Low crop prices and high input costs are putting pressure on arable farmers' liquidity. This is already visible in the financial figures, but business advisors and banks do not expect to see the full impact until later this year. What are arable farmers struggling with, and what can you do to alleviate the burden? You can read about it in this article.
It is primarily the low potato prices that are currently taking a bite out of arable farmers' liquidity positions. This is especially true when potatoes have to be disposed of for animal feed at negative prices, while the cost price is above 20 cents. Almost all potato growers have a portion of unsold product in storage that is not covered by the contract. Roughly, that ratio is 80/20, but due to the good yields of last autumn, this varies significantly per farm. How buyers handle the unsold portion varies. Some still pay something for it, but there are also processors who pay nothing. Buying out contracts also occurs, because there is no room even for the contracted kilos.
Pain in the summer
Growers are dealing with this bleak scenario in different ways. Some are opting for short-term pain and have started clearing early, while others are willing to wait and see and can store the product for several months. "Our expectation is that the effects of low crop prices will not become noticeable until after this summer," says Hessel Kingma, Arable Farming Sector Specialist at Countus. "At the moment, there are no immediate bottlenecks in the liquidity position of arable farmers." Normally, a peak in the liquidity position is noticeable precisely at the beginning of the summer. Looking at the medium term, however, we do see more challenges.
The differences between them are significant. Companies that have recently made investments using their own resources are indeed facing liquidity concerns, says Kingma. Nevertheless, he observes that many entrepreneurs continue to invest. "The construction of (storage) sheds, for example, has not stopped either. In many cases, companies are still relying on income from sources such as the sale of onions and seed potatoes."
Long-term impact
The idea is that because arable farmers have had good years on average in recent years, they can survive this season. However, a bad year can impact your business operations for several years, warns accounting firm Aaff. "When evaluating financing applications, banks look at the average performance of the past five years." states Senior business advisor Frans van Wanrooij: "An average year like 2019 will soon be replaced by the result of 2025. If operational profitability (EBITDA) and free cash flow (DSCR) decline, the bank will require additional substantiation. A forecast is indispensable, especially if additional financing is needed to address liquidity problems. Furthermore, a 20% decline in your financial result negatively impacts your bank rating, which affects the interest rate you pay."
By the end of 2025, ABN Amro already saw that the liquidity position of their arable farming clients was decreasing was, by €34.000, to over €155.000. That is a lower bank balance than was on the account in 2024 and 2023. Mainly due to disappointing income from the recent harvest, less money came in during the third and fourth quarters of last year, while expenses increased. Since last July, expenses have exceeded income, according to an analysis of customer data at the bank among 270 arable farmers.
Potatoes crucial
By far the largest share of income for arable farmers comes from potatoes. According to ABN Amro, this crop accounts for 35% of the income share. Other crops rank second (13%), and sugar beets come in third (11%). Incidentally, the bank sees no difference between large and small entrepreneurs. The financial situation is roughly the same; only the amounts vary. The exception is the largest arable farms, where cultivation is more open-ended. There, income and expenses fluctuate significantly.
Kingma observes that arable farmers are keeping a close eye on their expenses. "In a year with good product prices, you see, for example, that major maintenance is brought forward. Now it is the other way around, and non-essential matters are being postponed. If investments are made, they are primarily in labor-saving technology." In addition to lower incomes, there are also rising costs putting pressure on the earning capacity of arable farmers. Figures from Countus show that the cost price of seed and ware potatoes and onions has risen by an average of €6 per 100 kilos compared to 2020.
Rising cost price
Earlier this year, NAV was still counting on the cost price prices for ware potatoes would fall by 1% to 1,5%. With the sharply increased fertilizer and diesel prices, the cost price can quickly increase by 1 cent or more per 100 kilos. Of course, that also depends on existing stocks and how often irrigation will be carried out in the coming growing season.
According to data from WUR, an average 60-hectare arable farm on clay soil (in the Southwest Netherlands) uses 135 liters of diesel per hectare. At the end of March, the diesel price fell slightly, but at €181,47 per 100 liters, the average price level is 33% higher than before the outbreak of the war in Iran. For an arable farm of 100 hectares (13.500 liters annual consumption), this means a cost increase of €8.000.
The advice from business advisors is essentially unanimous: indicate expected liquidity shortages early so that they can be anticipated. Countus has been working for some time with a reporting tool (CMRA) for arable farming, which uses the company's own figures to generate a forecast up to three years ahead. This is intended to signal potential bottlenecks early. ABN Amro already observed a slight increase in overdrafts among arable farmers at the end of last year and expects a limited peak in the second quarter. According to the bank, this is not alarming, given that the sector has a volatile character compared to other agricultural sectors.