The Maine Potato War of 1976 | Planet Money

Intro

In this episode of the “Planet Money” podcast, titled “The Maine Potato War of 1976,” the historical significance of Maine as the potato capital of America is explored. The podcast highlights the challenges faced by Maine potato growers when Western states like Idaho and Eastern Washington emerged as strong competitors in the potato market. The story delves into the impact of commodities markets on the balance of power and the consequences of a high-stakes battle for economic control. Through interviews and historical accounts, the podcast provides insights into the chaotic world of potato trading and the long-lasting effects of the Maine potato war.

Main Takeaways

Maine’s Potato Dominance and the Rise of Western Competitors

• Maine has a historical significance as the potato capital of America, with the Catata potato being highly regarded for its taste and pride of the state.
• The emergence of Western states like Idaho and Eastern Washington as potato-growing regions posed a challenge to Maine’s dominance due to their favorable growing conditions.

The Impact of Commodities Markets on Potato Trading

• The New York Mercantile Exchange (Nimex) served as a centralized marketplace for trading commodities, including potatoes, in the 1970s.
• Hedging in the futures market provided insurance against price changes for both potato farmers and buyers, such as potato chip makers.
• Speculators played a significant role in potato futures trading, contributing to market liquidity and movement.

The Maine Potato War of 1976

• J.R. Simplatt, a major figure in the US potato market, made a significant move by opening a million-dollar trading account in 1976.
• A battle for economic control of the potato market ensued between Western growers and Mainers, leading to a potato war.
• The Mainers strategically bought up the other side of the bet, causing prices to rise and putting pressure on the Westerners.
• The Westerners attempted to flood the market with supply to lower prices but faced challenges in finding buyers.

The Collapse and Aftermath of the Potato Futures Market

• On the last day of trading, outstanding contracts for potato deliveries exceeded the normal amount, leading to a commodities default.
• Two companies, Simplatt and Tegares, committed to delivering an unprecedented 50 million pounds of Maine potatoes, causing further market instability.
• The Maine potato war had long-lasting effects on the potato industry, making farming riskier and affecting consumer perceptions.

Summary

Maine’s Potato Dominance and the Rise of Western Competitors

The story of the Maine Potato War of 1976 sheds light on the historical significance of Maine as the potato capital of America. Maine’s signature potato, the Catata, was highly regarded for its taste and served as a source of pride for the state. However, the rise of Western states like Idaho and Eastern Washington as potato-growing regions posed a challenge to Maine’s dominance in the market due to their favorable growing conditions.

The Impact of Commodities Markets on Potato Trading

In the 1970s, the New York Mercantile Exchange (Nimex) provided a centralized marketplace for trading commodities, including potatoes. Potato growers utilized the futures market as a form of hedging, allowing them to sell future potatoes and protect against price fluctuations. This hedging mechanism provided insurance for both potato farmers and buyers, such as potato chip makers. Additionally, speculators played a significant role in the potato futures market, engaging in buying and selling for profit without physically handling potatoes. Their involvement contributed to market liquidity and movement.

The Maine Potato War of 1976

The Maine Potato War of 1976 was a battle for economic control of the potato market between Western growers and Mainers. J.R. Simplatt, a major figure in the US potato market, made a significant move by opening a million-dollar trading account. The Mainers strategically bought up the other side of the bet, causing prices to rise and putting pressure on the Westerners. In an attempt to lower prices, the Westerners tried to flood the market with supply by shipping train cars full of potatoes to the East Coast without buyers lined up.

The Collapse and Aftermath of the Potato Futures Market

The potato futures market faced a crisis on May 7th, 1976, when a large number of outstanding contracts for potato deliveries exceeded the normal amount. Two companies, Simplatt and Tegares, committed to delivering an unprecedented 50 million pounds of Maine potatoes, causing a commodities default. This default had significant implications for the commodities industry, shaking people’s confidence in the market’s reliability and potentially threatening the New York Mercantile Exchange. The Maine potato war had long-term effects on the potato industry, making farming riskier and affecting consumer perceptions. Maine potato futures were eventually delisted, while Simplatt and Tegares gained more power and influence.

Conclusion

The Maine Potato War of 1976 serves as a historical reminder of the impact of commodities markets on large commodity markets like potatoes. It highlights the challenges faced by Maine potato growers when Western states emerged as strong competitors. The collapse of the potato futures market had long-lasting effects on the industry, making farming riskier and reshaping consumer perceptions. The episode concludes with a teaser for the next episode, discussing big ideas to improve the economy and efficiency.