Crisis or no crisis, consumers still have to eat. It is therefore not surprising that the agricultural sector performed well in 2013. Agrifood exports climbed in 2013 to EUR 77.9 billion, according to Statistics Netherlands.
The economic outlook in 2014 for the European Union – the key market for Dutch agricultural businesses – is steadily improving. To ensure they continue to grow in the long term, however, agricultural businesses need to invest in their supply chain in qualitative vertical cooperation. This is the main conclusion of ABN AMRO’s 2014 sector update Visie op Agrarisch published today.
Upscaling trend continues
Many agricultural businesses continued to upscale their operations in 2013. Dairy farmers invested heavily in expansion of their production capacity ahead of the abolition of milk quotas in 2015. Environmental restrictions and feed supply are among the factors determining the profitability of dairy farming in the years ahead. Of the total area of the Netherlands, 16 per cent is used to grow crops, with 30 per cent of agricultural businesses active in arable farming. These businesses also continued to grow in scale. Their total area expanded to 532,412 hectares: an increase of nearly 12,000 hectares compared to 2012. The number of poultry farms dropped in 2013 for the fourth year in a row to a little over 1,200. The number of laying hens, however, rose for the first time in three years to 34.7 million.
Rising commodity prices
Commodity prices remain at elevated levels, leading to high price tags on food products. This impacts the entire agricultural sector, but especially the livestock business. Feed accounts for two-thirds of the input costs of pig farms, and as much as three quarters for meat-producing chicken farms. ABN AMRO foresees continued high price levels for commodities. This is good news for crop farmers, and challenges livestock businesses to produce even more efficiently. Horticulture businesses saw their profits eroded in 2013 by their high energy bill, for which cold spring weather was largely to blame. Greenhouse farms, feeling pressure on their margins, focused on lowering their costs, and in particular their energy spending.
Greater need for distinctiveness
Agricultural businesses can create opportunities for long-term growth by nurturing their distinctiveness. In ABN AMRO’s view, this means focusing on sustainable and efficient production methods and supply chain transparency. “In vegetable farming, both growers and traders are rethinking their market positions and the added value that they provide. Retailers, in their turn, are also looking for ways to stand out from the competition, and this presents opportunities. The livestock industry can also benefit from concepts based on healthy living, superior taste or sustainability. Tree and ornamental plant nurseries are specialising in certain varieties or choosing specific sales channels," explains Pierre Berntsen, Director Agricultural Companies at ABN AMRO. "Dutch agribusinesses stand out from the competition through a combination of quality, packaging, digitisation and sustainability. Meanwhile, vertical cooperation in sales, product development and cultivation can also lead to more stable returns."