Feels like farmers have perhaps survived

Photo: Dmitri Kotjuh

Pan-Estonian survey shows farmers grew desperate during the winter but now, with spring in the air, milk seems to sell again.

After Russia banned import of dairy products from Europe in the fall, Estonian farmers went through a terrifying winter, says a study conducted among members of Central Union of Estonian Farmers last November and this February. «Many are waiting for the spring, to then decide if and how to continue,» said CEO Kalev Kreegipuu.

The study says solvency of farmers was strongly hit, mostly to the super cheap crude milk price.

From November to February, late payments grew more than threefold. If by year’s end, paydays for workers were postponed by 17 enterprises, in February it was 27 – close to half of respondents. In the companies questioned, lay-offs grew from 28 to 86.

Buying-in prices low

Nearly half of those interviewed had to sell land or even capital assets of the companies to keep up with obligations. With mere fifth struggling with leasing payments before, now half were having problems. With a few late with taxes in November, a third was now forced to ask taxman to wait.

«In our company, we have all the problems that the survey showed,» said OÜ Halinga board member Agu Laanemets. «In the beginning of March, we will hold a big meeting for creditors, suppliers, and partners, to clarify the situation. Thankfully, I may observe that as the spring drawn near, our situation is hopeful and, for the first time over several months, a demand has arisen for milk and they are asking for offers.»

Improvement of demand has also been detected at AS Metsaküla Piim while the current buying-up price is seen as too low.

«At the current up to €240 tonne price we are making losses which we may only take for a brief period of time,» said majority owner Jaan Metsamaa. «I see some signs of life on the market wherefore I hope by August the situation may normalise and milk rise to €300 per tonne.»

At today’s session, the government is considering €2.8m of extraordinary aid to farmers; on top of that, through Rural Development Foundation, they plan to buy up land from farmers in trouble with resale obligation.

«As shown by the crisis, it is not possible from budget alone to solve the problems of the farmers, and land buys by the foundation could be an additional lever to pull,» said agriculture minister Ivari Padar. «I’m not sure if this government will manage [time wise – edit] to take the decision but agriculture ministry will make sure to prepare the package.»

The state’s land buys are intended to support current clients of Rural Development Foundation; in single transactions, these may involve hundreds of hectares, but for the country as a whole we may be talking about tens of thousands of hectares.

Tax Board hopeful

The Tax Board sees situation of farmers through glasses much more rose-colored as the above survey. Namely, over the past four months, the amount of entrepreneurs applying for tax delay shrunk more than thrice – from 70 in November to 17.

Comment

Brit Juus, Swedbank’s agricultural sector head

With milk price persistently low and under cost price for most of the producers, Swedbank is prolonging payment holiday as needed. At the moment, we are busy issuing working loans to finance spring activities; if needed, we use Rural Development Foundation suretyship. For agricultural producers, Swedbank offers loan schedules up to 30 years as secured by lands.

Cash flows of milk producers have been alleviated by the direct aid that came at end of 2014 and in February, and the €6.9m special support for milk producers. In the fall, Swedbank offered six months of payment holiday for milk producers whose cash flows turned negative due to milk price drop. We sent the clients a clear signal – payment holiday is an option to improve liquidity; the producers also need to try hard and for that there are various ways: seek options to cut costs, assess the importance of planned investments, as debt levels go up try to agree longer-term schedules with purchasers, assume loans from owners.