The cash flow in the second quarter of this year deviates significantly from the normal picture, due to the corona crisis. This is evident from figures from ABN Amro and Wageningen Economic Research.
In the arable farming chain, the corona crisis sometimes led to a sharp drop in demand in the first weeks. The demand for chips potatoes, in particular, collapsed. In the first quarter of 2020, potato chip yields were already lower than in 2019 due to lower prices. Partly due to the start of the corona crisis in March. In the second quarter of 2020, the export and domestic sales of French fries fell sharply due to the closure of the out-of-home segment. The government has drawn up a compensation scheme totaling 50 million euros for chip potato growers for the damage suffered.
Decline bigger than usual
The average current account position of arable farms fell in the course of the second quarter to just under €20.000 at the end of the second quarter. Compared to the second quarter of 2019, this is a decrease of €7.000. A limited decline in the course of the year is not unusual, however. The second (and third) quarters are usually quarters in which the stock declines due to cultivation expenditure, while crop yields decline.
Lower costs
Not only did revenues lag behind in the second quarter, imputed costs were also about €2.600 lower than last year, despite additional costs for irrigation and overseeding. In connection with the consequences of the corona crisis, banks have offered entrepreneurs no repayments and sometimes no interest for 6 months.
Banks have interpreted this in different ways and entrepreneurs have used it in varying ways. As a result, many entrepreneurs have shifted their repayments from March to April. This distorts the picture of the monthly liquidity development in March favorably and unfavorably in April.
Payments to the tax authorities are a lot lower this year than last year, probably because payments have been temporarily suspended. Entrepreneurs have also taken out fewer loans for investments this quarter.
Moderate outlook for the rest of 2020
Due to the large stocks of chips and the expansion of the potato area in northwestern Europe, under normal growing conditions, price pressure is expected for the potato harvest in 2020. However, due to the dry spring, production can still be tempered, which in turn can have an upward effect on the price. .
In the past period, plenty of potatoes were processed from the 2019 harvest, ABN Amro writes. The contracts are fulfilled by the processors, but usually 2 months later than planned. It is expected that a small catch-up can be made in the third quarter, also because the processing of pool contracts has been pushed back because the final price cannot yet be determined.
In addition to the deferred income, a number of cost items (seed and seed potatoes, PPP, fertilizer) have also been deferred until the third quarter. At the beginning of this year, Cosun expected a price for sugar beet that will be around the level of the 2019 harvest. Due to the corona crisis, the demand for sugar fell, making the outlook less good. In addition, the results of Aviko (part of Cosun) will also lag behind, as a result of which this plus on the sugar price will also be omitted. The export of onions is still difficult, but the price development is positive.
Early payout rights
There are more than 13.000 agricultural entrepreneurs who have applied for an advance from RVO for payment of payment entitlements in order to receive them in July. This advance amounts to €300 per eligible hectare. For the average arable farm, this involves an advance of almost €20.000, calculated Wageningen Economic Research.
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