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European farmers remaining optimistic

The boom in the agricultural markets has fundamentally altered conditions in the farming sector. Arable farmers have profited from this situation, while livestock farmers have struggled not only with growing energy costs, but also with rising feed prices. The climate may be set to change, as will become evident during EuroTier 2008 this autumn.

Dr Andreas Quiring, Head of Farm Economics, Competence Centre Agriculture and Food business
Stephanie Jürgens, Project Manager, Competence Centre Agriculture and Food Business

The best assessments of the general economy and individual business situations in Europe were recorded in spring this year. Only pig farmers saw their own current situation critically against a background of low producer prices and high feed costs, but they too were looking to the future with cautious optimism. However, the survey conducted in spring 2008 reveals that the mood among European cattle farmers is distinctly more positive. Twice a year, in cooperation with the agricultural market research institute Kleffmann Group (Lüdinghausen, Germany), nearly 3,000 leading arable farmers and livestock farmers in six European countries (Czech Republic, France, Germany, Hungary, Poland, and United Kingdom) are questioned about their views on the current situation in the agricultural sector, as well as trends and expectations. The results of the currently ongoing survey will be presented at EuroTier 2008 and published by the DLG for the DLG Exhibitors' Workshop in spring 2009.

European Dairy Farmers (EDF)

For more than 15 years, the European Dairy Farmers Club has been developing reliable analyses of the cost and return situation of dairy farms throughout Europe. The new reality in the agricultural markets, with greater price fluctuations as well as greater potential for leading entrepreneurs was discussed in detail at the annual EDF congress in Groningen, the Netherlands. Together with the EDF there will be a EuroTier Dairy Event 2008 on the eve of the EuroTier Exhibition on 10 November 2008. In addition to the keynote speech by Professor Marina von Keyserlingk from the University of Columbia in Canada on the topic of "Cow Comfort", there will once again be a presentation ceremony for the Dairy Farmer Award 2008. The EuroTier Dairy Event will be held at the Convention Centre at the Exhibition Grounds in Hanover. Attendance is free of charge, but for organisational reasons prior registration with the DLG is requested.

Livestock farmers less optimistic

The economic situation in the agricultural sector reached historic peak levels in the Czech Republic, France, Germany, Hungary and the United Kingdom in 2008. A continuous mood upswing was noted in nearly all the countries surveyed following the low point reached in autumn 2005 with the exception of Poland, where a slight downturn in assessments of the situation was recorded. This is attributable to price developments on the pig market and the revaluation of the zloty.

A detailed consideration of the economic situation in spring 2008 broken down by key areas of production clearly reveals the crisis in pig production across all frontiers (not just in Poland). The average ratings in pig farmers' assessment of the economy in all countries are 1-2 points below the overall economic assessment for agriculture (on a scale of 1 = very good to 5 = very poor). At the beginning of the year, 80 % of pig farmers in Germany judged their business situation to be "poor" or even "very poor" (average score 4.2). Only farmers in the Czech Republic rated pig farming a little better in economic terms (average score 3.4). This is partly attributable to the fact that pig farming in the Czech Republic is generally a sub-sector of large-scale farm operations with diverse production segments. In all the countries surveyed the pig farmers expect a distinct improvement in returns in the coming twelve months, therefore easing the pressure on their economic position. In order to remain competitive, pig farmers are aiming for higher performance, expansion of their farms and cost reductions. The upswing in arable farming is just as distinct as the downswing in pig production. In all countries arable farmers rate their position as "good" to "very good". The DLG Trendmonitor Spring 2008 confirms a distinctly improved economic environment for dairy farmers in Germany in comparison with the year before. Fifty percent of the dairy farmers questioned describe their business situation as good. The results obtained from the other countries surveyed also indicate distinctly improved values in comparison with the year before. However, all dairy cattle farmers express uncertainty regarding the development of milk prices, dismantling of quotas and cost increases.

Willingness to invest remains high

Expectations regarding future farm development are distinctly positive. Farmers are optimistic, but not euphoric. This is also reflected in their willingness to invest, which was already notable in autumn 2007. Against the background of sharp rises in grain prices in autumn 2007 this willingness has continued to grow across all branches of farming. Answers to questions about investments planned for the coming 12 months revealed this clearly. The responses by leading farmers in Europe indicate that a continued high level of investment can be expected. Spending is continuing to rise in the Czech Republic, France, Germany, Hungary and the United Kingdom. Once again Polish farmers form an exception here. Their investment plans are declining slightly, although still at a high level. Possible causes of the reduced readiness to spend could be delays arising in applications for, and disbursement of, EU monies and liquidity situations that limit the range of Polish farmers.

There are large differences between countries regarding the areas scheduled for investments. In spring 2008 the focus was on investment in agricultural machinery and plant production. However, livestock husbandry farmers also revealed a substantial rise in their investment plans. Expenditure on dairy cattle housing improvement and construction heads the list in France, Germany and Poland, while renovation and modernising of farm buildings was favoured in the Czech Republic.

Investments in solid manure storage were prominent in Hungary. This indicates that professionalising of production and optimising work schedules rank high among business-minded farmers. In the arable farming sector, tractors were the key target of investments in all six countries in spring 2008. This was followed by equipment and machinery for tillage and drilling, fertilising and plant protection, as well as harvesting and transport. The rise in producer prices is clearly evident here and is leading to greater investments in machinery and equipment for securing harvests and returns. Interest in grassland and forage harvesting machinery is also growing again, particularly in Germany and the Czech Republic.

Main issues for European farmers

The question "What issues currently concern you the most?" produced in some cases widely differing answers from the six countries surveyed. Generally however, it is evident that developments in producer prices (including meat prices) were discussed heatedly last spring. Against the backdrop of the dismantling of quotas, milk prices especially were, and are, a leading theme in Germany. Prices for farm inputs are also a major topic among farmers and are attracting more attention. The relevance of the EU's agricultural policy for European farmers has however been declining steadily since 2006. Its significance has only increased again in France as a result of discussions on the Health Check. 23 % of French farmers declared this to be a main topic of discussion.

Developments in agricultural policy are increasingly slipping down the scale of subjects of interest and market mechanisms are rising to take their place. It is not only domestic markets that influence production conditions and producer prices as the world market assumes a steadily increasing important role.

agri benchmark

Global production conditions in arable farming and animal husbandry are the focus of agri benchmark, the international network of consultants and scientists at the Johann Heinrich von Thünen Institute in Braunschweig and the DLG. Agri benchmark records and analyses production systems and processes, production costs and returns and cost effectiveness broken down by farming segments. This is done in accordance with a uniform standard so that the data surveyed in the individual countries can be compared. The surveys are based on "typical farms", in other words not statistically average farms, but rather farms that determine the market and reflect typical production conditions for a region. Furthermore, through networking with consultants and farmers in the field, not only costs and returns but also background information on the application of various specific procedures and production conditions becomes clear. The main results are compiled in a report and made available to all interested parties at www.agribenchmark.org. This detailed analysis provides information about expected future momentum in the respective regions and possible changes within the production systems that will in turn influence market developments in the world agricultural market.

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