The prospects for the Dutch agricultural sector in the coming years appear less positive due to the reduction of the livestock population as a result of nitrogen policies. However, some price recovery is achievable during 2021, according to the updated outlook from the ING Economic Bureau.
According to ING sector economist Henk van den Brink, the agricultural sector proved less sensitive to the coronavirus crisis than other sectors last year, with a volume growth of 1 percent. However, the production value shrank by 4 percent due to lower sales and declining prices.
This year, uncertainty remains high over the possible consequences of the new nitrogen policy, especially in intensive livestock farming, ING economists note. The agricultural sector also faces threats in the fight for space from claims for housing construction, solar and wind parks, and the creation of new nature areas.
“Economically, agriculture is an indispensable pillar. The sector has always invested heavily in innovation and sustainability. Moreover, the agricultural sector remains under the nitrogen ceiling for livestock set by the EU,” states Van den Brink, the Agri & Trade sector economist of the ING Economic Bureau. “Challenging years lie ahead for the agricultural sector.”
The coronavirus crisis initially caused the milk price to drop by over six percent below its long-term average. Due to higher feed costs, this decline reached more than 20 percent, but since March it has returned to the average level. According to ING, the high feed costs will continue to temper the expected growth in returns for the rest of this year.
For pig farmers, price and profit developments last year experienced high peaks and troughs, resulting in above-average returns. However, they face an uncertain year ahead due to coronavirus and African swine fever. Furthermore, global raw material prices are rising, leading to high feed costs, according to the ING Economic Bureau.