Management Assistance Program – Commodity Loans copyright eStudy.us 2008 michael.roberson@eStudy.us

12. eFarmer.us Cost Overview for Fresh Market PRODUCTION COST – Variable Cost Lime Fertilizer Seed Seed Treatment/Cutting Herbicides Insecticides Fungicides Fuel and Lube Repairs Irrigation – Fixed Machinery Costs – Fixed Irrigation System Costs HARVEST & MARKETING COST – Variable Cost Marketing Cost Bags Fuel and Lube Repairs Hired Labor – Washer – Grader – Bagger – Fixed Machinery Costs – Fixed Irrigation System Costs copyright eStudy.us 2008 michael.roberson@eStudy.us

13. eFarmer.us Expected Return Report Production1000200030004000 Gross Revenue (Price $8.00/cwt)$8,000$16,000$24,000$32,000 Variable Production Costs$2,651$5,302$7,952$10,602 Variable Harvest & Marketing Cost$3,597$7,194$10,791$14,388 Annual Interest 6% on Variable Cost$88.98$177.99$266.95$355.93 Total Variable Costs$6,337$12,675$19,010$25,346 Total Fixed Costs$800 Total Expenses$7,137$13,475$19,810$26,147 Return to Land, Capital and Mgt$863$2,525$4,190$5,854 Assumptions: 250 potatoes per acre Cash Flow Statement: See Appendix * Values are rounded for reader friendliness copyright eStudy.us 2008 michael.roberson@eStudy.us

14. eFarmer.us Risk Market Risk: Price per cwt changes throughout the year (timing of harvest is highly important) Production Risk: Potato yield and grade vary per acre depending on weather (irrigation systems minimize this risk) Financial Risk: – Large initial investment quality seeds machinery land – Expected return using Average Cash Flow – Time Value of Money copyright eStudy.us 2008 michael.roberson@eStudy.us

15. eFarmer.us Basic Summary Market Opportunity – Farmers’ Market – Produce Auctions – Cooperatives – Local Restaurants/Wholesalers Advantages of Western and Central Kentucky – Early planting is March to April, there is also a late planting from June to July (weather conditions) – Kentucky farmers have skill and capital to grow potatoes (investment would be in an irrigation system) – Production for laborers is full time job – Annual consumption, per person, in the United States is 125 pounds copyright eStudy.us 2008 michael.roberson@eStudy.us

16. eFarmer.us Appendix copyright eStudy.us 2008 michael.roberson@eStudy.us

17. eFarmer.us Appendix

18. eFarmer.us Appendix

19. eFarmer.us Appendix

20. eFarmer.us Bibliography Overview – http://www.ers.usda.gov/Briefing/Potatoes/Background.htm http://www.ers.usda.gov/Briefing/Potatoes/Background.htm Production Characteristics – http://www.potato2008.org/en/potato/cultivation.html http://www.potato2008.org/en/potato/cultivation.html – http://www.coopext.colostate.edu/TRA/PLANTS/index.html#http:// www.coopext.colostate.edu/TRA/PLANTS/potato.html http://www.coopext.colostate.edu/TRA/PLANTS/index.html#http:// www.coopext.colostate.edu/TRA/PLANTS/potato.html Pest Management – http://www.ca.uky.edu/entomology/entfacts/ef304.asp http://www.ca.uky.edu/entomology/entfacts/ef304.asp Production Opportunity Cost – http://www.kltprc.net/books/mm2002/Gifs/Fig_16_2.htm http://www.kltprc.net/books/mm2002/Gifs/Fig_16_2.htm Expected Return Report – http://www.uky.edu/Ag/AgEcon/pubs/software/budgets_veg_mel on.html http://www.uky.edu/Ag/AgEcon/pubs/software/budgets_veg_mel on.html Basic Summary – http://www.agmrc.org/commodities__products/vegetables/potatoe s.cfm http://www.agmrc.org/commodities__products/vegetables/potatoe s.cfm