Bankruptcies point to tougher organic potato market
A second organic potato farm in Oregon’s Klamath Basin has filed for bankruptcy, potentially pointing to tougher conditions in this niche market.
Carleton Farms of Merrill, Ore., is seeking Chapter 11 bankruptcy protection, which allows companies to stay operational while restructuring debt.
The outfit grows potatoes and other crops on about 4,000 acres, with about half that acreage under organic production.
Carleton Farms owes between $10 million and $50 million to fewer than 100 creditors, with assets of $1 million to $10 million, according to its bankruptcy petition.
Umpqua Bank of Roseburg, Ore., is the company’s largest unsecured creditor, with more than 70 percent of its $17.5 million loan to the farm unsecured by collateral.
In late 2017, Wong Potatoes of Klamath Falls, which grows organic and conventional potatoes on 5,000 acres, also filed for Chapter 11 bankruptcy. The company has liabilities of $2.9 million and assets of $2.5 million.
Carleton Farms and Wong Potatoes have been involved in litigation against each other since 2016 over the operations of a joint venture and other disputes, according to court documents.
Regardless of these farms’ particular financial troubles, experts say the organic potato industry has grown more competitive in recent years.
“I wonder if we just got too many acres too quickly,” said Brian Charlton, cropping systems specialist at Oregon State University’s Klamath Basin Research and Extension Center.
The Klamath Basin’s high elevation and low winter temperatures help suppress fungus and insect problems in potatoes, which makes the region well-suited to organic production, he said.
“I think we’re one of the best locations in the Northwest to grow organic potatoes,” Charlton said.
Organic potato acreage recently grew to about 2,000 acres in the basin, up from about 800 acres seven years ago, he said. Due to lower pricing and water availability, though, organic potato acreage will likely drop by 30 percent in 2018.
“It can be just as volatile as the conventional,” said Scott Cheyne, assistant manager of the Klamath Irrigation District, who has experience in potato farming.
With more organic potatoes to choose from, buyers can expect farmers to beat each other on price, Cheyne said.
Growers also have to cull many organic potatoes that don’t meet quality standards, he said. “For whatever reason, the organic buyers are more picky.”
Culling a higher proportion of their organic potato crop can quickly cut into profits, Cheyne said.
Organic potatoes yield about 35,000 pounds to the acre, compared to about 55,000 pounds for conventional potatoes, said Ed Staunton, whose family owns Staunton Farms of Tulelake, Calif.
Farmers also don’t have as many products to control sprouting and discoloration in organic potatoes, compared to the conventionally grown crop, said Staunton.
“People want organic produce but they want it to look better or as good as conventional produce,” he said. “But we don’t have the tools to have them look as good.”