'For the second year in a row, agricultural and horticultural entrepreneurs have had a relatively good year.' With that sentence, ABN AMRO opens the most recent sector forecast.
This year, many subsectors were once again under pressure. For example, arable farming volumes are lower due to the heavy rainfall, which means that fewer potatoes could be harvested. The pig herd is also shrinking. On the other hand, the milk supply is increasing, which has recovered after a sharp decline in 2021 and 2022. According to the bank, the low volumes ensure high selling prices. For example, prices in pig farming have risen and the prices of broilers and arable products are also on the rise. Milk prices are a lot lower due to the higher supply. Milk prices have fallen due to the high supply and disappointing demand and are much lower than in 2022.
Costs have also fallen during that period. Compared to a previous high, prices of animal feed, fertilizer and energy fell. Good prices and low costs made for a good year for agriculture. The sentiment among farmers, measured by Wageningen University, is therefore positive. But when entrepreneurs are asked to look into the future, they are negative. The University does not provide an explanation, but a possible explanation could be that sustainability tasks have a negative effect on farmers. The lack of clarity about nitrogen and an agricultural agreement also creates uncertainty.
| Volume development in percentages | 2022 | 2023 | 2024 |
|---|---|---|---|
| dairy cattle | 0,5 | 2,5 | -0,5 |
| Agriculture | 3 | -3 | 0 |
| Pigs | -1 | -4 | -3 |
Milk
ABN AMRO expects milk supply to dairies to increase by 2,5% this year. There will be stabilization or a slight contraction for next year. Only after 2024 is the milk supply expected to shrink significantly. According to ABN AMRO, this is caused by the government's buyout schemes. As of the end of November, 3 dairy farmers have registered for the National Termination Scheme for Livestock Farm Locations (Lbv). The effect of the buyout will only be noticeable in the milk supply to the dairies in 213.
Milk supplies also increased in other important dairy countries last year. This caused dairy prices to drop. The price drop ensures a recovery in demand and seems to have found its way up. The milk price is expected to rise further in 2024. This does depend on the international demand for dairy products. This demand has decreased due to high consumer prices. In Dutch supermarkets, sales of dairy products fell by 2% in the first half of the year.
Feed costs also fell, but not as much as the milk price. In addition, the costs of manure disposal have risen sharply and the interest rate also rose. As a result, the income of dairy farmers decreases and liquidity pressure increases.
Pigs
In five years, the number of pigs in the Netherlands has fallen by about 10%. The pig herd has also shrunk this year. The number of slaughters has also fallen, by 14% in the first half of the year. Pig herds and slaughter numbers are declining across Europe. Pork production in Germany fell by around 10% and in Denmark by around 20%. The reason for this is the increased environmental and animal welfare requirements. As a result of buyout schemes, the Dutch pig herd will shrink further in the coming years. 447 pig farmers had registered for this at the end of November. The effect will be visible after 2024.
The smaller pig herd ensures historically high prices. Prices peaked in the summer and have been falling again since then. But still very high... Higher selling prices and lower costs made 2023 a very favorable year for entrepreneurs, but lower volumes and decreased production made it less favorable for slaughterhouses and meat processors. The supermarket price in the EU is about 30% higher than two years ago. This means that less or different meat is often chosen.
The bank expects meat processors to use their capacity differently due to the smaller pig herd or even close down. This will reduce the level of self-sufficiency. ABN also expects that the new sustainability rules will offer opportunities to livestock farmers who can produce with less environmental impact and greater animal friendliness.
Poultry
The poultry sector has had a good year. Selling prices are at record levels and costs have actually fallen. Yet there are also many concerns. Bird flu has major consequences and outbreaks have occurred in several locations. That is why the national obligation to keep animals in cages is back in force and tests are being carried out on vaccinating animals.
The number of animals kept in the Netherlands will shrink in the near future. This is firstly due to sustainability requirements of the supermarket. From the beginning of this year, supermarkets will only have 1-star better life chicken on their shelves. As a result, an estimated 60% to 80% of broiler chickens in the Netherlands are slow-growing and reared according to this system. This means that fewer animals can be kept in existing stables.
The poultry flock is also shrinking due to the fact that poultry farmers are also registering for the buyout scheme; at the end of November the counter stood at 1.543 poultry farmers. The precise effect will only be visible later. The switch to 1 star better living and the lower supply results in higher consumer prices and a decrease in sales in supermarkets. This is partly compensated by an increase in demand from the catering industry.
Arable
Increasingly extreme weather conditions determine the volumes in arable farming. Now rain is playing tricks on farmers, while earlier in the year there was drought. The harvest will be about 3% lower this year according to preliminary harvest forecasts from Statistics Netherlands. A decline is expected in particular for consumption potatoes, but also for sugar beets and onions. The poor weather conditions and relatively low 2022 potato harvest led to very high potato and onion prices earlier this year. Arable farmers with free contracts have been able to benefit from this. The contract prices were also above average. The prices for fertilizer and energy were also somewhat lower.
Weather conditions at home and abroad will determine the harvest for next year. The KNMI's future scenarios show that the Netherlands will increasingly experience extreme rainfall and long periods of drought. This volatility means a lot of uncertainty for next year. Under average weather conditions, production will increase, but a limiting factor is the shortage of seed potatoes. Due to a smaller acreage and disappointing harvest, its availability will decrease next year.
The demand for arable agricultural products remains good, partly because fast-food restaurants are operating at full capacity. Consumption is increasingly taking place outside the home. Fast food chains benefit from this. ABN AMRO expects this to be the case next year as well. The demand for chip potatoes will therefore remain strong.