Recovery of agricultural sector only in the second half of 2021

Recovery of the agricultural sector will only become visible in the second half of 2021. ABN Amro predicts this in a new sector forecast. The corona crisis and other challenges will cause declines in volumes next year, especially in pig farming and arable farming.

In the 'Sector forecast Agriculture and horticulture' which ABN Amro is publishing today (November 20), the bank outlines current developments and looks ahead to the coming year. It is concluded that the corona crisis is leaving deep traces in the price development of a number of agricultural products. The lower demand from the catering industry is depressing the prices of chips potatoes and dairy products, among other things. In addition, there are a number of sector-specific challenges that have a significant impact on the markets.

Price pressure continues
What 2021 will look like for the agricultural sector is far from certain, according to ABN Amro. The bank is anticipating a new revival of the corona virus at the beginning of the year. If a vaccine is not fully rolled out until the end of 2021, the current restrictions will remain in place for a while. And that means less sales to the food service channel.

The lack of rapid recovery means that price pressure on a number of agricultural products will continue for the time being. Other challenges such as the outbreak of African swine fever in Germany and the nitrogen crisis are also depressing prices. Moreover, they have an impact on production.

Dairy production stable
Production in dairy farming is under structural pressure as a result of the nitrogen policy. ABN Amro expects the dairy herd to shrink slightly as a result of purchase arrangements. This is compensated by an increase in production per animal. Total production, which will increase by 2% this year, is expected to remain stable in 2021.

The situation is different in arable farming where volumes have remained the same this year, but are expected to shrink by 1% next year. The corona crisis and the warm, dry summer leave their marks here. This has a particular impact on the potato acreage, which the bank expects to shrink. There is less demand for chips potatoes, even now due to the second lockdown. ABN Amro does expect fast food consumption to fully recover in 2021.

Further phasing out pig farming
However, the biggest blow is expected in pig farming. Production in this sector is already shrinking by 3% this year and ABN Amro is counting on another 2021% contraction in 7. While the sector in China is scaling up, the Netherlands is actually phasing out. This is due to social pressure as a result of the nitrogen problem, animal welfare and odor nuisance.

It is estimated by the Producers Organization for Pig Farming (POV) that approximately half of the 400 approved pig farmers actually use the 'stopping scheme' that has been set up by the government. This causes the predicted 7% shrinkage. Extra possibilities to stop or to produce more sustainably mean that the sector will continue to shrink after 2021.

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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