News Economy
'Recovery of agricultural returns will not be forthcoming in 2021'
Agricultural production has proved less sensitive to the lockdowns than other sectors, but the corona crisis has resulted in lower prices. As a result, the production value has fallen by more than 4%, according to the Economic Bureau of ING. "Some price recovery in 2021 is feasible, although the prospects for a strong improvement in returns remain unfavourable."
The volume of agricultural production grew by 2020% in 1,2. Agricultural production will reportedly continue to grow in 2021, but only a meager 0,5%, the Economic Bureau of ING expects. "Step by step, the nitrogen measures in intensive livestock farming in particular are causing a shrinking livestock population and therefore lower production."
The production value decreased by more than 2020% in 4. This is mainly due to the decline in demand from abroad. The domestic food sector has survived. Although part of consumer spending shifted from catering to supermarkets and specialty stores.
Challenging years for farmers
In addition to the corona crisis, nitrogen policy will remain a source of concern in 2021. "Mainly because of not too clear rules about internal and external netting and differences in implementation per province." There is also pressure on agricultural land due to housing construction, solar parks and wind farms, the creation of nature and forests and the call for food transition and circular agriculture.
"For a sector that - from an economic point of view - is an indispensable pillar, has always invested heavily in innovation and making stables more sustainable (including in terms of nitrogen excretion in order to remain below the European nitrogen ceiling) and has to deal with a skewed margin distribution in the food and agri chain, these will be challenging years," the bank writes.
Difficult year for potato growers
2021 will also be a difficult year for potato growers, according to ING. Growers saw the prices of chips potatoes plummet at the start of the corona crisis due to the closure of the catering industry. "To date, the prices have remained well behind the long-term average. Recently, the price has risen slightly again due to additional demand from Belgium." ING expects that growers and traders who have sufficient good quality potatoes in stock and who are not bound by contracts may see a further boost in turnover in the coming months.
The corona crisis also affects the new potato season. "Both the new contract volumes and prices for delivery ex-land are lower. In combination with the higher cultivation costs it will be a tough year for many potato growers," the Economic Bureau of ING writes in the report.
The onion market is less dependent on lockdowns in the catering industry and continues to perform well, ING reports. "Export suffered briefly from a shortage of containers, but reached record highs in the second half of 2020. The seed onion area is expected to increase by 5% this year and prices will remain above average in 2021." This also applies to other arable crops, such as carrots and wheat. In addition, global grain prices are currently at their highest levels since 2014.
Falling prices in livestock farming
The onset of the corona crisis has also led to a sharp drop in milk prices. Prices remained below average for almost a year, ING points out. While the yields were disappointing, the costs for concentrates were 25% higher than average. High feed costs will also dampen expected return growth in 2021, ING expects. "In March the milk price will be back to the average level and it is expected that this will remain the case for the rest of the year. However, the development in prices between the various milk flows continues to diverge."
Pig prices showed a downward trend in 2020. Uncertainty remains an asset for pig farmers, ING says. "2021 will be challenging due to the uncertain course of both corona and African swine fever. Although pig congestion in the slaughterhouses has almost been resolved, stocks in the cold stores are high. The unfavorable factor is that global commodity prices are rising, resulting in high feed costs. Piglet prices are also rising sharply, due to demand from Spain and a lower supply due to the hot summer of 2020 and the remediation scheme."
As a result of the restructuring scheme, companies have already stopped and more will follow in the course of this year, but more and more of the 407 companies originally registered have dropped out, the Economic Bureau of ING has concluded. "Whether the previously estimated 7% shrinkage of the pig population will be achieved this year and how much nitrogen space this will provide, therefore remains shrouded in mystery."
Linda van Eekeres
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
