News Economy
Nitrogen crisis slows agricultural production
ING expects production growth of 1% for the agricultural sector in 2021. According to the bank, the year has started well with growth of 0,7% in the first quarter. There are, however, major differences between the subsectors and the prospects are also less rosy in the longer term.
The fact that agriculture has also been affected by the corona crisis has not gone unnoticed. Production growth in 2020 was nil and prices fell by an average of 5% across the board. The production growth that ING foresees this year is mainly the result of the production dip during the first lockdown last year. Due to higher (feed) costs, the bank sees a gloomy view of opportunities for improving returns.
Arable farming is growing, livestock farming is shrinking
ING expects growth of approximately 1,5% for arable farming and glasshouse horticulture. The production in livestock farming is shrinking by 2%. This decrease is mainly due to the expected tightening of the Dutch nitrogen policy. This leads to additional uncertainty in dairy and pig farming. The nitrogen policy, in combination with an aging population and a lack of successors, ultimately leads to a gradual shrinkage of the livestock, resulting in lower production. The bank expects the volume growth in agriculture to be nil for 2022.
Good demand for milk
A continued high demand for dairy from China and an expected pick-up in demand for products with a higher margin at home and abroad are causing milk prices to rise this year compared to next year. The spread in milk prices is increasing due to concepts such as PlanetProof and the switch from supermarket chain Plus to organic milk. The milk is not really expensive, but the prices will be around the long-term average. Not only the milk price is rising, but the feed costs are also rising. This slows down the results on the dairy farms.
Return on pig farming around the average
According to ING, the low point in the yields of fattening pigs is behind us. The yield of fattening pig farmers is average up to and including May and the yields also seem to be normalizing for the sow farmers. But here too, the high feed costs weigh heavily on the yield.
The restructuring of the pig sector is underway, although the number of participants in the purchase scheme fell short of the government's expectations. In the period April 2020 to March 2021, the number of pig farms decreased by 16%. The total number of pigs has decreased by 6% in that period. Because the sow herd has also shrunk considerably, ING expects the supply of fattening pigs to decline further in the second half of this year. The downward trend will continue in the coming years. An increasing number of companies are no longer able to make the investment, have no successor and find it difficult or impossible to sell their company.
The demand for meat remains despite the growing popularity of meat substitutes. With a consumption of 0,87 kilos per capita compared to a meat consumption of 78 kilos - which is not yet showing a declining trend - meat substitutes are not a threat.
Better prospects for arable farming
The tide seems to be turning in arable farming, after a potato year with low prices and disappointing exports. The relaxation in the corona policy is causing a higher demand for potatoes from the food industry. There is also a European area shrinkage and a cold and wet spring.
In arable farming, onions and wheat performed above average last year. Despite the lockdowns and temporary shortages of containers, onion exports reached record highs and above-average prices, especially in the first half of the season. This resulted in an area expansion of 11% this year. Grain growers benefited from the highest global grain prices in 8 years.
Jurphaas Lugtenburg
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