BB Agricultural Congress
Ausma: 'Loads of land increased little'
During the arable farming session at the National Economic Agriculture Congress, Arjan Ausma, arable farming sector specialist at Rabobank, took attendees through a number of national and international trends. In addition to consumer trends, the land market and financial burdens were also considered.
With hard figures, Ausma showed flawlessly what the agricultural sector is capable of. For example, attention was paid to the intensive construction plan. About 60% of the Dutch arable farming plan consists of harvested fruit, of which potatoes take up more than a quarter. In 2018, it is even possible that the share of potatoes is greater than the share of grain. In Belgium the share of harvested fruit is over 30% and in other Western European countries it is less than 10%.
60
procent
1-on-1 potatoes
The soil quality and building plan expansion are discussed. "Nevertheless, we see that very intensive cultivation takes place on a very small surface. Due to the presence of potato storage, '1-on-1' potatoes are actually grown," says Ausma.
Potato cultivation has been able to grow mainly due to an increase in the processing capacity of chips potatoes, coupled with growing demand. "In the 2015/2016 season, the Netherlands and Belgium together accounted for an annual processing capacity of 7,8 million tons," Ausma explains. "Between 2016 and 2019, new production lines will be set up and existing lines expanded. We are counting on a plus of 2 million tons. In the 2018/2019 season, the expected capacity is 9,8 million tons. However, if I am speaking with the Belgian industry, then they are now taking into account 10 million tons or more."
Market disruption
In his presentation, the Rabobank man presents the audience with an overview of trends and developments among consumers. “Disruption is the word of this century. The disruption is causing markets to behave differently. Globally, food is a growth market. In Northwestern Europe, the market is saturated. The population is declining and GDP (Gross Domestic Product) is not increasing much."
"Consumer buying behavior remained traditional for a long time. Now you see a hybrid consumer emerging," Ausma says. "This means that he gets his daily groceries at a quality discounter, such as Lidl, but also goes for experience and expensive products. The middle segment is disappearing. Just look at V&D. As a company you have no business here anymore."
The power of supermarket chains was also discussed during the other presentations and the debate. In the presentation, Ausma makes clear how it is. Only 5 purchasing organizations (AH, Jumbo, Lidl, Aldi and Superunie) hold the power. There the hourglass reaches its narrowest point. At the top you will find the input of 63.000 farmers and horticulturists. Down the 16,7 million consumers.
5
buyers
Land and interest keep farmers busy
When the land price, capital market interest and annuity are discussed, the audience is on the edge of its seat. "What does an arable farmer do with his money after good years? He invests it in machines and buildings. We see that this means that the machinery is in good order. Growth at companies is also reflected in land and land prices. Interest rates are currently unimaginably low. the loads per hectare haven't increased much since the 80s."
A graph shows that the 5-year annuity (interest and repayment) fluctuates from €1.800 to more than €2.000 per hectare. The price of land rose in that time from €15.000 to over €50.000 on average. However, interest rates went from almost 12% to less than 2% in the same period. Had this not been the case, agricultural land would now be unaffordable.
Loads per hectare
The audience asks about the burden on arable farmers. Have they increased? Ausma summarizes a number of figures offhand: "Agricultural entrepreneurs have financed approximately €3 billion at Rabobank, with a market share of 80% to 85%, approximately €1 billion is added. On 500.000 hectares of land, including lease, this means that an arable farm with 140 hectares has approximately €30.000 to €32.000 in financing costs per hectare. This is based on 70 hectares of ownership. On average, less than half is financed. The buildings are free of financing. Each year there is a few thousand euros. We are talking about the top in the arable sector. It concerns the 400 to 500 largest companies. The CBS average comes out at 60 hectares per company, while we are talking about 140 hectares."
Resolve a problem
In addition to the price of land and interest rates, there is also a lot of discussion about the repayment on land. The average repayment term of 30 years remains in place. According to Ausma, in the arable sector, repayments take an average of 26 to 27 years. "Land has 1 problem. You do not depreciate on it, so you repay with net profit. Because you do depreciate investments in machines and buildings, you see that the repayment is paid with the depreciation of these 2 items. On paper this works. However, as an entrepreneur you find yourself in a trap. After a while your account is empty, but the machines have to be replaced. Inflation can be a way to pay off on land. However, this is only interesting when companies are in their last cycle and have no succession, but sell everything."
Niels van der Boom
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