Farmer cannot change food system himself

Minister Piet Adema is working with fifty parties on a so-called Agricultural Agreement, which should put the sector on a new footing. This large number not only says something about the versatility and division of agriculture, but indicates that other parties are also needed. Such as the food industry, supermarkets and banks. Farmers are part of the agribusiness and, however much they may want to, cannot change the system. And the government does not have all the knowledge of markets that the other parties do. So they are condemned to each other.

A good reason to dive into the classic study that introduced the word Agribusiness. That was a book by John Davis and Ray Goldberg with the modest title 'A Concept of Agribusiness'. It appeared in 1957 and was the result of a research program that Harvard University had set up five years earlier to delve into 'agriculture and business'. The authors came to the conclusion that all kinds of activities that a farmer himself did at the beginning of the 19th century had meanwhile been transferred to other industries.

Processing milk into cheese or butter and threshing grain were now in the hands of the dairy or the contractor. The sale is done by the cooperative. The farmer no longer took care of his own transport from the farm to the market, nor did he produce and maintain his own means of transport and traction: the horses and the required fodder production had been replaced by the tractor and the purchase of diesel oil. Producing one's own manure was replaced by artificial fertilizer. In short: agriculture had become less important in the economy. If you really wanted to know how big a role food production still played in the economy, you had to look at agribusiness as a whole.

Research into the entanglement of farmer and chain
The rest of the book therefore consists of chapters in which all kinds of statistics are processed to measure agribusiness and to record the mutual relationships in input-output tables. And a chapter on the need to focus policy not only on farmers, but on agribusiness as a whole.

The concept caught on. Goldberg wrote the book as a young assistant professor and rose to become an eminence grise of agricultural economics at Harvard, with successful programs for agribusiness. In the decades that followed, much more research took place worldwide into the entanglement of farmer and supply chain through contracts and cooperatives. But also the strong concentration in the supply and purchase industry and what that means for the balance of power and margin distribution. The 'why' question received more attention. This led to the conclusion that technology had made many activities easily manageable, and that sometimes required scale. Then things can be better in specialized and larger companies, the farmer is left with the activities that are risky, without much reward in return.

Thinking about food systems
The agribusiness concept is now 65 years old, but still very much alive. In the Netherlands, WUR's agricultural economists calculate the size of the agribusiness complex year after year: currently only about 7% of our economy. It has also led to thinking in terms of food systems.

It is therefore logical that the minister not only wants to conclude an agreement with farmers, but also with other parties in the system: processors, supermarkets, suppliers, banks and the nature movement. If you want to rethink the food system, everyone has to be on the same page. It should be one where we focus on the highest margin products: the most sustainable or luxury products. Because the production space in the Netherlands is decreasing and our labor and land are expensive. Just as there is nothing wrong with Amstel in the beer market (the best brewers brew it), but the consumer pays more for a Texels Skuumkoppe or a Brand Weizen 0.0. If production decreases due to the National Program Rural Area (NPLG), the processors may well import more raw materials. However, the income from the most profitable market segments must be channeled to the most sustainable Dutch farmers. I wonder if those agreements will be made.

Krijn J. Poppe

Krijn Poppe worked for almost 40 years as an economist at LEI and Wageningen UR and now holds a number of advisory and management positions. For Boerenbusiness he dives into his bookcase and discusses current developments on the basis of studies that have become classic.

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