ARiMR survives situation? Farmer on credit
Dr. Mariusz Dziwulski, economist, expert ds. analyzes the agricultural-food market at PKO Bank of Poland, referring data from which shows, that the value of bank loans to individual farmers in November ub. amounted to 33.1 billion £ and was by nearly 3% higher than a year ear ear previously. Changed distinctly the structure of borrowing by farmers of obligations.
Decreased the value of credit investment and real estate by slightly over 9% year-on-year. In contrast, the volume of credit increased by about 17% year/year. The decline in prices of agricultural products has transferred to reduced investment activity in agriculture – calculates experts.
Lukasz Goszczynski, a legal advisor and restructuring advisor from the Law Firm GKPG, considers, that the above assertion is of course found in data, because there are fewer registrations of new tractors, and also of farm trailers. It can be seen also, that the value of the machinery itself is declining. From the coach Piotr Domagala, director of ds. the agricultural sector in Santander Bank Poland, reminds, that in accordance with the data of the Supervision Financial Committee, the credit portfolio of individual farmers at the end of October 2024 year was over 31 billion zl, that is. by
6% more than in the analogous period of the year. doesn’t mean that only automatically, that farmers in 2024
year took more credit.
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It is a real challenge for polish agriculture. Competition from Ukraine is increasing
– according to Data Bureau of Credit Information, the value of granted credit to farmers until November 2024 year was 7.9 billion ln, which is a decrease by 35% in relation to 2023 year. But the most important is the fact, what credits they have taken farmers. Less more for a year and a half the market for financing of farms is dominated by liquidity loans, that is financed by the Restructuring Agency.and Modernization Agriculture. These are then loans on significantly favorable conditions than typical commercial financing – explains Piotr Domagała.
It is the lower cost of financing and easy accessibility that have made the popularity of this product. And this is the main reason for increasing debt of individual farmers. To this attorney and advisor of restructuring Adrian Parol points to other reasons for the increase in debt of farmer producers.
It is low purchase prices and increase costs of production. Another issue is the high cost of money itself, which is actually resulting from some quarters of high interest rates. This finally combines with the higher cost of servicing the debt – mentions mec. Parol.
Farmers still fear of risk. Will debt farmers be more?
Slawomir Izdebski, chairman of the OPZ Farmers and Farmer Organizations, considers, that it is impossible to determine, whether the number of debt farmers will in 2025 increase or decrease, because the unknown is the price of agricultural crops. According to the expert, the slight decrease in debt of farmers can be attributed to the fact that they are becoming more careful and have fewer obligations. To this an expert from the GKKPG office adds, that these are obviously the main reasons for the above situation, but you cannot forget about that, that there are some also some. Therefore there is a problem to look slightly wide.
Farmers are increasingly more unconcerned and want like at least risk. They are aware of credit mechanisms. This means, they remember, that with the main obligation there are interest charges. For development tendencies in 2025 year huge importance will have the approach of the National Support Agriculture Center, in whose competence is to offer farmers assistance, including this financial assistance. We urge KOVR, to prepare a program of support for the next months – Izdebski completes.
Chairman of the OPZZ of Farmers and Agricultural Organizations also assures that he is in constant contact with Director of KOVR. Directed by him the organization encourages farmers, to who have seen the problem of regulating debts, they referred to KOVR, which has developed mechanisms for helping with loans. Among the forms of support are programs with no obvious mechanisms.
– one of these e.g., supposes, that KOVR repares the loan.debt of the farmer in the exchange for taking the farm. However, it remains at the disposition of the farmer, who still on it. Changes only the entry of the owner, because then it becomes the State Treasury. However after a few years the farmer can buy the farm. In my judgment, this is the final mechanism, which can act in the most situations and prevent the insolvent farmer from making the worst decisions, with taking their lives including – convinces Slawomir Izdebski.
Flu birds, weather and other threats
Viktor Szmulewicz, President of the National Council of Isb Agriculture, forecasts,
that in 2025 the year may increase the debt of farms, which in the last time invested larger amounts or experienced a decrease
in profitability, especially if they operate in industries, in which the financial risk is higher. This includes these for example farming cattle
pigs.
Of course the list of factors, which may affect the actual profitability of farms, is really long and all time is growing. Climate changes, rapid weather phenomena, bird flu – these are only some threats. But before all those are different factors independent on us, a huge impact on the condition of farms – Szmulewicz calculates.
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to this advisor restructuring Adrian Parol reiterates attention to that, that often is yes, that the profits received in one year the farmer spends on paying the obligations, which have been committed only after that, in any way the activity has started. In the second order farmers allocate money to prepare for the next year of work and only that, what remains, is their earnings. This causes the effect of the credit snowball,because external financing is always needed.
– the prices of various services, including energy, fertilizers etc. are rising. This results in that farmers continuously must increase the state of debt. My opinion, the situation in this area is not improving at all, but instead deteriorating, dependent on the effort that the daily work farmers put in. Separate issues are of course the prices at supermarkets, which does not support changing costs of production – explains mec. Adrian Parol.
From the college dr Mariusz Dziwulski from PKO BP reminds, that the already mentioned increase in the value of short-term commitments is the effect of loans with funding to interest from ARiMR, granted for maintaining liquidity in agricultural farms in the years 2023-2024. Their purpose was to mitigate the effects of constraints on agricultural markets, related to the geopolitical situation, which resulted in deterioration in agriculture.
– In 2025 year this effect will gradually diminish. It is possible that the value of commitments total in the first months 2025 year will even decrease. Low level of investment activity will be accompanied by in the first half of 2025 year, though the price increases in agriculture, which we have observed since the fourth quarter of 2024 year, will encourage improvement in agricultural farms and reduce declines in purchases of durable assets. The opportunity for growth is the perspective of rate reductions this year. Today these constitute a barrier for new obligations by farmers. Investment increase will also be favored by increased inflow of funds from EU, which could be cofinanced with loans – says dr Mariusz Dziwulski.
Regulating obligations
To this Piotr Domagala adds data, according to which in 2024 year there was observed some deterioration in the timeliness of regulating obligations by agricultural farms. In his opinion, this is primarily the effect of the decrease in in income of agricultural farms (according to data from the Institute of Agriculture and Food Economics in 2023 year the decrease was over 44% in comparison to the year 2022).
– We have to remember, that the year 2022 was under this exceptionally good. Income of farmers in 2022 year was by 56% higher in the relation to year 2021. We can therefore say, that in 2023 year the revenue of this group returned to level comparable to the years 2020-2021. I expect that in 2024 year they would be one.at a level similar to 2023 year.Thisincreaseinin2022yearhasalsotransferredtoanextremelylowlevelofdeterminations.Nowthereforewe aretalkingaboutdeterioration,butinrelationtotheextremelygoodperiod-addsanexpertfromSantanderBankPoland.
Willbeworse?LukaszGoszczynskiofGKPG claims,thatlookingatthat,whatis happeninggenerallyinthemarketandintheeconomy,obviouslythiscannotbeexcluded.Howeveranexpertreports,thatfor example,afterthedataofthelargestmarketrecordofdebtsis seen,thatfor6monthsor so.thefarmer-entrepreneurwasdefaultedwithpayingtheirdebtsonaverageofover100dayslessthantheyearpreviousinananalogousperiod.Historicallyit is apparentthatsomethingisimproving,but-intheexpertassessment-thisdatadoesn’treflectthefullsituationandfinallydifferthatmaybe.
Wewillcertainlyobservedifferencesintimelinessbetweendifferentgroupsoffarmers.Smallerfarmsmayhavegreaterproblemswithregulatingtheirobligations,especiallythoserelatedtoplantpresentsanexpertfromSantanderBankPoland.
Source:MondayNews,opr.farmer.pl
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