Boerenbond wants broad toolbox against volatility

The turnover of Flemish arable farmers shows a slight decrease in 2017. It is also the sector with the greatest price volatility. The Boerenbond therefore advocates in its analysis of the agricultural year 2017 for a broad toolbox to limit price fluctuations.

Due to the higher yields, the union expects a 16% increase in turnover for grain, compared to 2016. Compared to the 5-year average, however, 2017 is just an average year. There is a worse starting position for potatoes. In Flanders, approximately 40% of the potatoes are traded on the free market. The other 60% of the production is grown under contract.

The contract price increased in 2017. Taking into account both the contract prices of 2017 and the developments on the free potato market, it is assumed that the expected average price level will be more than 25% lower than in 2016. Things look dramatic for the free market. , with prices 75% lower than last year. 

Pressure on sugar prices
The large sugar beet production, both in Belgium and in other European member states, is likely to put pressure on sugar prices. The fact is that the European beet acreage has increased by no less than 16,2%. In 17 of the 19 Member States, where beet is grown, the acreage expanded. The surface area in Flanders increased by 11%, compared to 2016.

The sugar factories estimate that the average yield is approximately 20% higher than the 5-year average. Taking into account an expected sugar content of 16% to 17%, Boerenbond expects a 2016% increase in sugar production compared to 36.

It is still unclear whether the price level of the 2016 campaign will be achieved, but what is certain is that the importance of sugar beet cultivation in the arable sector has decreased continuously in recent years.

Strong price fluctuations 
In terms of sales prices, the union notes that the greatest price volatility occurs in arable products. "In the price index for arable products, we notice very strong price fluctuations for potatoes (free market). The fact is that the price fluctuations are by far the greatest for potatoes. We also note that the price development of grains is to a certain extent related to that of energy prices. ", says Boerenbond

"The beet price does not fluctuate very much. This in turn is related to the European sugar policy, in which a guaranteed sugar price applied until last year. It is true that we have observed a gradual decline in the sugar beet price over the years. In 2017 (the first 7 months), the index of arable products is at the 2007 average," explains Boerenbond.

Mitigate volatility
Together with the permanent lack of transparency in the agri-food chain and the difficult position of farmers and horticulturists in the chain, price volatility continues to cause headaches, according to Boerenbond. Making the agricultural sector more resilient, agile and crisis-proof in an uncertain and volatile context is therefore a particular challenge. 

Boerenbond argues for a broad toolbox, both within the Common Agricultural Policy (CAP) and within other policy domains and own chain initiatives, which should allow individual actors as well as partnerships to strengthen their effectiveness and improve their crisis resistance. 

Toolbox
The toolbox includes the following elements: (income) insurance systems, contractualization, futures markets, taxation, voluntary temporary production limitation with compensation, diversification, chain agreements and facilitation of promotion and sales, both at home and abroad. The development of a broad and affordable range of (income) insurance systems is crucial. The CAP can play an important leverage role in this. 

Contractualization and Futures Markets
Contractualization is an important additional tool to manage risk and formalize market-oriented collaboration. The legal framework, created within the CAP for the collective and interprofessional development of standard contracts, is a crucial element for the introduction of contractualization in the agricultural sector. This discussion is separate from the commercial discussion about price, quality and quantity. 

In addition, well-functioning futures markets also offer opportunities for hedging market risks. The CAP can not only focus on informing about the importance and usefulness of futures markets, but can also stimulate development and participation in futures markets. 

Government support in extreme situations
Boerenbond believes that entrepreneurs should weigh up their entrepreneurial risk and/or cover it in another way, but the government has a permanent responsibility to support the primary sector in extreme market situations. The restoration of the market equilibrium through temporary, voluntary production restrictions with compensation from the government offers an opportunity. 

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