At the end of the third quarter of last year, there were almost 4% fewer farmer-entrepreneurs in the National Debt Register than a year earlier. Meanwhile, according to the Debtors Register BIG InfoMonitor and the BIK credit information database, the number of debtors from categories of crop farming, animal rearing and hunting, including service activities, fell by over 2% year on year. Based on the data from these entities, it can be noted that the indebtedness of the mentioned groups increased year on year by 5.8% and 0.2%, respectively. On the other hand, for average debt amounts, there were year-on-year increases of 10% and almost 2.5%. According to experts, further forecasts do not inspire optimism. In the near future, farmers may face even greater difficulties in this area.
Fewer Debtors, but higher amounts
According to data from the National Debt Register (KRD), at the end of the third quarter of last year, there were 3.7 thousand farmers-entrepreneurs engaged in farming and animal breeding in this register. This is 3.8% less than a year earlier when there were 3.9 thousand of them. In the case of the BIG InfoMonitor Debtors Register and the BIK credit information database, the year on year number of debtors from the categories of crop farming, animal rearing and hunting, including service activities, fell by 2.1%. At the end of last September, there were 1.6 thousand of them (exactly 1563). A year earlier, 1.6 thousand (1597) were recorded.
– These data may indicate that problems only affect chosen directions of production, not the entire agriculture. Many farms received direct or indirect support in connection with COVID-19 or war, which reduced the pressure to take out loans. Additionally, the number of indebted farmers may be decreasing due to concentration processes taking place in agriculture and the decline in the number of farms in Poland. Reluctance to incur debts at such high interest rates is important – comments Professor Mariusz Hamulczuk from the Department of International Economics and Agribusiness at the Warsaw University of Life Sciences (SGGW).
As Dr. Agnieszka Ginter from the Faculty of Agricultural Sciences at the University of Siedlce points out, the decrease in the number of debtors is small. However, in accordance with postulatory economics, the outlined trend of changes is in the desired direction and indicates improvement. In the expert’s opinion, the situation with indebted farmers should be perceived as alarming, especially in small holdings. Attention should be paid primarily to the currently difficult to predict conditions of agricultural production, including geopolitical ones, which have adversely affected the agricultural market. The most important issue in terms of indebtedness is its service, i.e. the ability of farmers to pay on time.
– In my opinion, the data presented from the registers do not reflect the real financial problems, as the situation of farmers is much worse. Many of them are in debt because production is unprofitable and involves numerous risks over which they have no control. We are talking about purchase prices. As a result, producers do not even recover the financial resources invested in starting production. Moreover, in the KRD, debtors who have incurred obligations in companies that have signed agreements with Economic Information Offices are placed – analyzes Adrian Parol, a legal advisor and restructuring advisor specializing in the agricultural sector.
According to KRD data, at the end of the III quarter of last year, the indebtedness of farmers-entrepreneurs amounted to nearly PLN 274 million. This is 5.8% more than in the corresponding period in 2022, when it was at the level of almost PLN 259 million. However, data from the BIG InfoMonitor Debt Register and the BIK credit information database show that the amount of arrears of debtors from the categories of crop farming, animal rearing and hunting, including service activities increased by 0.2% year on year. Recently, it amounted to almost PLN 516 million, and a year earlier – nearly PLN 515 million.
– These data confirm the deterioration of the economic climate, this results, among others from a survey of farmers’ opinions conducted by GUS. In June, more than 50% of these respondents indicated that their overall situation had deteriorated in the past half-year. However, in my opinion, this is not a very strong nominal deterioration of the situation, considering the real view and the inflationary trends prevailing in Poland, i.e. the increase in fertilizer, energy or equipment prices used in production – says Professor. Hamulczuk.
Debt under the magnifying glass and the vision of problems
At the end of last September, in the KRD, the average debt of a farmer-entrepreneur amounted to PLN 73.4 thousand. This is 10% more than a year earlier, when we were talking about PLN 66.7 thousand. On the other hand, data from the BIG InfoMonitor Debtors Register and the BIK credit information database show that the average amount of arrears increased by 2.4% year on year in the category of crop farming, animal rearing and hunting, including service activities. In the statistics from the end of the third quarter of last year, we see PLN 329.9 thousand, and a year earlier – PLN 322.7 thousand. Legal Counsel Adrian Parol emphasizes that these results are influenced by a significant increase in production costs in recent months, which is associated with high inflation. As the expert points out, purchase prices have gone up, but farmers still do not receive equivalent remuneration for their work.
– We have an increase in indebtedness, in nominal terms, coupled with a decrease in the number of registered debtors. This may indicate that those debtors who had greater indebtedness and may have trouble repaying it were left in the registers – analyzes the expert from the University of Siedlce.
KRD data also shows that at the end of the III q. of last year, a typical farmer-entrepreneur from this register was on average 955 days overdue in repaying his obligations. A year earlier, it was 795 days. As Dr. Agnieszka Ginter states, these data indicate a lack of financial liquidity of agricultural producers. Their contractors are late in paying for goods, which happens in business practice. A decrease in agricultural incomes means fewer opportunities to meet obligations, especially long-term ones. In the expert’s opinion, the extension of this period is worrying, but it does not seem surprising. It can be assumed that the repayment of obligations will become an even greater problem for farmers. This may cause an over-indebtedness spiral.
– The situation in agriculture may improve slightly. The prospects for changes in the economic climate generally seem to be slightly better. This usually leads to investment and indebtedness increases. However, the main determinant of debt increases are interest rate declines and, consequently, an increase in the availability of loans and the propensity of farms to take them out. Therefore, both the number of indebted farmers and the average amount of their debt may increase – predicts the expert from the SGGW in Warsaw.
In the opinion of Dr. Ginter, the situation in agriculture does not inspire optimism. Debts and the period of their repayment may increase. It is also not excluded that farmers, in the face of a lack of financial resources, will make further commitments. They will do so to start or continue farming in order to generate income. As the expert emphasizes, predicting financial results in agricultural markets is not easy due to dependence on many variables. Ad hoc solutions, such as the financial support per hectare of corn proposed by Mateusz Morawiecki’s government at the beginning of last December, will not solve the problems. Efforts should be made to take a systemic approach to remedying difficult situations in agriculture.
– The further situation of farmers will depend to a large extent on the decisions of the new government. I hope that a program will be implemented that will protect them from significant fluctuations in the purchase prices of agricultural products. And possibly the solution enabling obtaining state-guaranteed financing will appear. It finally should take interest in farmers – concludes Legal Counsel Adrian Parol.
