Arable farmer's liquidity under pressure this spring

The liquidity of the Dutch arable farms could generally come under pressure this spring. The higher (diesel) costs due to the spring work and the lower income from the sale of crops are the reasons for this.

This is what ABN Amro says in its liquidity monitor for arable farming for the first quarter of this year, in which the bank collaborates with Wageningen UR and the Ministry of Agriculture. In the first 3 months of this year, there is still little going on with the liquidity of arable farming, despite the fact that the corona crisis unfolded in full force in March. At €50.000 at the end of the first quarter, the current account balance of an average arable farm was virtually identical to the situation in 2019.

Limited supply due to drought
On balance, the average arable farmer credited his current account with €3 in the first 21.600 months of this year, about 26% less than in the same period in 2019. This is mainly because the income from the crops was lower than last year , which in turn had everything to do with the drought of the 2018 harvest. The tight supply from that harvest resulted in higher prices in the first part of 2019.

In the first quarter of 2020 there was, on average, room to make extra repayments on loans, notes ABN Amro. The level of credits and depreciations in the first quarter of this year was approximately the same as in 2019. The credits in the first quarter were just above 2 tons, the depreciation amounted to €180.000 in 2020.

Pay early cap
It is clear that the corona crisis has much more influence on the financial management of arable farms in this current second quarter. Just take the collapsed market for chips potatoes, for which the affected growers are partly compensated financially by the government. The earlier payment of the GLB monies will only have an effect in the third quarter, ABN Amro reports. Many entrepreneurs will not pay repayments and sometimes no interest to their bank in the next 6 months, the bank indicates.

Added to this is the current dry spring. Making a good seed or seed bed has therefore cost many arable farmers extra work. Irrigation before or after sowing and planting crops such as potatoes, onions and sugar beet is added to this. The resulting higher diesel costs will further depress the liquidity of the average company, ABN Amro expects.

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