Meet Washington’s newest billion dollar industry. But it just got a gutpunch

The abrupt closure of a french-fry plant in Connell this week wasn’t just a blow to Washington’s reputation as french-fry maker to the world.

It put a damper on news that the state’s fifth largest agricultural product just hit a major milestone.

Washington potato sales topped $1 billion last year. That’s a first, according to a new report released by the U.S. Department of Agriculture’s National Agricultural Statistics Service.

The figure represents a 66% gain in just two years.

Lamb Weston Holdings Inc., based in Eagle, Idaho, is a big part of the trend as Washington’s largest buyer of potatoes.

It stopped processing potatoes at the Connell plant on Monday.

The company informed employees, investors and the public of the news on Oct. 1 in its quarterly earnings statement to the U.S. Securities an Exchange Commission, which showed net income fell 46%.

Lamb Weston’s restructuring plan included closing the Connell plant, curtailing production in North America and trimming $100 million in capital spending. It does not appear to affect other processing plants in the region.

The Connell shutdown is permanent and means nearly 400 workers in Connell — 4% of Lamb Weston’s global workforce — will be out of a job going into Thanksgiving.

And it begs the question: What does it mean for future potato sales?

Major employer

Lamb Weston employs about 3,000 in the Tri-Cities, where it has processing plants in Pasco and Richland, a research facility and executive offices in Kennewick.

It is a major producer, but not the only company that turns Washington potatoes into french fries..

Still, the shutdown was a shock, said Chris Voigt, executive director of the Washington State Potato Commission, which advocates for the industry.

Potatoes are Washington’s fifth most valuable agricultural product — after apples, milk, wheat and cattle. The state is second only to Idaho for potato production.

Shutting down the plant in Connell is a major hit for the small city, which is about 35 miles north of Pasco. But it will probably be a blip, Voigt predicts.

Global demand for potatoes has slowed, but is still positive at about 2%, and foreign food processors reportedly are on the prowl for U.S. locations to site plants, possibly even in Washington.

Voigt is worried more about the 375 workers left scrambling to find new jobs.

The food processing industry struggles with labor shortages. If those workers decamp for other industries, the problem will only get worse, he said.

Lamb Weston is providing severance packages and encouraging workers to apply for posts at its other facilities. The state employment security department will step in to help workers access benefits and potential new jobs.

Potatoes top $1 billion

Washington farmers cultivate potatoes on 165,000 irrigated acres, sending about 90% of their crops to the processors like Lamb Weston, which turns them into frozen french fries for McDonald’s and other customers.

The USDA tallied the 2023 value of Washington potatoes at nearly $1.1 billion.

Passing the billion dollar mark is a significant milestone that speaks to a much larger impact. Processing them into french fries multiplies the value many times over.

Potatoes contribute $7.5 billion in economic activity and support 36,000 jobs, Voigt said.

Voigt said several factors account for last year’s billion dollar performance. It starts with 2022, when production was low and left relatively few potatoes in storage before the 2023 crop came in.

The tight supply drove up prices and Washington was well positioned to benefit. It start harvesting in July, a month earlier than Idaho.

Too, most Washington potatoes are grown on fixed-priced contracts for processors, with while Idaho leans toward the fresh market.

Washington had the market to itself for more than a month. By the time Idaho potatoes were coming in, the bumper crop had driven down prices.

As a result, Washington potato prices were an average of 16% higher than its neighbor, according to the USDA figures.

“The open market was below the cost of production,” Voigt explained. “That’s why we were able to maintain a higher price over Idaho, because they have more fresh acres and we have more processed acres.”

High yields and favorable growing conditions boosted the market as well. Notably, 2023 was free of the “heat dome” type of events that hinder potato pants.

Even before Lamb Weston confirmed it was closing the Connell processing facility, 2024 was shaping up as a different kind of year.

The abundant 2023 crop means storage facilities are fuller than normal and prices are down. Voigt said the market was stabilized when the USDA bought $50 million of potatoes through an oversupply program. This year should be stable, he said.

James Alford president of the Franklin County Farm Bureau, said 2023’s surplus led growers to cut back in 2024. As a result, there won’t be a significant oversupply, and the loss of one of the older processing plants in the system should not be a major setback.

“We hate to see it happen in Franklin County,” he added. “But we’re still on an upswing.”

Lamb Weston setbacks

Lamb Weston has been beset by setbacks that saw its share price plunge two times this year before posting a modest rebound.

Its shares were trading at $66.87 on Thursday, down from the 52-week high of $111.88, recorded in January. At its lowest, Lamb Weston traded at $52.99, in July.

In June, Cleveland Bakers and Teamsters Pension fund filed a class action suit in U.S. Distinct Court for Idaho alleging the company’s share pries were artificially inflated when the company misrepresented problems it was having with its new software.

Share prices plunged again in July when it reported disappointing earnings.

Lamb Weston described the Connell plant as an “older, high-cost facility” in its most recent earnings statement and release, where it announced the shut down.

“A supply and demand imbalance in North America and an ongoing inflationary environment necessitate these difficult steps, Tom Werner, president and CEO said in the release.

Connell reeling

The Lamb Weston shutdown may be a blip for Washington potato growers, but the sudden loss of a major employer and customer for the city water utility is rattling Connell.

The Franklin County city had a population of 4,970 in 2023, according to state estimates.

Mayor Lee Barrow said Lamb Weston alerted the city to its plan “minutes” before it met with employees. He’s already identified potential impacts on the city, a list that will grow as it becomes more clear how many workers live in Connell, whether they’ll leave and what that could mean for school enrollment.

The company’s $580,000 water bill accounts for about 34% of Connell’s utility revenue, the mayor said. It paid about $130,000 in taxes on the gas and electricity it used.

The city is already rethinking a $1.7 million well project, which would have been funded with a $300,000 grant from the Washington Department of Commerce and water revenue.

“At this point, we just have to turn it down. Without Lamb Weston, we just don’t need that well.”

The Franklin County Graphic reported that Lamb Weston is expected to demolish the processing plant and expects to retain the land.

Efforts are already forming to support Connell and recruit new industry.

The Port of Pasco serves as the economic development entity for the Connell area.

“We will do everything we can to support them,” said Jean Ryckman, president of the port’s board of commissioners.

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