German farmers warn of liquidity crisis as prices fall and costs rise

Germany's farm sector risks a liquidity crunch as weak prices for agricultural products and rising input costs squeeze farmers' margins, the head of the country's farmers' association said ahead of an annual industry gathering on Wednesday and Thursday.

"If we do not see a recovery in prices across our markets, agriculture will run into a real liquidity crisis," Joachim Rukwied, president of the German Farmers' Association, told dpa.

Prices for most grain varieties are currently at unsustainably low levels, with rapeseed a notable exception, he said. Some farmers have already reduced fertilizer use to cut costs, a move that could lower wheat quality and leave growers producing feed wheat rather than higher-value milling wheat.

Farmers are also facing pressure in other sectors. Pork prices have fallen to around €1.50 ($1.72) per kilogram of slaughter weight from well above €2 not long ago, meaning many pig farmers are operating at a loss, Rukwied said. Milk prices are also below satisfactory levels, he added.

At the same time, costs have risen. Nitrogen fertilizer prices are about 30% higher than a year ago, while fruit and vegetable growers have been hit by an increase in Germany's minimum wage to €13.90 per hour from €12.82 at the start of the year.

"Good harvests around the world have recently put pressure on prices," Rukwied said. Weaker consumer demand has added to the strain as households have less money to spend.

"After the inflation of recent years, consumers are shopping more with price in mind and in some cases consuming less. We need to find a new balance," he said. He added that a boost in demand linked to the football World Cup had yet to materialize. "Perhaps it will still come."