DLG-Trendmonitor Europe Agriculture in Europe: the business climate and European farmers' willingness to invest - autumn 2014

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1 DLG-Trendmonitor Europe Agriculture in Europe: the business climate and European farmers' willingness to invest - autumn 2014 DLG e.v. Dr. Achim Schaffner, Svea Sievers Eschborner Landstr Frankfurt am Main Tel.: 069 /

2 General economic parameters at a glance Falling feed costs due to record cereal and soya harvests offer livestock farmers some relief from cost pressures Producer milk prices under pressure due to strong growth in global milk supplies growth in production currently greater than growth in demand Dairy farmers are increasing production with their eyes on the end of quotas Pig market: producer prices under growing pressure because of high pig supply in EU and ongoing Russia's ban on imports

3 The business climate and conditions for investment - core questions 1. What effect do the market environment and investment conditions have on the business situation and on business expectations? 2. Do farmers want to invest? 3. Which animal husbandry technology innovations are important for farmers?

4 Business situation and willingness to invest

5 The current situation: widely stable in Germany, Poland and the United Kingdom; farmers in France less content Very good 2,0 2,5 3,0 Very poor 3,5 4,0 4,5 Germany France Great Britain Poland Spring autumn , mean values; N = valid cases; supported; only one answer possible.

6 Business performance expectations: Slight slowdown in Germany; stable conditions expected in Poland and the United Kingdom; increasing scepticism in France Very good 2,0 2,5 3,0 3,5 4,0 Very poor 4,5 Germany France Great Britain Poland Spring autumn , mean values; N = valid cases; supported; only one answer possible.

7 Farmers in Germany, Poland and the United Kingdom are willing to invest; considerably less willingness in France Are you planning to invest in your business in the next 12 months? 60% 50% 40% Proportion of "Yes" responses 30% 20% Autumn 2013 Autumn % 0% Germany Poland United Kingdom France Autumn 2013 and autumn 2014, data in %; supported; only one answer possible.

8 Germany: No change in willingness to invest despite an increasingly difficult business environment 56% 54% 52% 50% 48% Autumn 2013 Autumn % 44% 42% Germany arable farming pig dairy Autumn 2013 and autumn 2014, data in %; supported; only one answer possible.

9 Willingness to invest by commercial crop growers: high in Poland, the United Kingdom and Germany; slump in France 60% 50% 40% 30% Autumn 2013 Autumn % 10% 0% Germany France UK Poland Autumn 2013 and Autumn 2014, data in %; supported; only one answer possible.

10 Dairy farmers preparing for the end of quotas 70% 60% 50% 40% 30% Autumn 2013 Autumn % 10% 0% Germany France UK Poland Autumn 2013 and Autumn 2014, data in %; supported; only one answer possible.

11 Willingness to invest remains high among pig farmers in Germany, the United Kingdom and Poland; reluctance in France 70% 60% 50% 40% 30% Autumn 2013 Autumn % 10% 0% Germany France UK Poland Autumn 2013 and Autumn 2014, data in %; supported; only one answer possible.

12 Investment areas: farmers in France invest more heavily in animal husbandry; farmers in the United Kingdom increasingly invest in bio-energy 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Renewable Energies Outdoor Equipment Indoor equipment 0% D D Autumn Autumn F F Autumn Autumn UK UK Autumn Autumn PL PL Autumn Autumn Autumn 2013 and autumn 2014, data in %; supported; only one answer possible.

13 Reasons for investment: farmers in Poland intent on expansion; farmers in Germany and the United Kingdom aiming to optimise ongoing production 60% 50% 40% 30% 20% 10% Germany France Poland UK 0% Plant replacements Expansion of existing farm activities Admission of new farm activities Catch up investment backlogs Autumn 2014, data in %; supported; only one answer possible.

14 Global growth in investment in animal husbandry Brazil China Growth stimulated by expansion in slaughter capacity and increased farm productivity ratios Obstacles to growth in animal husbandry logistics and difficulties in finding qualified employees Focus on updating technology to replace agricultural workers Pig production increasing again after the problems with disease and a reduction in herd numbers in 2011 Animal husbandry characterised by high rate of investment in holdings and processing Driving this trend is: Rising global demand for meat Increase in global trade Capital flowing into agriculture Australia/ New Zealand Increased meat production, including pig meat, to meet growing demand from Asia Milk producers under increasing price pressure due to global glut in milk supplies

15 Farming and animal husbandry - innovation DLG-Trendmonitor and public relations Europe activity

16 Innovations which farmers regard as important Big Data Data Management for production control and -planning Opticial Sensors animal welfare in animal hsubandry PL GB F D Separation of liquid manure automatic feeding in dairy farming 0% 10% 20% 30% 40% 50% 60% 70% Autumn 2014, data in %; supported; multiple answers permitted

17 Where farmers see the greatest opportunities for developing their businesses Start new branches as single farm Cooperation with further farmers to start new branches Cooperation with further farmers to cut costs Optimization of actual production UK PL FR DE Expansion on new facilities Expansion of actual facility 0% 10% 20% 30% 40% 50% Autumn 2014, data in %; supported; multiple answers permitted

18 Do you carry out any public relations activity? UK PL FR Yes No DE 0% 20% 40% 60% 80% 100% Autumn 2014, data in %; supported; only one answer possible

19 If yes, what public relations activities do you carry out? Press work Public discussion meetings Website Discussion with politics, NGO s UK PL FR DE Stakeholder farm visits Days of open farmgate 0% 5% 10% 15% 20% 25% 30% 35% Autumn 2014, data in %; supported; multiple answers permitted

20 Europe: farmers display great willingness to invest A high level of willingness to invest is reported in Germany, Poland and the UK despite an increasingly difficult economic environment Modernisation and expanding capacity (in Poland) are central features Optimisation of existing production Milk: full utilisation of the industry's capacity, expansion in preparation for the end of quotas Pigs: implementation of legal requirements such as extracted air purification, etc. Bio-energy: increase reserves by optimising heating concepts Innovation is vital in the areas of animal welfare and static data management for farmers Interest rate levels continue to favour investment

21 Global aspects: an increasingly dynamic market for meat More dynamic global economy is boosting the demand for meat Lower feed costs are relieving the cost-side pressure on farmers, creating leeway DLG-Trendmonitor for investment Europe Dynamic developments in meat production in Brazil, China and Australia; Sub-Saharan Africa is growing its animal husbandry sector

22 How the survey was structured

23 Countries surveyed and survey period Countries surveyed: Germany, France, Poland and the United Kingdom August / September 2014 Methodology Random samples/ countries CATI (computer aided telephone interviews) Surveys conducted twice each year since autumn 2003 Total of 2,350 interviews conducted - representative of forwardlooking DLG-Trendmonitor farmers in Europe: Europe - Germany and France: 750 interviews in each country - Poland: 500 interviews - United Kingdom: 350 interviews Company structure of the companies surveyed More than 50 ha of land in agricultural use with: - emphasis on arable farming (commercial and niche crops) - emphasis on animal husbandry (pigs, cattle, poultry)

24 Structure of the companies surveyed Average area in agricultural use (ha) Average proportion of land leased Average number of dairy cows / farm Average number of porkers / farm Germany 269DLG-Trendmonitor 51% Europe 136 1,001 France United Kingdom Poland % 67 1, % 186 2, %