Less money in the account due to irrigation

The liquidity position of arable farms declined sharply in the third quarter of 2018, partly due to additional costs for irrigation. This is apparent from the liquidity monitor of ABN-AMRO and Wageningen Economic Research (WUR).

The liquidity position decreased by almost €19.000 and amounted to more than €4.000 in September. That is €1.000 less than in September 2017. However, a decline is normal for the third quarter and was also seen in the third quarter of 2017, when the decline was more than €16.000.

Substantial costs for irrigation
In July, the gap between credits and debits was widest, with the cash position falling by €12.000. This is partly because significant costs were often incurred for irrigation in that month. Also less this year came in from products that were the last to come out of storage, while the yields from early potatoes are hardly noticeable in the third quarter. The pool prices of grain (advance) were higher than in 2017, but this is hardly noticeable for the liquidity position.

ABN-AMRO expects that the decline in 2018 will ultimately be less deep than in 2017. This is due to higher prices of land-based products, costs that remain the same and increased income due to good demand for industrial products and the export of onions and potatoes.

However, financial returns will differ greatly in the coming period as a result of the drought. Lower yields will often not be able to be compensated in the case of contract cultivation, while free products can benefit. Even then, it remains to be seen whether the final balance will be higher, because higher prices do not always compensate for lower yields.

Liquidity Shortages
In addition, ABN-AMRO expects that liquidity shortages will arise at more companies, partly because 2017 was also a moderate arable year and reserves were opened. ABN-AMRO therefore expects entrepreneurs to be cautious about investing.

Although the balance decreased in the third quarter, the percentage of companies that were overdrawn remained the same. The share of companies that were heavily in the red (more than €50.000) rose from 12 to 20%. The percentage of companies that were more than €25.000 in the plus has decreased to 20%. The balance fell below zero at 14% of the companies in this group.

Anne-Jan Doorn

Anne Jan Doorn is an arable expert at Boerenbusiness. He writes about the various arable farming markets and also focuses on the land and energy market.

aj.doorn@boerenbusiness. Nl

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