Potato Prices as Affected by Supply and Demand Factors: An Irish Case Study

The supply and demand factors affecting the farm level price for Irish potatoes has undergone considerable change in the last two decades. On the demand side, per capita consumption has decreased by almost a half, and the use of potatoes has shifted from consumption of table stock potatoes towards greater levels of processed potato products. On the supply side, domestic production levels of potatoes decreased by just over 30 percent, whilst grower numbers decreased by greater than 75 percent over the same period. Against this background of significant changes in domestic consumption levels and patterns and domestic production of potatoes this paper examines the effect of these factors on potato price levels and variability. Farm level price and volatility is a concern for a number of reasons as it adds challenges for business planning, debt repayment, and, in some cases, solvency. Farm level price data and supply and use balance sheet data from Eurosta are used in an ARCH modelling framework to quantify and examine the factors affecting potato price mean levels and volatility.