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 three per cent per annum in recent years, a trend that also continued in 2009 (Table 2).

The number of agricultural and horticultural holdings has declined by about three 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.

Situation by 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. 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 than in 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 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 than 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.

Overall Situation

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 three per cent in 2009, the price of the products fell by almost nine per cent. As a result, the entire sector’s production value fell by more than six per cent to almost €22,500 million (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 €8,500 million), while the production value of the arable farm sector – including fodder crops – amounts to more than €2,000 million.

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. When account is taken of the decline in the number of farms and inflation, 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

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January 2010