By Goran Djakovic
Goran Djakovic of Serbia, AGROPRESS Board President and a member of the IFAJ executive board, asked executive member colleagues to comment on the impact of the global economic crisis on their country. The following are the responses he received. The document below is also posted at www.agropress.org.cs
United Kingdom, Northern Ireland and Republic of Ireland,
(James Campbell, a journalist from Northern Ireland):
As a consequence of the world economic crisis, the pound sterling currency exchange rate has weakened considerably relative to the euro currency and this has worked in favor of farmers in the sterling area. That includes Northern Ireland, which is part of the United Kingdom of Great Britain and Northern Ireland. Obvious effects are that exports from the sterling area are more competitive within most other member states of the European Union, where the euro is the currency. Imports are more expensive in sterling currency and this also helps local prices to rise. The disadvantage of this is that some imported inputs such as animal feeds, grain, fertilizer and agro-chemicals, and oil fuels are more expensive than they would be if the currency was stronger – but this has not been a major problem in the short term.
Another effect is that the EU Single Farm Payment in Northern Ireland, when translated from euro into local sterling pounds, makes approximately 15% more pounds available to each applicant in 2009 than it did in 2008. These short-term advantages of a depreciation of the currency exchange rate help to offset some of the disadvantages of the economic crisis.
The disadvantages include a serious reduction in the construction industry, in which many farmers’ sons had been working. The general slowdown in spending in the economy also filters back down to affect demand for some products. The prices for milk and beef have fallen as world market prices have slumped – but these falls would have been worse for Northern Irish farmers if the currency had not devalued. The opposite is the case in the Republic of Ireland, where the currency is the euro and the price drops are hitting much harder.”
Australia
As the global economy remains in turmoil, Australian Bureau of Statistics figures released indicate the agricultural sector is keeping Australia out of recession. AgForce treasurer Charles Burke said the September quarter figures show that in seasonally adjusted terms, agriculture, forestry and fishing contributed 0.3 percentage points to Gross Domestic Product while all other sectors except construction had a negative GDP. During the September period, construction contributed 0.1 percentage points while transport and storage, property and business services, and finance and insurance services all detracted 0.1 percentage points.
“The significant lowering of the exchange rate this quarter has been a benefit for agriculture because up to 70 percent of our production is exported,” Mr. Burke said. Food is not a discretionary item – people need to eat, in good times and in bad. But the ABS figures underline the strategic importance of the agricultural sector to the Australian economy. “At the height of the financial and resources boom, it was easy for some to forget the ongoing long-term sustainable contribution of the agricultural sector. The global financial crisis has had an impact on agriculture, but the small rise in GDP demonstrates that our sector is faring better than others.
Slovakia
Milan Semančík, Chairman of the Slovak Agricultural and Food Chamber, recorded by Jana Janku, member of IFAJ Executive Committee.
Agro and food sector – mainly the agricultural basic production – is undergoing an extremely difficult situation. The previously balanced relationship between plant and livestock production is ruined, sale prices of the majority of core agrarian commodities have sunk down deeply and pushed the land farming businesses into a battle for survival. People are depressed and cannot see any prospects in the agriculture.
If we look at the previous couple of years, the fall in prices did not result in such a wide range of slumped prices in agro commodities compared to this year. Even if the price development dynamism of agricultural products was lagging behind the increase in input prices, the situation was moderated and befitted by useful restructuring of production and business risks. Nowadays, there is no “strong” commodity for farmers to grow to help stabilize their business.
Experts say the annual production of commodities has been impacted by strong fluctuation — over 30 per cent, compared with a long-term average of 10-20 per cent. However, now the amplitude between maximum and minimum fluctuation attains even the high level of 30 per cent in a foreground horizon. This is one of the reasons why the tools applied by the European Community in the agro sector need a revision — they do not support the sustainable development of agriculture anymore.
Ukraine – no credit, failed not efficient producers
Iurii Mykhailov a journalist from Ukraine, says “the biggest impact is the difficulty obtaining credit. Banks, even before, were not very happy crediting agriculture. Now, the situation has got worse. Production dropped partly because of this, and partly because there began a wave of bankruptcies. I think that in the medium- and long run this will have positive effect on agriculture because less efficient producers will go bust.”
Netherlands – decline in price of flowers and milk
Hans Siemes, a journalist from The Netherlands (the second biggest exporter of agricultural products in the world), says that in exports the recession has a double impact. “There’s less demand, so exports are decreasing as is the currency of the euro versus the dollar. The euro is expensive and that has a great impact in exporting. Two sectors with the main problems are dairy and horticulture. Prices of vegetables and flowers are extremely low (for farmers, not in the shops). Several horticulturists went bankrupt. Dairy farmers won’t have an income; for most, the income is negative. They are depending on the bank not to let dairy farmers go bankrupt. Other sectors too feel the pain of the crisis.
Switzerland – decline in exports of cheese, people are buying the sheaper foods
Markus Rediger, director of the agrobusiness information center in Bern, says “sometimes it is not easy to find out whether troubles in the markets are caused by the economic crisis or other reasons. But we face troubles in the export markets. The sales of cheese, especially more expensive quality cheeses, are down and we face the same troubles in the milk markets as other European countries. In Switzerland people buy more cheap food and invest very carefully. Most people repair machinery instead of buying new equipment.“
Canada
Owen Roberts, from the University of Guelph, says people feel helpless being influenced by global and economic forces they have no control over. “However, they can make conscious decisions about where to buy food, and more and more that decision is focused on local or domestically produced food. However, they still don’t seem willing to pay more for it than they did before. Maybe that too is a result of the economic downturn, but I don’t think so — I think in Canada we have nurtured a cheap-food culture and now everyone, especially farmers, must try to figure out how to live with it.”
United States of America
Gregg Hillyer, from USA, says that the end result has been a decrease in ag exports, but not in every segment (soybeans are still strong). This has resulted in lower commodity prices, lower prices for meat and dairy products and a softening of land prices. Farmers here are concerned about 2010 with many land grant university ag economists saying corn and soybean farmers will have negative per acre returns based on current commodity prices.