Agriculture in Europe: Business climate, trends in machinery and management

DLG-Agrifuture Insights

Dr. Reinhard Grandke, Chief Executive Officer of DLG (German Agricultural Society), Frankfurt am Main

Economic Environment

•China increases imports of soybean from Brazil and decreases imports from the US•China increases imports of pork from Brazil and the EU and decreases imports from the US

Trade conflict USA - China

•China: Decreasing pig inventory boosts pork imports•ASF reduces pork production in Eastern Europe

African Swine fever

•Shift in pork imports from EU to North America in case of new trade agreements and change in requirements on animal welfare regulations •Higher international competition on deliveries to the United Kingdom for German, French, Irish, Dutch and Danish exporters

Brexit

•Trade agreement reduced tariffs on agricultural products•Ratification of agreement, however, is open to disagreement due to Amazon politics

Mercosur –EU Trade agreement

•Fertilizer regulations: Farmers feel constraints as EU requirements on fertilizer use strengthen to mitigate water pollution• Increased regulation and prohibition of use of some pesticides and crop protection products in insect protected areas • Introduce of governmental 3-level label of animal welfare (by choice)

National legislation Germany

•Debate on animal-welfare requirements creates uncertain climate for livestock farmers with regards to regulatory and investment conditions•German “climate ministry” propose price for carbon dioxide (CO2) pollution

Environmental + climate

impacts, animal welfare

• National CAP strategic plans as frame for CAP implementation

• Eco Schemes as new tool to strengthen ecological orientation of CAP

• Debate about adjustment of direct payments in Western and Eastern Europe

CAP-reform 2020

Economic framework

Global National

World wheat markets

Source: IGC Market Report 29.08.2019

in Mio. t

Production is expected to be higher than consumptionin Mio. t

• Huge world wheat harvest• 5-year average EU-wheat harvest• Record harvest in France of good

quality wheat• Below average harvest of mixed

quality in Germany • Stocks in major export nations

thought to be stable

0

50

100

150

200

250

300

500

550

600

650

700

750

800

Carryover stocks Stocks major exportersProduction Consumption

Price pressure due to high global harvest

Matif Wheat contract September 2019 in €/t Cash prices for B-wheat in the Rhineland in €/t

Source: Agrarticker 06.09.2019

Development of wheat prices

Pig production

Source: EU-KOM, 04.0.2019

World pig prices: • African Swine Fever and US-Chinese trade

conflict determines pig market• In 2019, exports to China increased: Germany

+11%, Netherlands +29%

Feed prices: • Price for feed grain declined due to high grain

harvest in EU• Decline in soybean prices lowered overall feed costs

Source: Agrarticker, 21.08.2019

EU-milk deliveries nearly similar to previous year’s level

• Milk price remains nearly unchanged due to milk market stability

• Average milk price: 33,43 euro cent/liter = 0,41 euro cent/literhigher compared to previous year

• Feed & energy costs lower by 0.6% and 3.2% in week 33 compared to the previous 4 weeks

Quelle: EU-KOM DG Agri 29.08.2019

Source: LTO Nederland, International Milk price Review, June 2019; Data base: Farm gate prices of 16 dairies in 9 European Countries

Milk market

Market conditions for farmers

EU-grain production on 5-year average level; French arable farmers expect record high harvest of high-quality wheat; German arable farmers expect below 5-year average harvest

Regional incidents of drought and heat in June could negatively impact yield and quality

Internationally, an oversupply of wheat leads to lower prices; world wheat stocks expected to stabilize at around 68 Mio.t

Export market is marked by high competition between main exporters. Exports from Russia decrease due to high domestic demand, and prices lead to higher export opportunities for European exporters.

African Svine Fever in China boost EU-pig exports and pork prices; continuing risks of African SvineFever outbreak for pig producer in Germany, France due to epidemic in Poland and Belgium.

Market for Dairy products widely stable, due to nearly constant deliveries in EU compared to previous year

Business climate and investment conditions – core questions

1. What impact do markets have on the business climate and expectations of arable farmers?

2. Do farmers want to invest under current market conditions?

3. How can arable farmers address these challenges, and what kind of innovations are important to them?

Assessment of business situation and development

2,0

2,5

3,0

3,5

4,0

4,5

France Germany Poland Great Britain The Netherlands Russia

Average; N=valid cases; supported; only one answer possible. DLG-Trendmonitor Europe autumn 2005 – Spring 2017 N= D+F 750, UK 350, PL 500; Agrifuture Insights, autumn 2017 – autumn 2018 N=150 every country

Current business situation in arable farming

French, Russian and Dutch farmers more satisfied with actual business situation

2,00

2,50

3,00

3,50

4,00

4,50France Germany Poland United Kingdom Netherlands

Expectations on business development in arable farming

Expectations averaged in most countries, German arable farmer less optimistic

Very bad

Very good

Average; N=valid cases; supported; only one answer possible. DLG-Trendmonitor Europe autumn 2005 – Spring 2017 N= D+F 750, UK 350, PL 500; Agrifuture Insights, autumn 2017 – autumn 2019 N=150 every country

Investment decisions and areas of investment

Readiness to invest – arable farmers

Increasing investment plans in arable farming, only Polish farmers limit investments

Share of “yes” answers

DLG-Trendmonitor Autumn 2010 – Autumn 2016, DLG-Agrifuture Insights autumn 2010 to autumn 2019, data in %; supported

Are you planning to make any investments on your farm in the next 12 months?

0%

10%

20%

30%

40%

50%

60%

70%

80%

France Germany Poland United Kingdom Russia

Investment areas of arable farmers

Tractors and tillage equipment is focus of farmers investments

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

0%

10%

20%

30%

40%

50%

60%

70%

Tractors Combineharvester

Tillageequipment

Automaticguide systems

PrecisionFarming

equipment

Fertilizers Plantprotection

Arable land

Germany France Netherlands Russia Poland United Kingdom

15

Challenges in arable farming and approaches to address them

Business conditions for arable farmers

There is a need to rethink arable production systems and expand crop rotations, use more mechanical weed control, use different seeds, take later sowing time

Growing challenges with herbicide-resistant weeds

Rising difficulties for rapeseed cultivation due to chemical ban and unfavorable seeding conditions due to dryness of soils

Need to increase nutrient efficiency in fertilizing

Sharp decrease of sugar beet prices after end of EU’s market regulation

Concepts of arable farmers to address challenges

Farmers in Europe use different approaches to develop cropping systems

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

0%

10%

20%

30%

40%

50%

60%

70%

80%

Germany France Poland United Kingdom Netherlands Russia

Increase power of impact of mechanization Mechanical weed control

Under feed manuring Improve field hygiene to reduce disease occurence

Intensifying stubble processiong Later seed

Increasing organic soil components Expansion crop rotation

Change to organic farming

Importance of technology trends

High demand on innovations in technology to meet farmers’ needs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Germany France Poland Netherlands United Kingdom

Strip tillage Sensor technology for crop management

Automatic guide systems Equipment mechanical weed control

Boost efficiency in fertilizing Sensors for measuring nutrients in manure

Telemetrics for machine control Mobile data access for in-time crop management

Drones for crop management

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

Digitization

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Germany France Poland United Kingdom Netherlands Russia

Documentation of production Boost efficiency Input use Telemetric equipment service

Management of machine use / logistics Cloud Computing Farm Management systems

"Internet of things" - networking of machines Web-platforms for trading

Digitization: Areas of use

Documentation, efficiency and farm management systems in interest of farmers

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

In use Useschedueled

In use Useschedueled

In use Useschedueled

In use Useschedueled

In use Useschedueled

In use Useschedueled

France Germany Poland United Kingdom Netherlands Russia

Farm Management Systems Platform for data transfer Cloudsoftware Telemetrix for machine control Electronic field book

Digitization: What kind of tools arable farmers are using already and what kind of tool they plan to use

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

Conclusions – Business climate and investments

Business climate

• High global wheat harvest leads to lower price for wheat

• Higher competition on export markets; European producers have more opportunity to export due to decreased exports from Russia

• Expectations on business development averaged in most countries. German arable farmer less optimistic

Investment intentions

• Despite low price level and difficult outlook on wheat market, investment intentions of farmers in Germany, France, the United Kingdom, Russia and the Netherlands increased

• French farmers tend increase power of impact; German farmers catch up investments, implement new farm practices

Concepts of arable farmers that address challenges

• German farmers see field sanitation and mechanical weed control as the most important measures

• French farmers look to intensify chemical weed control and invest in farm equipment to increase in power of work force

• Farmers in UK are interested in ecological farming

To address challenges, arable farmers need to develop solutions suited to their location. Manufacturers need to better understand the needs of farmers in order to offer the right approach to develop farming systems.

British arable farmers view on Brexit

Assessment of impacts on Brexit for British Farmers

0 10 20 30 40 50 60 70

Domestic market opportunities for British farmers increase due to import tariffs

UK self-negotiated trade agreements increase export opportunities

Exports decrease due to difficult access to the EU market

Profits of UK farmers decrease due to the lack of EU direct payments

Investment goods (machinery, equipment) will become more expensive

The structural change in British agriculture will increase

Brexit leads to significant decline in agricultural investment

Entire sample

Disagree Partially agree Fully agree

British arable farmers mostly expect negative consequences due to Brexit

DLG-Agrifuture Insights autumn 2019, data in %; supported; several answers possible

Methodology of survey and farm structure of surveyed farmer

• Total N = 900 Interviews (150 each country, 50 each arable, dairy and pig farming)

• Sample

• CATI (computer aided telephone interviews)• Trendmonitor: survey twice/year autumn 2003 – spring 2017• DLG-Agrifuture Insights: survey once/year since autumn 2017

• methodology of questioning

• Germany, France, Poland, United Kingdom, Netherlands, Russia

•July + August 2019

• Countries

•Time of questioning

Realization of questioning:

Methodology of survey

Farm structure of interviewed farmers

Ø utilisable agricultural area (ha)

Ø share of leased land (Percentage of farmed

land)

Ø number of dairy cows/farm

Ø number of finishing pigs/farm

Germany 307 49 155 1.149

France 201 70 135 1.378

United Kingdom 353 34

Poland 442 34 84 1.165

Netherlands 142 30 238 4.146

Russia 21.532 47 789 61.495

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