Rabobank makes recommendation
What are the consequences of the fipronil scandal?
The House of Representatives will debate the fipronil crisis on Thursday 24 August. But what are the short-term and long-term consequences of the fipronil crisis? Rabobank outlines a number of situations.
At the end of July, dozens of poultry farms finally said, because fipronil would have been found in the eggs. We are now one few weeks later and meanwhile millions of eggs have been destroyed and supermarkets have taken the eggs off the shelves. However, until now there was no clarity about the consequences.
Short-term consequences unclear
According to Rabobank, the consequences for the sector are not yet fully clear. The impact also varies considerably from company to company. However, it appears that most companies are still able to absorb the blow themselves, because they still have enough financial resources or because they combine their poultry farm with another agricultural branch.
However, that does not alter the fact that there are also companies that cannot cope financially. This means that a number of companies will have to or want to go on strike. Rabobank wants to prevent this by making agreements about the postponement of repayments or the granting of a bridging loan. Also other banks want to support this.
Period of uncertainty of importance
The long-term consequences depend mainly on the period of uncertainty. The longer that period is, the greater the long-term consequences will be. This is reflected, for example, in the consequences of an empty stable. An empty stable is of no benefit to an entrepreneur. The longer the stable is empty, the greater the loss for the entrepreneur.
Poultry farmers are also afraid that their laying hens will have to be killed early. The hope is, of course, that the chickens will become Fipronil-free by moulting, but if that doesn't work, then only premature death will remain. That would be a significant cost item for the entrepreneur, because the barn will initially be empty and new laying hens must then be purchased.
A third long-term consequence is an increase in the egg price. This ensures that other parts of Europe are ramping up production. By the time Dutch companies are able to fully produce again, the egg price will fall just as fast.
Sales are in danger
Another major consequence is that the sale of Dutch eggs is at risk. If consumer confidence in (particularly) Germany does not recover quickly, an alternative outlet will have to be found. Currently, 5 billion eggs are exported to Germany. And the longer it takes before the Netherlands is allowed to supply eggs again, the greater the chance that other countries will be able to take advantage of these markets. At a later stage, those markets have to be recaptured at lower prices.
It is therefore mainly the lack of clarity that causes the damage among the affected poultry farms to increase further. This in turn causes the impact on the sector to increase and more companies to encounter problems.
There should be clarity soon
According to Rabobank, it is important that clarity is provided as soon as possible. All parties in the poultry sector need this, because every day without clarity costs the sector quite a lot of money.
The solution, according to Rabobank, is that the fipronil crisis is treated in the same way throughout the EU. It is especially important that European legislation and regulations are applied in the same way.
Kimberly Baker
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