In the latest issue of France-Europe-Allemagne1, a weekly magazine reporting on food and agricultural policies, Harm Holman, the president of the European Dairy Farmers network, warned of the level of debt incurred by Dutch cattle breeders. Noting that the share of fixed costs in Dutch livestock farms is reaching 60 percent, and even 75 percent for some, and with a debt of two Euros per kilogram of dairy quotas, Holman added that some farmers are “playing Russian roulette,” since they run the risk of facing unbearable debt overnight when prices drop…
The issue of farming debt is a genuine challenge. Many French dairy farmers faced enormous difficulties during the latest dairy crisis, precisely because the amount of their debt incurred when high prices led to the modernization of their operations. But with the heightened price volatility recorded on dairy markets, and more generally on international agricultural markets, such financing arrangements are extremely risky… and can hasten farming bankruptcies, whenever prices become lower than a given level.
Must we regulate farming debt, in the same way the American government legislated on consumer credit following the subprime mortgage crisis? Such approach leaves little room to entrepreneurial freedom. Maybe we should rather get involved downstream by managing price volatility in agricultural markets, and thus limit the risk of default. The very future of European agriculture is at stake.
1 France-Europe-Allemagne, Issue 189 of March 8, 2010, http://www.socopag.fr