May 4, 2023
Pasco, Wash., potato farmer Mike Pink and Kyle Niehenke, executive director of the Adams County Development Council, chat as they stand on farm ground neighboring McCain Foods’ Othello, Wash., plant the afternoon of April 25. Othello and the surrounding Columbia Basin are poised for additional growth following McCain’s $300 million expansion, which was completed in late 2022.
Up to 15% of North America’s french fries can be traced to the corner of Broadway Avenue and Lee Street in Othello, Wash., where McCain Foods’ two plants, left, and J.R. Simplot Co., right, are producing roughly 1.5 billion pounds of frozen potato processing products each year.
Othello, Wash., produces 1.5 billion pounds of french fries a year.
OTHELLO, Wash. — This tiny Washington town could be called the French Fry Capital of the World.
Every year, the three potato processing plants in town produce 1.5 billion pounds of frozen french fries, tater tots and hashbrowns — the weight of seven aircraft carriers.
McCain Foods in late 2022 completed a $300 million, 170,000-square-foot plant in Othello. That’s in addition to the company’s other plant.
Just around the corner from the McCain plants is the J.R. Simplot Co. facility.
“There is no other city that can boast the production capacity that Othello does for making frozen potato products,” said Dale Lathim, executive director of the Potato Growers of Washington.
Lathim negotiates with processors on behalf of more than 60 farmers representing 85% of the region’s potato volume.
The addition of the new McCain Foods plant has been a game-changer for the region’s farmers.
They have added 11,000 acres to their rotation for potato farming to supply the new plant, the company said in a press release.
McCain Foods and Simplot did not respond to multiple requests for comment.
Growers like Mike Pink are finding new opportunities with the expansion. He has added 600 acres of potatoes in the last two years, an increase of roughly 35%.
That’s an unusual move, the Pasco, Wash., farmer said. Potato processing plants have a well-established base of farmers with whom they contract.
“The volume doesn’t usually change because most of these plants are running close to capacity,” Pink said. “The only way to increase acres is due to expansion (of) the processor or a grower retiring or quitting.”
During a recent trip to Washington, D.C., Kyle Niehenke, executive director of the Adams County Development Council in Othello, ordered french fries.
“There’s a pretty good chance (I was) eating products from home, 3,000 miles away,” he said.
Niehenke describes the “Potato Belt” of the Columbia Basin as stretching from Hermiston, Ore., to Coulee City, Wash. Othello is in the center.
French fries are big business, Lathim said. About 40 billion pounds of frozen potato products are produced worldwide each year, Lathim said. Of that, North America produces about 16 billion pounds, and the Columbia Basin produces 6 billion pounds.
Othello, with a population of 8,700, produces about 15% of the french fries in North America, Lathim said.
“We’re blessed, more than all of the other regions combined,” he said. “We have perfect, ideal growing conditions for growing potatoes; affordable power; plenty of water available.”
Add the fact that the potatoes are raised near the processing plants, he said.
All of the potatoes processed in Othello and the Columbia Basin come from farmers in the surrounding region, Lathim said.
French fry plants in other regions have to truck potatoes hundreds of miles, Lathim said. Of the 36 plants in North America, the Columbia Basin has 14.
Cost of production
Pink estimates his cost of production has nearly doubled in the last 10 years and increased by close to 75% in the last five years due to several factors.
“I feel like I’m in Vegas and I went from the regular blackjack table to the high-limit room, because that’s where we’ve gone,” Pink said. “It’s huge numbers. It makes everybody nervous — growers, suppliers, bankers. It’s big-time now. It’s not small change anymore, it’s serious money.”
It costs roughly $6,000 per acre to grow potatoes.
The processing plants tell farmers which potatoes to grow and how much.
“It costs so much to grow potatoes now that we only grow pretty much what processors ask us to grow,” Lathim said. “It’s too risky to try to speculate on them.”
The weighted average contract price is $11 per hundredweight, or $220 per ton, an increase of 19.7% over last year’s contract, Lathim said. That price was 20% over the previous year, he added. The average yield for an acre of potatoes is 33 tons.
Overall, the price of the potatoes the processors purchase has increased in relation to cost of production.
Negotiations for this year concluded last October. Negotiations for the 2024 contract will begin in July or August.
“Since COVID hit, there’s been hyper-inflation in the agricultural community,” Lathim said.
All inputs are up “significantly,” including labor costs and the cost to purchase or lease land. Overall, grower costs are up more than 50% since the McCain expansion groundbreaking in 2019, Lathim said.
But farmers and processors remain profitable.
“This is probably the most symbiotic industry that I know of in agriculture,” Lathim said.
Larger growing operations have tens of millions of dollars invested in specialized equipment and storage, while processors have hundreds of millions of dollars invested in plants that can only process potatoes, he said.
“They need us to be profitable, we need them to be profitable, so there’s huge incentive for both sides to always reach an equitable, reasonable contract price,” Lathim said.
Even with McCain’s expansion, the total number of potato farmers probably stayed “very close to the same,” said Chris Voigt, executive director of the Washington Potato Commission.
Instead of growing fresh-market potatoes, farmers switched to raising potatoes for processing, which comes with tighter standards. Major chains such as McDonald’s don’t want bruising or discoloration in their french fries.
USDA standards are generally a little more forgiving than processor requirements, Voigt said.
Voigt says the area is maxed out on the amount of acres, at about 165,000 acres each year.
“There’s probably about 600,000 acres available for potato production, but you can only use a quarter of that every year,” he said.
Potatoes can only be grown once every four years on a piece of ground. Continuous planting of potatoes in the same field would allow diseases such as verticillium wilt and pests such as nematodes to move in. The cycle must be broken by planting other crops.
“If we didn’t have access to fumigants, we could probably only grow potatoes once every 12 years,” Voigt said. Fumigants are pesticides that form a gas to control pests that live in the soil.
About 70% of the crop goes for export, primarily as frozen potato products, Voigt said.
Voigt said the Washington industry has struggled for eight years to keep up with overseas demand. Even with McCain’s expansion, the industry can’t meet all of the demand, with the European Union filling the gap, particularly around the Pacific Rim.
The industry’s investing in soil health research, new technologies and breeding to increase yields or bringing new ground into production. That would require more water from the Columbia River to convert more land to irrigated agriculture, Voigt said.
“There’s plenty more dirt here in the Basin that would be very ideal for growing potatoes, even maintaining our current rotations,” Lathim said. It all comes down to economics, he said.
“Crops that were normally grown in other regions, they’ve been moving more and more of them here to the Basin,” he said. “If we did want to expand even further, what we would need is prices to come up to where we could basically outbid some of these other crops….”
Othello plans to promote itself as the French Fry Capital. “That’s one of our claims to fame, so absolutely,” said Shawn Logan, mayor of Othello. “We haven’t developed anything yet.”
More processors could build plants in Othello, he said.
“Othello is the cheapest place in the country to build a new processing plant,” he said.
The city is also well-positioned to attract other food and beverage processors, said corporate site selection consultant John Boyd.
The city commissioned him to study how Othello measures up to 25 other comparable sites in the U.S. for operating costs, electric power and natural gas costs, land and construction costs, property tax and sales tax costs, and other factors.
Boyd points to “millions of dollars in operating cost savings annually” in Othello compared to California, Idaho’s Treasure Valley and even “skyrocketing costs” in the nearby Tri-Cities and Moses Lake areas.
Niehenke said Adams County is targeting food processors “as hard as we can,” to benefit crops already grown in Othello — or what could be grown in the area.
Many California companies, turned off by regulations or politics, are looking to either relocate or add a base of operations in Washington. Anything grown in California, except for tree nuts that can’t grow in Washington’s climate, is fair game, Niehenke said.
“We’ll see a lot of new commodities grown up here in the coming years that I think may surprise some people,” he said.
It will take work for Othello to maintain its No. 1 status, Voigt said. He points to the state’s high labor costs and greenhouse gas legislation that is driving up the costs of fuel and electricity.
“Quite frankly, there’s been so much more expansion in Canada and other places, just because the cost of doing business is lower than it is in the U.S., particularly in Washington,” he said.
Voigt said he is aware of interest by one of the three major companies — McCain, Simplot or Lamb Weston — in building another french fry plant in Washington, possibly in Othello, the Tri-Cities or Moses Lake.
Lathim predicts the equivalent of one new potato processing plant in North America each year, with other tweaks made to improve efficiencies, for an annual expansion rate of up to 3%.
“We’re going to need that just to keep up with demand, and we’re going to need good crops,” he said.
McCain announced plans in March to double the size of its facility and production in Coaldale, Alberta, Canada — a $438 million expansion.
Lathim also pointed to other “quiet expansions” throughout the Basin.
“They don’t all get announced,” he said.
In the meantime, Pink, the farmer, just hopes Mother Nature treats his crop good over the next few months. May and June are critical months, he said.
Farmers can take pride in Othello being the No. 1 place on earth for frozen potato products, Pink said.
“When you can say, ‘I’m part of the production that goes into the town that produces the most french fries and processed products in the nation,’ that’s kind of cool, it really is,” he said.