Liquidity dairy farm relies on advance corona

The liquidity of Dutch dairy farms recovered somewhat in the third quarter of this year from the decline in the second quarter. This is mainly due to the corona regulations. The outlook for the current fourth quarter is not favourable.

The ABN Amro Liquidity Monitor shows that the current account position has improved by €3 in the past 2.600 months, about €25 per dairy cow. According to the bank, the position at the end of the third quarter has therefore almost reached zero, namely €700 negative. However, the improved liquidity does not come from operational management, but is mainly due to supporting measures in this corona crisis, ABN Amro reports in a statement.

Dairy farms, for example, have received an early payment of payment entitlements. In July, RVO paid an advance of an average of €9.000 of this payment, which normally only takes place in December. In addition, dairy farms have taken advantage of the special tax deferral. Entrepreneurs have also made use of the suspension option offered by the banks. 

Support obscures
Many entrepreneurs did not have to pay any repayments and sometimes no interest for a period of 6 months, in the second and third quarters. That saved an average dairy farm about €4.000 to €5.000 per month in repayments, according to ABN Amro. According to the bank, the liquidity improvement resulting from these support measures obscures the fact that the cash flow is suffering from the low prices for milk, nukas and cattle for slaughter.

Milk income decreased by €4.300 in the third quarter compared to a year earlier. This is mainly due to a lower milk price, which is on average 3,5% lower compared to a year earlier. Dairy farms also invested less in the past quarter, while other expenses also decreased. The current position is similar to that of a year ago. The development of the current account position is a result of the credits and debits. Ancillary income and private expenses are included in the balance, according to ABN Amro.

Lower payments
The market developments in the current quarter, influenced by the current corona crisis, offer little cause for more optimism for the liquidity position of Dutch dairy farms. RVO will pay out the remaining payment entitlements in December. This is an average of €12.000, but the advance of €9.000 has already been paid off. As a result, payments in December are much lower than last year, concludes ABN Amro.

The suspension of repayments by the banks has also come to an end. There will be no new collective arrangement for postponement, ABN Amro explains, but customization can be offered.

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