Origin Enterprises has warned of a “particularly challenging” year ahead in 2016 with the continued weakness of commodity prices and the associated pressure on farm incomes, reducing farmer investment in crops.

In a first quarter trading statement, the agri services group said that cashflow pressure for farmers would result in more “concentrated purchasing patterns” as farmers cut spending on inputs.

Origin added that activity levels on farms remains robust with the total area sown for winter crops broadly equivalent to last year despite the delay in winter plantings caused by the interruption to this year’s harvest.

Sales decline

Origin reported first quarter revenues for its 2016 financial year to the end of October 2015 of €300.4m, a 5.5% decline compared with the same period last year. Underlying revenues actually declined by 9% which was slightly offset by favourable currency effects as the sterling hardened against the euro.

The autumn and winter period of the year for Origin is generally quiet with 90% of the group’s earnings typically arising in the second half of its financial year.

In the UK, Origin said winter plantings were well advanced with an estimated 3.05m hectares sown compared to 3.09m last year. It added that greater volumes of winter wheat will be planted this year in the UK at the expense of rapeseed reflecting the implementation of the three crop rule by farmers.

In Poland, Origin said that maize harvest yields-to-date are below average as a result of the unusually hot and dry summer in eastern Europe. The group estimates winter sowings of up to 5.6m hectares, down slightly from 5.8m last year.

Ukraine

Market conditions for Origins business in the Ukraine continue to be adversely impacted by the ongoing political uncertainty and associated currency weakness. As a result, many farmers are facing tighter liquidity.

Business-to-business Agri inputs for Origin recorded lower revenues due to slower fertiliser volumes. In Ireland, the group said fertiliser sales in the three months to the end of October were in line with previous years as some dairy farmers invested in nutrition programmes prior to the end of the grass growing season.

Fertiliser sales in the UK were lower as more farmers delay purchasing decisions until closer to the main application period when there is greater visibility on pricing and crop development.