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Dutch Agriculture Sector 2009

01 February 2010

Low milk prices left many dairy producers in the red, whilst beef producers were not much better off in 2009. Despite lower feed costs producers have struggled against low commodity prices according to a new report from Wageningen University in the Netherlands.

General situation

In 2009, the agricultural and horticultural sector was hit hard by the economic recession (credit crisis) that began in the second half of 2008. Although production volumes were not influenced by the recession, sales of many products were lower than in times of normal economic conditions. Exports were hampered by the credit problems and the weaker currencies of various countries. Exports are of particular significance to the Dutch agricultural and horticultural sector since the majority of the produce is destined for foreign markets. The agricultural markets are characterised by the potential high volatility of prices following slight changes in supply or demand. As a result, the decline in demand in a number of markets seen in 2009 was in part the reason for a substantial decline in the price of many products. This in turn – and following the substantial decline in the results for 2008 – resulted in a further considerable decline in the results achieved by the overall agricultural and horticultural sector in 2009. The lower prices reduced the margins between sales proceeds and the costs in the agricultural and horticultural sector and, in turn, resulted in a sharp decline in incomes.

Large differences are evident in the movements in the income of the various agricultural and horticultural sectors (Table 1). Incomes fell in most sectors: in a number of sectors the average farm incomes even moved significantly into the red in 2009. The sole exception was the layer farming sector, which recorded a significant improvement in farm income after the poor year of 2008. The number of agricultural and horticultural holdings has declined by about 3 per cent per annum in recent years, a trend that also continued in 2009 (Table 2).

Table 1 Profitability and income (x 1,000 euros) on agricultural holdings
cost ratio
Farm income
per unpaid
Total income
per holding
Change (a)
  2008 2009 (e) 2008 2009 (e) 2008 2009 (e)
Total 90 83 26 3 56 24 -
Dairy farms (b) 90 69 39 -6 72 7 ---
Veal farms 86 86 36 37 - - 0/+
Pig farms 92 90 12 10 34 33 -/0
- pig breeding farms 91 98 9 51 28 83 +++
- pig fattening farms 94 85 29 -5 49 19 --
- integrated pig farms 91 88 0 -9 18 7 -
Laying-hen farms 89 113 -5 135 6 200 +++
Broiler farms 95 98 -3 36 17 55 ++
Arable farms 91 90 40 41 55 60 0/+
- starch farms 97 91 53 41 57 60 0/+
Greenhouse horticultural holdings 92 84 1 -62 -4 -102 ---
- vegetable holdings 91 76 -19 -132 -24 -220 ---
- cut flower holdings 90 81 -3 -57 -26 -99 ---
- pot plant holdings 99 97 39 27 65 54 -
Mushroom farms 100 93 47 17 - - ---
Open-air vegetable holdings 87 84 23 9 - - -
Fruit farms 93 84 42 20 - - -
Bulb growing businesses 84 79 -10 -34 - - -
Tree nurseries 101 97 56 47 - - -
a) Change of total income (last five groups: farm income per unpaid awu.); -/0/+ = + or - maximum 5,000 euros; - or + = 5,000-25,000 euros; - - or ++ = 25,000-50,000 euros; - - - or +++ = >50,000 euros; b) Farm income per unpaid awu in 2009 excluding depreciation milk quota: 7,000 euros.

The number of agricultural and horticultural holdings has declined by about 3 per cent per annum in recent years, a trend that also continued in 2009 (Table 2). The number of greenhouse horticultural holdings once again exhibited a particularly sharp decline in 2009. This rapid fall in the number of holdings has been due to factors including the restructuring of the sector. However, the deterioration in the operating results in recent years now also plays a role. The decline in incomes in 2008 and 2009 and the increased financial uncertainties have resulted in a lower level of investments. Moreover, the opportunities for investments are also restricted by the financers’ more reticent attitude to providing credit.

Table 2 Development of number of holdings per farm type
  2000 2005 2008 2009 % Change
Total agriculture and horticulture 97,480 81,830 75,150 73,010 -2.9
Dairy farms 26,820 21,330 18,590 18,330 -1.4
Veal farms 1,280 1,130 1,240 1,180 -5.1
Pig farms 6,060 4,290 4,060 3,890 -4.2
- pig breeding farms 2,090 1,510 1,300 1,230 -5.3
- porker farms 2,420 1,680 1,770 1,720 -3.1
- closed pig farms 1,550 1,100 980 940 -4.7
Laying-hen farms 660 570 520 540 +3.8
Broiler farms 540 370 340 310 -7.6
Arable farms 13,750 12,360 11,180 10,920 -2.3
Greenhouse horticultural holdings 7,910 6,080 4,830 4,460 -7.5
- vegetable holdings 2,640 1,960 1,570 1,460 -6.8
- cut flower holdings 3,610 2,760 2,130 1,930 -9.6
- pot plant holdings 1,650 1,360 1,130 1,080 -4.7
Mushroom holdings 520 320 230 210 -11.5
Open-air vegetable holdings 1,460 1,080 1,040 980 -5.9
Bulb growing businesses 1,340 1,060 950 880 -6.8
Fruit farms 2,210 1,810 1,740 1,720 -1.6
Tree nurseries 2,430 2,210 2,190 2,150 -1.7
Source: CBS (Statistics Netherlands) agricultural census, provisional data for 2009.

Situation in each type of holding

Cattle farming

The income of dairy farms fell very sharply in 2009 and, on average, moved into the red for the first time following the unparalleled rapid decline in milk prices, which fell by more than a quarter in the year under review. The estimated lower income is in part due to the introduction of the amortisation of milk quotas in the years leading up to their abolition in 2015. The lower costs, in particular of animal feed, were insufficient to compensate for the tremendous decline in proceeds: the average income moved into the red in 2009. Some dairy farms were confronted by liquidity problems in the months in which milk prices were at an extremely low level, although these have been alleviated by the increased milk prices in recent months. The dairy farms’ proceeds/cost ratio (yield) fell sharply from 90 in 2008 to 69 in 2009. The operating income per unpaid ALU (Annual Labour Unit) decreased from 39,000 to -6,000 euros. Although the average farm was still able to save a relatively large amount in 2008, as was also the case in previous years, a significant draw down on assets was necessary in 2009. The organic dairy farms’ operating income per unpaid ALU also fell sharply in 2009, and also moved slightly into the red. The average income of the organic dairy farms was slightly higher than the income of the conventional dairy farms in 2009.

The income of beef cattle farmers remained at a low level in 2009, notwithstanding the lower cost of cattle feed. Veal farmers will record an approximately unchanged income in 2009 with stable contract payments and declining manure disposal costs. Sheep farmers will record an increased cash balance per ewe in 2009 due to the lower feed prices at unchanged sale prices per animal.

Intensive livestock production

The costs of the intensive livestock farming sector decreased sharply in 2009 due to lower feed prices. After the 2008 harvest the decrease in the grain prices initiated a trend towards lower feed prices that has continued in 2009. The movements in operating income once again varied greatly by type of animal in 2009, depending on the trend in the sale price per animal.

The pig farming sector recorded lower prices for porkers and higher prices for piglets in 2009 as compared with 2008. The lower feed prices resulted in a significantly higher cash balance per sow, while the cash balance per porker was substantially lower as compared with 2008. As a result, the movement in income recorded in 2009 as compared with 2008 varies greatly with type of pig farm, with a significant improvement for sow farms, a substantial deterioration for porker farms and a slight fall for closed farms. The average pig farm’s operating income amounted to 10,000 euros per unpaid ALU in 2009, a low level that will compel many pig farmers to draw down on their equity for the third year in succession.

The income generated by egg farms increased significantly in 2009, in particular due to the increased price of eggs. The average operating income reached an unparalleled level in 2009, after a negative result in 2008. This improvement will offer egg farmers scope to strengthen their equity position in 2009. The income of farms producing free-range eggs was not higher than farms producing battery eggs, even though the price of free-range eggs increased more sharply.

Broiler farms also enjoyed a better year in 2009 as compared with 2008. Although the average sale prices were lower than in 2008, on balance the greater decrease in feed prices yielded increased operating results. However, the recovery was only modest in comparison with the substantial increase in the egg farmers’ income.

Arable farms

In 2009, the average arable farm’s income remained unchanged from the level in the previous year after the decreases in 2006 and 2007. The lower prices of ware potatoes, cereals and sugar beet were compensated for by the increased harvests of the crops. In addition, onions are expected to command a higher price. The profitability of the arable farming sector amounted to 90 per cent in 2009. The average operating income per unpaid ALU remained at about 40,000 euros in 2009. However, the operating income per unpaid ALU of farms cultivating large crops of starch potatoes fell to about the same level as the average arable farm. The estimated average income of arable farms leaves no scope for strengthening their equity position.

Greenhouse horticulture

The results achieved by the overall greenhouse horticulture sector in 2009 were considerably worse than in 2008, when they had already exhibited a substantial decline from the level in 2007. The average income decreased by about 100,000 euros per holding and about 60,000 euros per unpaid ALU. The greenhouse horticulture sector was confronted with dramatic results in 2009, with incomes in the red at both greenhouse vegetable holdings and cut-flower holdings. Solely the pot plant and bedding plant holdings were able, in spite of a decline, to achieve an income in the black. The greenhouse vegetable holdings were confronted with the severest decline in income, amounting to more than 100,000 euros per unpaid ALU. The income of cut flower holdings per unpaid ALU also fell sharply, by more than 50,000 euros. The pot plant and bedding plant growers were also confronted with a decline in income, albeit ‘only’ more than 10,000 euros per unpaid ALU. These lower incomes were due to the substantially lower prices of the most important products, as well as the higher costs including the further average increase in gas prices, an important cost factor for the entire horticultural sector. The wide variation in the income within the greenhouse horticultural sector is due to factors including the variation in the results for each crop, differences in scale and the differences in operations: some holdings supply electricity to the national grid but other holdings do not. The profitability of each segment of the greenhouse horticultural sector fell sharply in 2009, although the decrease varied greatly between the segments: 15 percentage points in the greenhouse vegetable sector, 9 in the cut-flower cultivation segment and 2 in plant cultivation segment. On average, the profitability of the entire greenhouse horticultural sector fell to a record low of 84 per cent in 2009. Consequently, many greenhouse horticultural holdings will be compelled to draw down substantially on their assets. In addition, many holdings in the vegetable sector and ornamental plant sectors are confronted with liquidity problems. The poor results have led to a sharp fall in investments: many holdings are now focused on survival. The current conditions have compelled a number of holdings to terminate their operations.

Mushroom cultivation

The results achieved by mushroom holdings declined significantly in 2009: the prices commanded by their produce, in particular in the fresh market, fell sharply. The sector’s profitability amounted to 93 per cent. The estimated operating income per unpaid ALU achieved in 2009, 17,000 euros, does not offer scope for savings.

Open field horticulture

A significantly poorer result is expected for open field vegetable horticulture in 2009 as compared with the previous year. The decline in income is primarily due to the lower prices of the crops. The results achieved by bulb-growing holdings in 2009 – as in the previous year – declined substantially due to the disappointing prices. In 2009 the holdings will generate a negative operating income for the second consecutive year. Fruit growers were, after a number of reasonably good years, confronted with a sharp fall in their income in 2009. The prices of apples and pears fell due to increased supplies as compared with 2008. Incomes achieved by tree nurseries fell in 2009, since the increase in costs outweighed the increase in the price of their produce. The tree nursery segment is the only segment of the open field horticulture sector to achieve a reasonable income in 2009.

The overall situation in the sector

In 2009, the entire agricultural sector was confronted with a sharp fall in income for the second consecutive year. Although the volume of the sector’s production increased by almost 3 per cent in 2009, the price of the products fell by almost 9 per cent. As a result, the entire sector’s production value fell by more than 6 per cent to almost 22.5 thousand million euros (including agricultural services) in 2009. Within this total the production value of plant products fell by about 4.5 per cent, less than the almost 11 per cent decline in the production value of the livestock farm products. This year’s total production value of the horticulture sector is approximately the same as that of the livestock sector (more than 8.5 thousand million euros), while the production value of the arable farm sector – including fodder crops – amounts to more than 2 thousand million euros.

The cost of the goods and services purchased by the agricultural and horticultural sector fell by about 4.5 per cent in 2009, primarily due to the approximately 15 per cent lower cost of animal feeds and fertiliser. On balance, the net added value of the sector decreased by more than 15 per cent. The net operating income for the families of the farmers or horticulturalists – after the deduction of interest payments, wages and long-term leases – fell even more sharply, namely by almost 50 per cent. It is striking to note that in 2009 the total amount of the subsidies received by the agricultural sector, primarily comprised of farm payments, is slightly higher than the sector’s net income of 800 million euros. When account is taken of the decline in the number of farms and inflation then the purchasing power of the farm family’s operating income fell extremely sharply in 2009.

A comparison of incomes in the agricultural and horticultural sector with those in the small and medium-sized enterprise sector (SME) reveals that incomes in the agricultural and horticultural sector exhibit greater fluctuations and that the average income generated by agricultural and horticultural holdings was lower than the average income in the SME in 2008 and, in particular, in 2009. In previous years, the Incomes in the agricultural and horticultural sector had been higher. Movements in incomes in the SME are more stable and less dependent on market and price movements than in the agricultural and horticultural sector.

The credit crisis also resulted in a decline in the SME’s income in 2009. The SME’s relatively stable wage costs in recent years are of importance to the sector. Wage costs have and will decrease in 2009 and 2010 due to a significant reduction of the number of jobs in the SME (EIM, 2009).

In 2008 and 2009, as was the case in the two previous years, the development in the Netherlands’ agricultural and horticultural sector incomes is expected to lag behind that in other EU countries. In 2006 and 2007, the increase in the income in the Netherlands’ agricultural and horticultural sector still ranked high in the EU.

Further Reading

- You can view the full report (in Dutch) by clicking here.

January 2010


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