Look beyond sham recovery in the coming time

The good news for the short term is that the Dutch agricultural sector is benefiting considerably from the strong support packages, especially from Germany (€130 billion, 3,8% of GDP) and France (€110 billion, 4,3% of GDP). They are important trading partners for the Dutch agri-economy. Are the support packages enough to get the economy going again? Or are we dealing with sham recovery?

How much we benefit from the support packages depends on tailwinds or headwinds. For example, the growth impact could be stronger if support packages within the eurozone are more closely aligned. But more important is the brake of the current uncertainty. Will there be a second wave? New lockdown? This uncertainty pushes consumers' saving behavior and inhibits companies' willingness to invest.

The financial sector can also reduce the effect of the stimulus measures by tightening credit conditions. Banks are afraid of being robbed by bankruptcies. In our view, that fear is justified. We expect a record wave of bankruptcies to flood the eurozone.

Adapt to new situation
What can you do with that as an agricultural entrepreneur? For starters, it's more important than ever to get a grip on your liquidity position† But of course much more needs to be done. What adjustments are needed for your business plans? What are the scenarios you envision and how will you respond to them? Just take the supply chain. You will have to organize continuity again.

One thing is clear: we are not going back to before corona. The crisis will accelerate the transition of agriculture. Our international model has taken us far, but in the future we will have to deal with trade barriers and protectionism. And look how lockdowns and border closures have painfully exposed our reliance on foreign migrant workers.

Digitalization and Automation
In recent months, we have seen breakthroughs in the field of digitization and automation in almost all sectors. Take education; After years of struggle, corona has suddenly broken online teaching. Exactly the same applies to agriculture when we look at robotics. The number of patent applications for robots in agriculture and horticulture has increased by 50% in the past six months compared to previous years. With a lack of personnel as the main driver.

Challenges
In my view, the most important challenge for agriculture is to (re)gain trust in safe food. You may say: our food has never been as safe as it is now, but that's not how consumers experience it. And certainly not after corona. How do we increase transparency about a) the origin of products (and ingredients) and b) hygiene and c) food safety. Perhaps blockchain technology can play a role in this. A digital log that provides insight into all transactions related to a product.

Enough challenges for you as an entrepreneur. But you are not alone. The whole world has to contend with it. And that is exactly what you should trust. When it comes to innovation in agriculture, our country belongs to the absolute top!

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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