Farming – Between opportunity and risk

The demand for agricultural raw materials is increasing all the time. To meet this demand, farmers need to make significant investments, a risky proposition given the difficult economic situation and the effects of climate change on crop yields. What is needed is a stable system that offers farmers long-term support.

The farmers’ situation today

Rising demand for “food, feed, fibre, fuel”

Reasons for the rising demand for agricultural products include demographic development and the change in eating habits, especially in emerging markets. But it is not just a question of "food". It is also about “feed, fibre and fuel”: the demand for animal feed, fibres (for industrial purposes) and regenerative resources for the production of energy is also increasing.

While an increasing demand offers farmers plenty opportunities, they are, at the same time, facing major challenges in meeting the rising demand for agricultural raw materials.

The effects of climate change

Late frost, heavy rain, heatwaves, drought and windstorm: agricultural production is directly exposed to deviations from average climatic conditions – more frequently and severely today, as has been confirmed by many scientific reports. Climate change is taking place, that much is now undisputed.

Financial stability

Secure, sustainable growth in production requires capital. The long negative cash flow gives a long investment cycle from sowing to harvest, agriculture is heavily reliant on financing. The growing intensification and specialisation of agricultural production have increased the agricultural sector’s need for investment and outside capital. Not surprisingly, the current credit crunch is also affecting the farmers.

If farmers are to produce a sufficient quantity of agricultural raw materials, they need stable and reliable access to financing. Such financial stability can only be guaranteed through an integrated approach of financing and risk management from which the farmers profit. The government, specialist insurers and the interests of other involved parties such as NGOs and agribusiness also benefit from stable agricultural production.