Gloomy outlook for arable income

Dutch arable farming has generally survived the corona crisis reasonably well this year. The operating results are on average slightly lower than last year, but there has not yet been a significant drop in income. However, the prospects for 2021 are bleak, outlines Bert Smit (photo), arable researcher at Wageningen UR.

Wageningen Economic Research, the successor to the LEI, and the CBS have the annual income estimates for Dutch agriculture and horticulture. For arable farming, the institutes are assuming an average income of €41.000 for this year. That's slightly below the multi-year average, which is between $40.000 and $45.000. Wageningen UR emphasizes that there is great variation in the results among arable farms, also due to the differences in character and crop plan.

55% of the arable farms are expected to have a positive cash flow this year, explains Smit in an explanation. This is not only due to the yields, but also partly because arable farmers have invested less. Interest payments have also been deferred and less tax has been paid than the previous year. Many companies already received an advance on payment entitlements in July. "In the longer term, deferred payments can still lead to a decrease", Smit notes.

Stable Yields
Revenues remain stable in the estimate. Onions and grains are showing a price increase, while the prices of seed and consumption potatoes have fallen. At €2020, the average total yields for 300.000 are approximately 2% lower than in 2019. Prices for crop protection products, fertilizer and energy decreased. Costs for seeds and seed potatoes, depreciation and maintenance and rent increased slightly in 2020. The total costs in 2020 are expected to be equal to 260.000 at approximately €2019.

The 2019/2020 marketing year ended with very low prices for free ware potatoes, also as a result of corona, which has severely affected sales opportunities and exports. The chip potato market has been hit hard by the corona measures. A drop in demand in the catering industry led to serious problems in processing and sales.

Hang over the market
Part of the potato stock has been sold as animal feed, but a large part has been processed into chips. The consequence of this is that large stocks of frozen chips remain above the market. "There is little demand worldwide and countries such as Australia and New Zealand are trying to protect their own industry against dumping," says Smit.

Due to the reduction in the total acreage of potatoes for the coming season, the seed potato market is leading to a fall in prices. This decrease amounts to €3 per 100 kg (from €31 per 100 kg in 2019 to €28 in 2020). There was much less demand for malting barley in 2020. Due to the high feed prices, this barley was sold as feed without any problems, albeit without brewing premium. "But potatoes on average account for 50% of the income on an arable farm. The poor prospects are expected to lead to lower incomes in 2021," concludes Smit.

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