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Agriculture: Economic sentiment remains subdued

DBV Agricultural Business Barometer shows no signs of improvement

As of March 2018, the economic sentiment among German farmers continues to remain subdued. This concerns the assessment of the current economic situation and even more so the expectations for the future. According to the latest data of the Agricultural Business Barometer of the German Farmers’ Federation (DBV), investment activity has not improved either. For the coming months, the planned investment volume is significantly below the level of the years prior to the price crisis of 2015/16. On the other hand, the level of liquidity is assessed comparatively well.

Compared to the previous survey from December 2017, the index of the Agricultural Business Barometer has fallen slightly from 23.2 points to currently 22.1 points. Thus, the current index value is 3.7 points lower than in March 2017 and therefore significantly below the relatively high values of 2011 to 2014. At the time, the index value peaked at 36.2 points. The index value summerises the assessment of the current economic development and expectations for future economic development.

35 per cent of farmers plan to invest within the next six months; a year ago this figure was 33 per cent. However, the volume of investments planned for the next six months is 4.5 billion euros, which is 0.1 billion euros below the previous year’s level. The relatively high investment level of 2013 and 2014 with planned biannual investment volumes of a good 6 billion euros will be significantly undershot. From the DBV’s point of view, investing in efficient agriculture also secures many jobs in the upstream and downstream economic sectors.Investments in stables usually also improve animal welfare.

On a scale from 1 (best) to 5 (worst), the future economic development of the farms is rated at 3.15 on average. At 2.86, the assessment of the current economic situation is significantly better. Compared to December, the assessment of the current economic situation remains virtually unchanged on average for all farms. However, there are noticeable differences between the types of farms. While forage farms currently perceive the economic situation as deteriorating, processing plants and holdings specialising arable farming assess their situation slightly better than in December. Compared to December, the expectations for the future are still rather skeptical and thus remain rather unchanged for all types of farms.

For agricultural holdings, price trends are by far the most important factor influencing the assessment of their economic situation. In particular, lower producer prices for milk and higher feed prices are currently having a negative impact on the economic climate. Lease prices continue to have a particularly negative impact. Nevertheless, cattle prices and particularly capital-market interest rates as well as leasing conditions continue to be viewed relatively positive.

Year-on-year, producer prices for milk, pigs as well as crop are considered to have worsened significantly. Harvest expectations are lower than a year ago (wet autumn, late spring). On the other hand, cattle prices and the general political conditions are assessed somewhat better.

The Agricultural Business and Investment Barometer is calculated precisely and reliably in a representative survey every quarter on behalf of the German Farmers’ Federation DBV, the VDMA Agricultural Machinery Association and the Landwirtschaftliche Rentenbank. For the current circuit in March 2018, the market research institute Produkt + Markt interviewed about 1,000 farmers and contractors all over Germany.

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