Arable farmer's liquidity position stabilises

The liquidity position of arable farmers stabilized in the second quarter of 2018, while the group showed an increase in the previous quarter. The average current account balance remains just below €40.000. This is apparent from the ABN Amro liquidity monitor.

The average current account balance of arable farms is €38.000. That is almost twice as high as 2 year ago (€1) and also higher than last quarter (€36.000). It is striking that the liquidity position remains high, while the returns are lower. This may be due to the fact that the costs are often only settled/paid at the end of the year.

Drought affects forecast
ABN Amro is negative about the development of the liquidity position of arable farmers. This is because this year (so far) we have already had to deal with a number of tough weather conditions, which only play a role later in the year. At first, spring arrived late, which means that the harvest season started later. We are currently dealing with a prolonged drought period, which can lead to a downturn in production.

Recently it also appeared MARS report in which expectations for wheat yields have already been lowered by 3,5%. Germany in particular is suffering from the drought. In combination with the lower production in Russia, this has already resulted in considerably higher wheat prices. 

Major differences between companies
The drought is not only causing negative expectations, but also major differences between the arable farms. In this way, companies that can irrigate well can limit the decrease in production. However, the way in which the products are sold is also important. 

For example, the potato growers with a contract will benefit less from higher prices, while the free potatoes can be sold at higher prices. In addition, the costs for the sprinkling higher than normal, which will return later in the year. 

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

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