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Agriculture: economic climate suffers setback

Agricultural Business Barometer falls back to spring level

In September 2017, the economic sentiment among German farmers has suffered another significant setback compared to June of this year. According to the latest data of the Agricultural Business Barometer of the German Farmers’ Association (DBV), expectations for the future worsened in particular. However, by contrast, the current economic situation is assessed in a similar way as in the previous survey in June. The willingness of German farmers to invest has also increased again. Nevertheless, the level of the years before the price crisis of 2015/16 will not be met.

Currently, the index of the Agricultural Business Barometer has fallen from 31.4 points in June 2017 to 26.6 points, which is roughly the level of March (25.8 points). This is mainly due to the fact that expectations for the future have worsened significantly across all forms of agricultural businesses. Thus, the current index value is well below the relatively high values of 2011 to 2014. At the time, the index valued peaked at 37.2 points. The index value summarizes the assessment of current economic development and expectations of future economic development.

32 per cent of farmers plan to invest within the next six months; a year ago this figure was only 21 per cent respectively. The volume of investments planned for the next six months is 5.2 billion euros, which are 2.4 billion euros more than a year ago. From the DBV’s point of view, the revival of investment activity in the German agricultural sector has also had a significantly positive impact on the economic power of rural areas. Investing in efficient agriculture secures many jobs in upstream and downstream sectors of the economy.
 

On the scale from 1 (best) to 5 (worst), the future economic development of the farms is rated at 3.03 on average. At an average of 2.86, the assessment of the current economic situation is somewhat better. Whereas arable farming and, above all, processing industries are complaining about a deteriorating economic situation, dairy farms are continuing to recover. In comparison to June, the expectations for the future, which are relatively high by time comparison, have declined significantly across all forms of business in September.For agricultural holdings, the development of agricultural prices is by far the most important factor influencing their assessment of the economic situation. Particularly, lower producer prices for pigs and higher prices for fertilisers and energy are currently having a negative impact on the economic climate. The harvest is falling short of the expectations from June. Lease prices continue to have a particularly taxing effect on the situation. However, national and EU agricultural policy is once again judged much more positively on a year-on-year basis.

The business and investment indicator for the agriculture industry is calculated quarterly in a representative survey on behalf of the German Farmers’ Federation DBV, the VDMA Agricultural Machinery Association, and the Landwirtschaftliche Rentenbank. For the current circuit, the market research institute Produkt + Markt interviewed about 1,000 farmers and agricultural contractors all over Germany in September 2017.

 

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