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Insolvency in large agro-businesses threatens to affect small firms

According to a recent study by the credit insurance company Euler Hermes, 34 insolvencies were registered last year affecting companies with annual revenues greater than 50 million Euro; 10 of them from Western Europe (4 Italian, 2 Spanish, 2 Belgian, 1 Dutch and 1 British). The majority were engaged in industrial activities in the primary sector, as pointed out to Efeagro by its sector analyst Marc Livinec.

“The most feared impact of these insolvencies is their domino effect within the industry. Also, food manufacturers have to deal with large retailers, which are much more concentrated and against which they have little room for maneuver,” he says. In his opinion, the negative impact could be mitigated if manufacturers became powerful enough to set prices and resist the pressure from other links in the chain.

A challenge in the sector has to do with changing habits towards a healthier diet, which forces us to adapt quickly, although producers do not always have the necessary tools to reach new market niches, says Livinec.

The insurer Coface also foresees a greater demand for healthy and sustainable products, which will allow organic farming to continue expanding in the coming years.

In one analysis, it cites protectionist tensions and climatic risks as some of the main factors that, as in 2019, will take a toll on the agro-food industry this year.

Overall, the growth of the world economy will not recover this year and there will be a 2% increase in the number of business insolvencies; in line with 2019.

In Spain, the head of the Risk Unit of the Spanish Export Credit Insurance Company (Cesce), Juan Francisco Pacheco, said that the agro-food sector has performed well in 2019, with a reduced number of bankruptcies. He focused on the dismantling or orderly closure of companies, which normally do not have an impact on suppliers or financial institutions, but which increased by 8.13% annually last year.



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