Subdued outlook for agricultural businesses

Cash crop producers admit to uncertain economic environment - Farmers are less willing to invest - Loss of active ingredients is challenging producers

FRANKFURT/MAIN, Germany, 8th June, 2016 – The latest edition of the DLG-Trendmonitor Europe survey reveals a further cooling in the agricultural business climate. Results from this spring show that while farmers in Germany and Poland considered the current business situation as much the same as it was in the autumn 2015 survey, those questioned in France and the UK were considerably less satisfied.
Expectations for business development during the next 12 months remain unchanged as unfavorable in Germany and Poland compared to the survey last autumn. And while these farmers are skeptical of any business improvement in the coming months, farm business managers in France and the UK expect a further downturn.
For cash crop producers the situation is even more pessimistic, with those in Germany joining their French and British colleagues in having a less optimistic outlook for the next 12 months. In fact, only cash crop farmers in Poland expressed unchanged expectations. That’s because grain prices there have declined less than in other EU countries, and that has helped to stabilize the business expectations of local farmers.
Willingness to invest in agriculture varies
The willingness of cash crop producers to invest has declined significantly thanks to the depressed level of current prices. While 45 percent of the surveyed cash crop producers in Germany expressed willingness to invest in the autumn of last year, that fell to only 37 percent in the spring 2016 DLG-Trendmonitor Europe survey. Likewise, the propensity to invest in France is also dropping, sitting at just 14 percent now compared to the 18 percent recorded in the autumn of 2015. On the other hand, the willingness to invest has increased in the United Kingdom, where the proportion of surveyed farmers willing to spend money on their businesses has increased by 4 percent to 31percent in the past six months.
However, a long-term comparison of the survey, which has been conducted twice a year since 2003, shows an overall decline in investment intentions. And this even applies to cash crop farmers from Poland; although investment intentions there were the same this spring as they were in the autumn survey at 39 percent, it is still below average.
For cash crop producers, one of the top priorities now is maintaining a positive cash flow. Following a period of the good economic returns in recent years, the focus is now on minimizing production costs to ensure the economic stability of farms while prices for cash crops are low. This means farmers must evaluate their direct costs and labor requirements as well as costs of machinery carefully in order to achieve profitability.
Innovations required in crop breeding and technology
The latest DLG-Trendmonitor Europe survey also shows that cash crop producers in Germany view the decreasing number of active ingredients available for crop protection products as a major challenge to securing income and profitability in agriculture. A shrinking arsenal of herbicides has proved problematic when tackling increasing resistance problems with some weeds, and this has required a shift to new crop rotation strategies to help combat them. Farmers in the UK take a similar point of view to their German counterparts, but those in France see adapting to new husbandry techniques in response to climate change as the greatest agricultural challenge.
Faced with these challenges, German farmers are looking to the crop breeders for help in maintaining profitability in the cash crop sector. In particular, they want new varieties with better resistance to disease, and they would also like them to use resources more efficiently. Better provision of advice on increasing the use of cover crops and legumes as part of crop rotation management will also be required in the future.
However, the current economic situation faced by farmers means that spending on technology is being scrutinized more closely than ever for the expected return on investment. This means increased price pressure on the manufacturers who offer innovations to help them secure sales in this low-price environment.
The DLG-Trendmonitor Europe survey is organized by the DLG together with Europe's leading agricultural market research agency, the Kleffmann Group (Lüdinghausen, Westphalia). For the spring 2016 survey, 750 German, 750 French, 500 Polish and 350 British farmers were interviewed.
Media contact:
Malene Conlong
Tel: +49 69 24788237

Media Contact:

Malene Conlong
+49/ (0) 69 / 24788-237

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