The pig cycle again in arable farming

It's hardly news that the agricultural sector is under widespread pressure. Nor is it that arable farmers, whose businesses rely on potato cultivation, are worried today. But the fact that the price of French fries and table potatoes has plummeted to such an unprecedented low, putting the entire business model at risk, makes the situation exceptionally difficult this year. This could easily lead to stress, uncertainty, and frustration.

Arable farmers face high costs: rent or interest and principal payments, fuel, fertilizers, labor, buildings, and machinery. All these costs continue, while the potato yield currently doesn't even seem to cover the cultivation costs. While farmers are used to managing margins, they are now incurring losses. Fortunately, some of the sales were made early in the season, or attractive contracts were signed in the winter. That eases the pain today.

Increased vulnerability
What makes the situation particularly bitter is that yields in many regions are above average despite (or perhaps thanks to?) the dry weather. The problem apparently lies not with the country or the crop, but with the market. Factors like oversupply, stagnant exports, and the strong purchasing power of industry and retailers are driving prices down so much that it's currently unprofitable.

Above-average prices have been achieved in recent years. No big deal, you might say. At the same time, the cost price has also risen sharply. This shouldn't be surprising, as banks and accountants have pointed this out before. The profits of recent years have largely been spent on business development, which is part of entrepreneurship. The substantial investment in modern machinery, sustainability, and land has led to increased costs and, consequently, increased vulnerability.

Pig cycle
The question is: what next? Structurally improved pricing agreements, better contracts, and greater market transparency are crucial. Furthermore, politicians should recognize that food security isn't a given and take action. But we're still a long way from that. There's no shortage of ideas for solutions; now it's time for implementation. Perhaps we should accept the recurrence of the pig cycle in arable farming: the phenomenon of surpluses and shortages alternating, resulting in low and then high prices.

What to do then?
Stay calm, put things into perspective, and don't let yourself get carried away. A strategic entrepreneur is the first to know their expected liquidity and adapts in time. Then, conduct an honest analysis. Where necessary, don't hesitate and make adjustments.

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.

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