The farmer in the face of inflation and access to finance

After the first pandemic in history in which the population has not suffered famine thanks to the work of farmers, the response of governments has not been as expected by the sector. Increased production costs and taxes, hyper-regulation and more obstacles to access to water are concerns that affect decisions when it comes to programming their productive activity.

A decade ago, production costs accounted for between 40% and 45% of the value of final agricultural production. Today they are close to 60%, added to economic uncertainty, inflation, rising interest rates, illegal migration, drought, new types of supply chains, and of course, the war in Ukraine as a trigger, are variables that are complicating the day-to-day management of farmers and companies.

The primary sector started in 2023 with even more bureaucracy. The Royal Decree on packaging and packaging waste, proposed by the Ministry of Ecological Transition (MITECO) goes far beyond European regulations; greater phytosanitary control; Royal Decree establishing standards for sustainable nutrition in agricultural soils; and the digital notebook and Royal Decree establishing and regulating the information system for agricultural and livestock farms and agricultural production (SIEX).

It is also necessary to add the increased requirements in terms of environmental sustainability – via strategies such as ‘Farm To Fork’ or Agenda 2030, Green Deal, reinforced cross-compliance and those derived from the measures contained in the Good Agricultural and Environmental Conditions (BCAM). In the meantime, third countries with cheaper imports, as in the case of fruit and vegetables, are interfering without complying with the same requirements, affecting farms’ economic sustainability.

But it is always possible to fight against the negative factors. Well-known economists such as Daniel Lacalle, who this week took part in a meeting with farmers organised by COEXPHAL in El Ejido, believe that an increase in exports is going to be key in the coming season. “Domestic demand has been contracting for the last two quarters, however, the data coming in from Europe indicates a strong increase in demand, more than 11%”.

Therefore, the fruit and vegetable sector has two main advantages that can help it to face this turbulent situation: a product that is increasingly in demand throughout the world and the fact that it is a sector with a very healthy balance sheet.

The big challenge we face in the coming season is the cut in access to financing. The tightening of credit conditions is evident, according to data from the European Central Bank and the national banks“. For his part, the farmer has to bear in mind that, although inflation has moderated, prices are not going down, they are only slowing down, concludes Lacalle.

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