At the end of June this year, entries concerning 1.5 thousand unreliable debtors from the categories of farming, animal breeding and hunting, including the provision of services, were included in the Debtor’s Register of BIG InfoMonitor and the Credit Information Bureau (BIK). This represented a 4.2% decrease compared to the previous year. In the meantime, in the National Debt Register (KRD), the number of indebted farmers – entrepreneurs decreased by 1.9%. At the end of the first half of this year, their total was 3.6 thousand. Thus, the indebtedness of the former in the BIG InfoMonitor Debtor’s Register and the Credit Information Bureau (BIK) amounted to PLN 540.6 million. The amount of farmer – entrepreneurs arrears in the KRD amount was PLN 246.3 million. It can also be seen in the register that the average time of defaulting on payment obligations has been reduced.
Databases Show Fewer Debtors
At the end of June this year, the BIG InfoMonitor Debtors Register and the Credit Information Bureau (BIK) registered 1.5 thousand debtors from the categories of farming, animal breeding and hunting, including service activities. This is 4.2% less than a year earlier, when 1.6 thousand were recorded. However, in the KRD, the number of farmer debtors – entrepreneurs decreased by 1.9%. At the end of June, there were 3.6 thousand of them. A year earlier, this group accounted for 3.7 thousand entities. Dr. Arkadiusz Malkowski from the Economic Department of the West Pomeranian University of Technology in Szczecin warns that the data from the presented databases should not be used to draw far-reaching conclusions about the situation in Polish agriculture.
“These registers concern a small percentage of debtors who delay the repayment of debt, entered there by their creditors. It should also be noted that the KRD only includes farmers who operate according to the Polish Classification of Activities. This means agricultural entrepreneurs, not all farmers. Therefore, these databases do not reflect the real situation of rural residents, who can be farmers and benefit from direct payments, but are not agricultural producers.” – explains the expert.
In the opinion of legal counsel and restructuring advisor Łukasz Goszczyński from the GKPG Economic Law Firm, farmers – entrepreneurs face increasing problems year on year. Thus, the registers do not reflect their actual situation. Part of the industry is completely withdrawing from agriculture because it simply ceases to be profitable.
“If we look at the data since 2018, the number of debtor-farmers in the presented databases is indeed slightly decreasing. In my opinion, there can be many reasons for this. Among them, one can mention a decidedly smaller inclination to go into debt, resulting from the difficult-to-predict situation in terms of the prices of agricultural products in recent years. This is shown by the indicators of Cooperative Banks, which in 2023, compared to 2022, granted 80% fewer loans to farmers.” – adds Dr. Malkowski.
Not All Debts Are Reported
On the other hand, legal counsel and restructuring advisor Adrian Parol believes that these data justify the conclusion that the situation of farmers in the analyzed period neither significantly improved nor worsened. It remains difficult, resulting from inflation and low prices of products in agricultural purchases. According to the expert’s observations, farmers, after last year’s sale, still have not repaid their liabilities.
“The quoted numbers paint a sad picture of agriculture. These are not complete data, either. Some companies cooperating with farmers do not report arrears to the register because, after years of cooperation, they are accustomed to delays in payments. They know that debts will be settled after the sale of crops. The farmers’ financial situation itself depends on many factors, some of which they have no control over. This includes the condition of international markets, as well as fuel and fertilizer prices.” – lists attorney Adrian Parol.
From the BIG InfoMonitor Debtors Register and Credit Information Bureau (BIK), it follows that at the end of June this year, the amount of arrears of unreliable debtors from the categories of farming, animal breeding and hunting, including service activities, amounted to PLN 540.6 million. This is 9.3% more than a year earlier when it was PLN 494.7 million. On the other hand, KRD data shows that the amount of farmer-entrepreneur debt fell YoY by 8.8%. At the end of June, it was PLN 246.3 million, compared to PLN 270 million a year earlier. As Dr. Piotr Kica from the Chair of Finance and Accounting of the Faculty of Management of the Bydgoszcz University of Technology points out, the difference may be the result of the fact that the registers include different groups of debtors and different categories of arrears.
“The current economic conditions, characterized by high inflation, can increase the costs of agricultural activity (fuel, fertilizers, and energy). Nonetheless, farmers can benefit from support programs and periods of good market conditions for agricultural products, which can improve their financial situation and enable debt repayment. Farmers who do not have access to favorable credit conditions or cannot count on stable income may struggle to get out of debt.” – believes Dr. Piotr Kica.
Average Debt Time Shortens
Moreover, KRD data shows that at the end of the first half of this year, a farmer – entrepreneur from this register was in arrears with repaying liabilities an average of 836 days. This is 101 days less than on June 30, which was 937 days. Dr. Arkadiusz Malkowski argues that one conclusion can be drawn from this. Creditors recover their liabilities as a result of debt repayment or part thereof, agreements between the creditor and the debtor, as well as the recovery of liabilities from farmers’ assets. However, the expert from the GKPG Economic Law Firm here draws attention to the fact that just limiting the average delay period does not allow determining what exactly caused it.
“One should not expect a dramatic improvement in the situation of farmers even though they are currently in the process of obtaining funds from the sale of current agricultural production. These funds not only do not allow for full debt repayment, but also part of them will soon have to be allocated to investment to launch production in the next year. Low purchase prices prevent farmers from getting out of the debt spiral they often fall into for reasons beyond their control.” – believes restructuring advisor Adrian Parol.
Łukasz Goszczyński, on the other hand, emphasizes that this trend of the average reduction of debt time in the second half of the year may reverse to some extent. Rising inflation and related problems will push this situation in the opposite direction. However, the worst may only look in Q1 and Q2 of 2025, as then several factors, unfavorable for farmers, will accumulate.
The Government Can Limit Debt Growth
Questions arise about what the farmers’ debt will look like in the second half of the year and whether the number of debtors will decrease or increase. Dr. Arkadiusz Malkowski notes that in recent years, the willingness of Polish farmers to go into debt has clearly decreased. As he explains, this is due to many reasons. Among them, the most important issues are uncertainty about market prices and rising operating costs.
“A considerable part of farmers uses credit support, which is a natural phenomenon in the economy. Some of them no longer have the possibility of further indebtedness, due to the amount of the current long-term obligations. Moreover, it is visible that a large group of farmers cautiously approach the potential further investment in farms, observing a weak market situation in agricultural markets and, above all, unsatisfactory prices of produced raw materials. If the situation in agricultural markets does not change, the trend to limit farm debt will continue in the following months.” – assures the expert from the West Pomeranian University of Technology.
Additionally, Dr. Piotr Kica points out that actions taken by the government and other institutions, such as financial support programs, tax relief, debt restructuring programs or preferential loans, can limit debt growth or even reduce the number of debtors. On the other hand, attorney Łukasz Goszczyński adds that support programs are, of course, necessary for farmers, but that will not solve all their financial troubles. A slightly broader approach to the issue is needed, as the government does not have influence over everything. It should also be remembered that the agricultural market is governed by its supply and demand laws.
“Depending on the economic and political situation, one can expect that the government will introduce programs aimed at greater stabilization of farmers’ financial situation. Such actions may also include help in access to sales markets or support in negotiating the prices of agricultural products.” – convinces Dr. Piotr Kica.
Summing up, restructuring advisor Adrian Parol indicates that the government should definitely sort out this sector, ensuring e.g., farmers the opportunity to sell goods at prices that allow the profitability of agricultural production to be restored. To this, the expert adds that rapid and significant changes in government policy are needed, aimed at protecting farmers’ interests. Otherwise, in the next season, we will be observing a deterioration of the situation and moods among farmers, and even a wave of bankruptcies.
Source: https://managerplus.pl/ubywa-zadluzonych-rolnikow-w-rejestrach-jednak-eksperci-twierdza-ze-te-dane-nie-oddaja-realnej-sytuacji-40808
