Arable farmers show positive balances

Arable farmers in the Netherlands are showing a better average current account balance this year. In the first 4 months of 2017 in particular, they performed better than in 2016. This is apparent from the ABN Amro liquidity monitor.

Dutch arable farmers reached their lowest point in October 2016, when the balance amounted to a minus of € 4.300. However, in the months that followed, that balance increased again, due to the payment of farm payments (€11.500) and the receipts for various crops (€24.800). 

In April 2017, most arable farmers reached their peak. The average balance then amounted to €26.300. In the months that followed, the balance fell again (to €6.100 in July). The latter was related to the cultivation costs and the depreciation for crop protection products, fertilizers and fuels, among other things. This brings the average current account balance in September to a minus of €400.

Cash flow shows steady pattern
The cash flow on the arable farms shows a clear pattern. This will be higher in the first 4 months of 2017, partly due to more favorable prices. Then it gradually decreases. Due to the extreme weather conditions, which have caused damage to crops, the price was lower than expected.

Also of influence was the oil price. In combination with the lower dollar, costs for oil-related products were lower. However, the different marketing systems (pool, contracts or free market) on the arable farm are even more important. These cause major differences in the current account.

Low market prices affect
The prices of mainly potatoes are currently performing worse than the past 2 growing seasons. Prices for the other crops (cereals and onions) are at an average level. The enormous increase in those crops has put pressure on prices. In Europe, potato yields per hectare are in some places 20% above the long-term average.

The wet conditions, which have caused a loss of quality, also provide extra supply. This is because the storage quality is low, given the risk of rot. Last year, due to the good prices, many companies chose to sell part of the harvest directly. That will not be possible now, so they will save a lot. Hoping that prices will pick up again.

What’s next?
The expectation is not immediately positive. The liquidity monitor expects that the current account position will deteriorate in the coming period. This is because of the low product prices. Especially because products are stored for as long as possible, which worsens the position.

At the end of the year, however, the current account will receive a positive impulse. This is due to the company allowances. ABN Amro expects arable farmers to pause by not investing. With the current prices it is difficult to shape long-term plans. However, on the other hand, the bank claims that Dutch arable farmers are used to volatility.

Kimberly Baker

Kimberly Bakker is an all-round editor at Boerenbusiness. She also has an eye for the social media channels of Boerenbusiness.

k.baker @boerenbusiness. Nl

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.