The profitability of some farms in the European is being squeezed by lower agricultural prices, according to a new report published today (Tuesday, April 16).
While high commodity prices in 2022 and 2023 helped offset input costs for farmers over the last two years, the fall in commodity prices towards the close of last year has continued to reverberate and is now impacting on levels of farm profitability.
This has been exacerbated in the first quarter of 2024 by high input prices compared to previous periods while operating costs are also currently creating additional pressures on farm finances.
According to the results of an EU survey carried out in January and February of this year, some farmers are now considering making a change on their farms and “moving to more profitable crops, reducing their overall production, or even switching to non-agricultural activities”.
The latest “State of Food Security in the EU” report for Spring 2024 highlights that “all these elements, on top of a still long period until harvest with possible negative weather developments, could impact food supply in 2024”.
Farms
According to the report annual food inflation stabilised, below 5% at the beginning of 2024 and in some cases retail food prices have declined.
“However, prices remain high compared to two years ago, and the slight price decrease
is not really felt by consumers and especially not by low-income group,” the report highlighted.
One key issue also referenced in the new report is the relationship between supermarkets and farmers and the impact this could have on farms in the future.
“The issue of price transmission and related distribution of value along the supply chain has been an important part of recent farmers’ protests, prompting the need for a closer monitoring of price transmission mechanisms,” it noted.
The European Commission announced last month that it will launch an observatory of production costs, margins and trading practices to “increase transparency in the agri-food supply chain”.
Outlook
Key factors that could impact on EU food supply and food security identified in the report included the ongoing war in Ukraine, extreme weather events, elections in the EU and the United States and “administrative pressures” that farmers face.
Other concerns included potential labour shortages in the farming sector and the “lack of diversification in imports”.