ABN Amro expects the current account position of arable farms to deteriorate in the coming months, compared to last year. This is because of the low product prices. This can lead to liquidity shortages in several companies.
Arable farmers will (if possible) keep the products in storage for as long as possible. The bank says that this means that the financial resources continue to fall. Arable farmers will therefore stop making investments and there may even be liquidity shortages on some farms.
40% less
Due to the large harvests of potatoes, grains and sugar beet (all onion harvests were average), prices are under considerable pressure. Due to these low prices, 2017 will go down in the books as a bad year from a business economic point of view. ABN Amro estimates the average income for the arable sector (per unpaid annual work unit) at €25.400. That is almost 40% less than in 2016.
Arable farmers nevertheless managed to make a financial final sprint in 2017. The current account position increased in the last quarter, due to the payment of farm payments and the sale of crops. Arable farmers have slightly more money in their accounts in 2017 than in 2016.
The closing balance on the current account in December 2017 was on average €6.000 higher than 1 year earlier. On the other hand, the costs were also lower, such as energy costs. This is because more and more arable farmers are producing their own electricity.
Major differences between companies
The amount of cash flow strongly depends on the season. The position was high in the first quarter of 2017, as a result of a better product price for the 2016 harvest. The differences between the entrepreneurs are large, the bank notes. This is due to the differences in the marketing system such as pool, contracts and/or free market. Storage and quality control are also important for the price.
Sell fast
Potato growers have harvested 25% more than in 2016 and 12% more than the long-term average. This leads to price pressure. On the other hand, the processing capacity of the French fries industry has increased. Since harvesting is often done under wet conditions, the quality sometimes leaves something to be desired. Growers are forced to sell their product quickly.
The prices for seed potatoes are under less pressure than the ware potatoes, but here too the prices will be lower compared to previous years.
onion cultivation
Onion cultivation also suffered from the weather conditions last year. Being able to irrigate or not was crucial for the amount of yield. Nationally, there is an average yield. However, the market is calm with moderate prices. Senegal is becoming an increasingly important sales area and is therefore increasingly determining for price formation.
Grain and sugar beet harvest strong
Just like the potato harvest, the grain harvest is also large worldwide. Ukraine even achieved a record harvest. The yield per hectare (9,7 tons) was also high in the Netherlands. This is 8% more than in 2016. The world stock is large, which means that no price increase is expected in the short term.
Sugar beet growers also saw record yields, with good sugar percentages, come from their land. Incidentally, yields of more than 20 tons of sugar per hectare were even achieved.
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