Farmers are not the only ones affected by the volatility of agricultural prices. The fact is pointed out in an article published in the October 25 issue of Agrapresse, which shows that all agri-supply industries acting upstream of the agricultural chain are severely impacted by agricultural price volatility.
The phenomenon affects simultaneously the suppliers of agricultural machinery (tractors, combine harvesters, milking equipment) as well as suppliers of phytosanitary products. Consequently, the first half of 2010 has seen a 30 percent decline in sales of agricultural equipment and fertilizers, and a 20 to 40 percent drop of production, as compared with the same 2009 period. While an estimated six percent increase in sales for the first half of 2011 seems to be an improvement, it is nevertheless not enough to offset past deteriorations.
“Such phenomenon follows closely agricultural price instability and farmers’ cash flow”. In fact, when farmers’ revenues regularly fluctuate between plus 10 and minus 30 percent within a two-year period, the volume of purchases of agri-supplies also noticeably varies, since the latter represents an adjustment variable that is more and more used by farmers.
Agri-supply industries must therefore be confronted to markets that are increasingly volatile and unpredictable. “Prior to 2007, we were experiencing regular cycles. Today, there are no rules,” says Pascal Perrot, Representative of the SEDIMA (Syndicat National des Entreprises de Service et de Distribution du Machinisme Agricole) for the Creuse “département”. The volatility of agricultural commodity prices is thus a phenomenon with transversal and global consequences. It affects all agricultural activities, the income of farmers and small-scale growers in developing countries and therefore the upstream industries that manufacture the inputs needed for agricultural production. As Hervé Plagnol says in his editorial “While there is no country without farmers, there are no farmers without suppliers.”
But worse even, by becoming one of the adjustment variables against increasingly volatile prices, the decline in agri-supply expenditures contributes to foster tension in markets, and particularly farmers’ production capabilities by impacting their yields, and consequently their future competitiveness. This is the door to a vicious circle, whose consequences––to be perceptible in the future only––can be drastic.