Farmers' and horticulturists' confidence in their businesses recovered cautiously in the fourth quarter of 2020. The index for all agricultural and horticultural sectors rose by 2 points to reach 9 points. Following a survey just after the first quarter of 2020, the index had dropped to -4 points but rose for the third consecutive time in the most recent survey for the fourth quarter of 2020. However, in January, the confidence of the agricultural sector was still languishing below its long-term average.
Confidence among farmers in open field horticulture, greenhouse horticulture and dairy farmers remained stable, while confidence among pig farmers increased by 1.5 percentage points. Confidence rose particularly among arable farmers (8 points) and poultry farmers (5 points). This was shown in the Agro Confidence Index developed by LTO-Nederland, Flynth adviseurs en accountants, the Ministry of Agriculture, Nature and Food Quality (LNV) and Wageningen Economic Research.
The survey was sent out on 5 January and the panel had until 25 January to submit their views. A record of almost 650 companies participated in the survey. The survey does not ask about the justification behind the answers given. These are influenced by many factors, such as the corona crisis, weather conditions, trade barriers, policies or one's own business circumstances.
The mood index reflecting the current situation at the company decreased by 2 points, while the expectation for the next 2 to 3 years improved by almost 6 points. Together, these two indicators form the Agro Confidence Index. The mood index dropped to 13.5 points due to this drop, while the increase has pushed the medium-term expectation back above zero and now stands at almost 5 points.
Mood index varies
The current situation at the company (mood index) showed a varied picture among the underlying sectors in the fourth quarter of 2020. The index rose in two sectors and fell in four sectors. The most pronounced decline was seen among arable farmers (down more than 4 points), followed by dairy farmers (down 2.8 points). The decline was more muted among greenhouse growers and outdoor producers (i.e. flower bulb, tree nursery, open field vegetable and fruit sectors), by -1.1 and -1.6 points respectively. Among poultry and pig farmers, the mood index rose. Both sectors saw around a 4-point rise.
Although, in every sector, more entrepreneurs are positive than negative about the current situation at their company, the horticultural sector shows the most positivity. Despite the recent decline, sentiment has returned to pre-corona crisis levels and indices in outdoor and greenhouse horticulture are above the long-term average. Arable and dairy farmers remain in a gloomy mood. In these sectors, current index values are well below these sectors’ long-term average.
More optimists than pessimists
Farmers and horticulturalists are again more optimistic about the state of their businesses in the medium term (two to three years). This index rose almost 6 points. This means that slightly more entrepreneurs are optimistic about the future compared to the pessimists. The index rose from -1 to +5 points.
Arable farmers especially indicate that they expect to see improvements on the horizon. Here, the index rose by nearly 19 points. The index is now at 5 points. The index was last higher than its current level in the third quarter of 2018. The confidence increase for the medium term was broadly supported. But index gains in other sectors were much more modest. The index in the poultry sector rose by 6 points, while the increase was limited to 1 or 2 points in other sectors. The index for pig farming even fell slightly (0.5 point).
In retrospect, still negative
Looking back at the past 12 months, entrepreneurs are still pessimistic. The ‘retrospective’ business cycle index dropped more than 4 points and remains strongly negative at -24 points. In fact, all underlying indicators were more negative. Higher costs (-1.4 points), lower selling prices (-4.9 points) and lower production (-1.2 points) resulted in lower turnover (-5.3 points) and profits (-8.2 points).
Pig farmers in particular adjusted their views negatively over the past 12 months (-14 points). Arable farmers did the same (-6.7 points). In other sectors, the changes were less substantial, with the horticultural sectors slightly more positive compared to a quarter ago and the animal sectors slightly more negative.
Index for arable farming most negative, horticulture positive
Looking ahead to the next 12 months, Dutch farmers and horticulturalists are also pessimistic. The ‘looking ahead’ business cycle index stood at -7 points in the third quarter. To put this into perspective, this index has been negative since the 4th quarter of 2017. Although the index was higher again in this fourth quarter than in the previous quarter (+4 points), the recovery is levelling off. Although all underlying indicators picked up again, many indices still remained negative, except for manufacturing and earnings.
Arable farmers and pig farmers in particular are more optimistic about the next 12 months than they were in the previous quarter. Despite this, the index in arable farming remains the lowest of all sectors (-10.7 points). Only in open field horticulture are more entrepreneurs positive than negative (0.7 points).
Agricultural confidence is still below its long-term average in the fourth quarter, despite a further cautious rise.