In the second quarter of 2021 agro confidence fell by 1.5 points. This fall was mainly due to a decrease in the confidence of farmers and horticulturalists in the medium term. The mood regarding the current state of the business improved slightly. The Agro Confidence is calculated based on both indices. Confidence fell in most sectors. Confidence only remained stable among arable farmers and fell mainly in pig production.
Confidence decreased less sharply in other sectors. In the near future farmers and horticulturalists are mainly worried about lower selling prices and higher costs. This is shown by 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.
Click image to enlarge
Figure 1.1 Agro Confidence Index Agriculture and Horticulture and all sectors, 2013-2021-2 (source: Wageningen Economic Research)
Confidence remains lower than long-term average
Confidence among farmers and horticulturalists remained under the long-term average of almost 13 points in this quarter too. The last time that confidence was higher than this average was in the first quarter of 2019. The COVID-19 pandemic had a very negative effect on it in 2020. There has been a recovery since then, but this was abruptly interrupted in the second quarter of 2021. The sectors arable farming, dairy farming, pig farming and poultry farming are currently languishing below their sector average. Only the horticulture sectors are above (horticulture under glass) or on (open-field horticulture) the long-term average for their sector. In these sectors confidence remains good, despite a negative correction. The index fluctuates strongly in pig production (pig cycle), partly due to heavily fluctuating selling prices and costs.
Better assessment last 12 months, but still not positive for all sectors
The confidence index improved by 8 points in comparison with the first quarter. Dairy farmers in particular were more satisfied with the business situation over the past 12 months. The main reason for the better price formation was this more positive assessment. Horticulturalists also looked back more positively than in the previous quarter. There was a better assessment of both selling prices and production. However, the increased costs put the brakes on a further increase of this index. The increase was limited for arable farmers and poultry farmers and the index fell for pig producers, in particular due to rising costs. Despite these recent changes, only horticulture and open-field horticulture have a positive confidence index. In spite of the positive adjustment of 20 index points in dairy farming, the index remained just below zero for this sector.
Assessment of current state of the business almost unchanged
The Agro Confidence Index, which reflects the mood of entrepreneurs about the current state of their business, rose by half a point. This can be regarded as a stabilisation. The mood in the two horticultural sectors stands out again here. Despite the fall in horticulture under glass and stabilisation in open-field horticulture, the mood in these sectors remained good with an index of more than 30 points. In other sectors the mood index is around the average for total agriculture and horticulture. Here too the trends vary per sector. The mood among pig and poultry farmers fell strongly, while arable farmers were more satisfied than in the previous quarter. Among dairy farmers the mood fell to a limited extent.
Short-term future less favourable for pig and dairy farmers
When farmers and horticulturalists were asked to look forward to their business situation over the coming 12 months, the upwards trend of the last four measurements was interrupted in the second quarter of 2021. The index fell by more than 3 points. The pessimists therefore stay in the majority. The index stands at -5 points. The confidence index (looking forward) mainly fell among pig farmers. These farmers expect lower selling prices and lower production. Dairy farmers and glasshouse growers are of the opinion that they will be faced with lower selling prices. The increased costs also play a role and possibly the uncertainty during the COVID-19 pandemic. Large parts of the world are still affected by lockdowns.
Medium-term future for businesses assessed less favourably
When asked to assess the business in the medium term (looking forward 2 to 3 years), farmers and horticulturalists are also slightly less enthusiastic in the second quarter of 2021. The index fell by more than 3 points. Just as for the short term, pig farmers believe that they will have to contend with more difficult operating conditions in the medium term as well. The index fell by 26 points, which meant that the index dropped below the zero point.
More entrepreneurs are pessimistic. The index fell in this measurement in all other sectors shown. The smallest fall in the index (-1 point) was in the poultry sector. Poultry farmers are currently also the most optimistic about the medium term with an index of 9 points. Other sector indices are closer to the zero point. The index for dairy farmers fell by almost 9 points in the second quarter; this means that optimists and pessimists balance each other out here.