Agri & food faces these dilemmas in 2022

2022 also promises to be exciting. The reduction in animal numbers hangs over the livestock farming sector like the sword of Damocles due to the new nitrogen policy. Moreover, the logistics disruptions in the chain cannot be solved overnight. The staff shortage also seems to be here to stay. An overview of things that are going on.

Corona remains a cliffhanger
Corona, we can't ignore it. Although it was thought that the impact of the virus would fade into the background, the opposite is true. The Netherlands will be in a lockdown again at the end of 2021 and the situation is similar in other countries. The virus keeps mutating and vaccines therefore work less well than expected. A solution to the crisis is not yet in sight. The agricultural markets are no longer direct due to government measures of the leg, but the impact remains noticeable. The pandemic is being used at every opportunity in the trade to talk markets up or down, which causes price fluctuations. Corona will remain a cliffhanger next year.

Madness in commodity markets
2021 was all about craziness on the (agricultural) commodity markets. Grain prices rose to new heights and set new records. Dairy, coffee, cocoa, beef, fertilizer and sugar also fully participated in the rally. Many farmers benefit. The extremely cheap pork is an exception to the rule. The omikron variant of the coronavirus caused a price correction at the end of this year, but many raw material prices are entering the new year at high levels. Symbolic of this is the Bloomberg Commodity Index, which has consistently been above 200 points for some time. It is expected that the tense situation on the raw materials market will not end soon.

Logistical disruptions in the chain
Today, logistics is no longer an ABC due to major disruptions in the chain. It all started with the first corona outbreak in China in 2019. The fact that the container ship Ever Given became stuck in the Suez Canal in March added to the situation. The problem occurs worldwide: from China and America to Europe. Container ships are literally and figuratively cumbersome things that are not manoeuvrable. It therefore takes time to get the logistics flywheel going again. The problems are causing headaches for importers and exporters. They book ships, but then see them cancelled. The container prices sold a few times this year and are still extremely expensive. Experts do not expect the situation to normalize quickly, but the situation is less critical at the end of 2021 than a few months ago.

Major staff shortages
In line with the logistical disruptions, there is a staff shortage. Many sectors are shorthanded. Farmers are in need of staff and have to go to great lengths to attract people. The shortage in the meat processing industry is also evident above. Deboning a carcass is specialist work that cannot be learned in a day course. Slaughterhouses are having great difficulty filling their shifts, but transport companies are also struggling. Employment agency Randstad had 17.330 vacancies for drivers in November. In the United States, the shortage is estimated at 80.000 people. The tightness on the labor market affects many sectors and not just Western countries. There are also significant labor shortages in countries such as China. Due to the aging population and limited recruitment of professionals, the personnel problems will not be resolved quickly. Unless a crisis slows down the economy.

Expensive energy and (food) inflation
What hasn't become more expensive this year? Fuel is almost unaffordable and the gas bill rises out of the pan. Construction costs have also risen sharply, while consumers are confronted with high food prices. Not only goods, but also services cost more. All this resulted in an inflation rate of 5,2% in November, the highest level in forty years. Inflation in the Eurozone that month was 4,9%. In the United States, inflation has even risen to 6,8%. The European Central Bank currently believes that rising inflation will have a temporary effect and is therefore not taking action. The higher purchasing power of consumers and logistical disruptions in the chain, among other things, create a mismatch between supply and demand. The bank believes that this imbalance is decreasing.

Year of truth for nitrogen crisis
The year 2022 will be the year of truth for the nitrogen crisis. The new cabinet that will take office early next year has allocated €25 billion to tackle the crisis. Peak loaders are expected to stop or move their business to achieve the early targets to obtain. There is also a budget for stable innovations that reduce emissions. The government has not formulated any concrete reorganization objectives, probably in order not to force the desired reduction in animal numbers too much. We will only know afterwards whether the amount is enough. Exciting times are ahead for companies that depend on the supply or sales of the livestock farming sectors. After decades of growth, it is now time to row against the current. The battle for the permanent farmer is likely to intensify. The crisis on the housing market is an extension of the nitrogen crisis. Agricultural land will probably be used to realize the ambitions of 100.000 new homes annually. This also puts a brake on agricultural production in the Netherlands. 

Weak euro, support or disruptor?
Finally, we highlight our European currency. The euro is strong this year impaired and this will probably remain the case in 2022. The cause of this is the policy of the European Central Bank, which is expected to leave interest rates unchanged in 2022, according to economists. This despite rising inflation. The weak currency is a boost for (agricultural) exports. The other side of the coin is that imports are relatively expensive. This includes the purchase of overseas feed raw materials such as wheat, corn and soy. The high prices are particularly hard to bear due to the weak euro. With the large agricultural trade surplus that the Netherlands has, the weak currency will be a support rather than a hindrance in the new year.