Restlessness in the agriculture industry - Baywa crisis: Concerned farmers seeking new agricultural traders
The debt crisis at Germany's largest agricultural trader, Baywa, is having noticeable effects this summer: Many concerned farmers, especially in southern Germany, are turning to other buyers for their grain harvest. Private agricultural traders are receiving significantly more inquiries from farmers looking for a buyer or a storage facility this summer. Similar reports are coming from the environment of numerous agricultural cooperatives. However, there are no signs of panic among farmers.
"Baywa's problems are affecting the entire industry," says Michael Osterholzer, CEO of the similarly named agricultural trading company Osterholzer in the Lower Bavarian municipality of Massing. There are significantly more inquiries from farmers. "For the first time, we had to turn down grain at one location because we didn't have any more space," says Osterholzer. "But that's not just due to Baywa." Many farmers still have grain from the 2023 harvest in storage.
Baywa is the clear market leader in its core areas
The background: Baywa, which emerged from the cooperative movement, supplies farmers not only with seed, fertilizer, and farm machinery in its Bavarian core areas and in the new federal states, but also buys their harvest. There are no exact figures, but a leading expert estimates that Baywa's market share in Bavaria could be around 40 percent, followed by agricultural cooperatives and private traders with around 25 percent each.
In many Bavarian communities, Baywa's storage facilities have been part of the local landscape for decades, just like the local church tower. "God be with you, you land of Baywa" - to the tune of the Bavarian anthem - was one of the most popular songs by the music group Biermösl Blosn at the end of the 1970s.
Main problem: Interest costs in the tens of millions each year
In 2023, Baywa recorded a loss for the first time in its hundred-year history due to crushing billions in debt. Its financial liabilities alone amount to 5.6 billion euros. A few weeks ago, the company made its "tight" financial situation public. The main problem is the interest costs of its high debt, with Baywa paying almost 100 million euros to the lending banks in the first quarter alone.
Uncertainty not only among farmers
"The Baywa issue just before the harvest has caused some confusion and uncertainty," says Bernd Zehner, head of agricultural trading at the medium-sized Zehner Group in Lower Franconian Bad Königshofen. "It's not just the farmers who are affected, but all other market participants involved in the various marketing chains." However, the increase is not as large as initially reported. The effects are also regionally limited: In northern and western Germany, other agricultural traders are more significant than Baywa.
How many customers among the farmers of Baywa have been lost this summer is unknown. The company has assured farmers that the necessary funds for paying for the harvest are available. There have been no reports of payment defaults or delays by Baywa.
The situation for many farmers is indeed challenging, with agricultural market prices notoriously volatile. Consequently, many operations prefer to play it safe when looking for a buyer for their harvest. The developments at Baywa have caused significant unease, not just among farmers, but throughout the entire agricultural sector, including processors, since early to mid-July, according to Robert Leidenberger, a partner at the agricultural wholesaler Josef Marschall in Schwaig near Nuremberg. "This has and is leading to additional changes in commodity flows, given the weak grain harvest in Germany."
Clarity is expected to improve by mid to late September. By then, not only the scope of the aid package should be known, but also a restructuring report from the consulting firm Roland Berger.
The uncertainty caused by Baywa's debt crisis has led to an increase in inquiries from farmers seeking alternative buyers or storage facilities, as reported by competitors. Despite Baywa's market dominance in its core areas, particularly in Bavaria, where its storage facilities are a longstanding part of the local landscape, the impact of its financial struggles is causing concerns throughout the agricultural sector.
