Scarcity increases arable farmer's liquidity

The cash position of the Dutch arable farmer last year amounted to €46.000. That is €7.000 more than in 2018 and comes down to about €80 per hectare. Scarcity and higher prices gave liquidity an extra boost in the fourth quarter.

The figures appear in the liquidity monitor of ABN Amro, Wageningen Economic Research and the Ministry of Agriculture, Nature and Food Quality. The improvement in the cash position is smaller than in 2018, when an additional €16.000 was added. This is partly due to the investments that have been made.

More investments
According to ABN Amro, more could be invested in 2018 than in 2019 due to the higher average incomes of the 2018 harvest year. However, there are major regional differences. This is mainly due to differences in soil type, water management, salinization and irrigation options. In the end, in 2019, water availability in a large number of cultivation areas has recovered to a reasonable extent and production has reached a higher level on average. Harvesting could take place well into December.

Because some of the arable products on the free market were sold earlier than usual – due to scarcity and higher prices – the cash position of arable farmers increased in the fourth quarter. In addition, the payment of RVO's payment entitlements, as usual, took place in December.

Fewer repayments
The credit for the year 2019 amounted to €770.000. This was more than was achieved in 2018. This was offset by depreciation of €760.000, a much higher amount than in 2018. Expenditure increased due to the investment behavior of arable farmers.

Compared to the previous year, the amount of loans increased slightly in 2019. There was a peak in both credits and debits in May. This is the result of high loans taken out in that month to make investments and the expenditure on those investments themselves.

Outlook
Despite the lower price level at the beginning of 2020, ABN Amro expects that this will only have a limited impact on the total turnover on arable farms. Potatoes, the main crop, are traditionally partly covered by a contract. The liquidity position of companies can improve in the first quarter, when the stocks are partly sold. Cultivation costs are often paid in installments during a period when the income decreases.

The bank also sees developments that could affect the liquidity position of arable farmers. Due to the increase in production in recent years and geopolitical developments, such as trade conflicts and the Coronavirus, the price formation of potatoes and chips is difficult to estimate. In addition, cost-increasing aspects, such as higher storage costs due to the elimination of germination inhibitors and higher sustainability requirements, cannot always be passed on. 

Jeanette Pennings

Jeannet has her roots in the flower bulb sector and she grew up on an agricultural company in the northern part of North Holland. As a generalist she reports for Boerenbusiness across all sectors. She is also exploring the possibilities of sponsored advertising.

j.pennings@boerenbusiness. Nl

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