Dairy farmer gloomy, although sector is doing well

Dairy farming is in the news almost daily, which is not a good sign in itself. The loss of derogation means a major financial drain on companies that have to dispose of manure and the nitrogen problem continues to fester.

The gloom about individual companies also dampens the mood about the future of the sector. Although Rabobank is optimistic about the development of milk prices and supply and demand seem to be in balance. How periods of crisis can be the basis for better times, became clear to me again when reading the study by Jaap van Duijn about the Westland.

This is relevant now that the Ministry of LVVN and the sector are also strongly committed to technological innovation for livestock farming. This was exactly what the greenhouse horticulture sector did during the crisis of the 90s. Jaap van Duijn, son of a market gardener, once obtained his doctorate as an economist with a thesis on long-term waves in the economy and was the face of the investment group Robeco for many years. After his retirement, he immersed himself in the history of his native region and this led to the coffee table book 'The History of the Westland' a few years ago. This book begins long before the Romans and is not only about horticulture. Here it is relevant how he describes greenhouse vegetable cultivation in the XNUMXs.

Overproduction and overrun
After more than a decade of moderate economic results due to energy crises and higher labor costs, the crisis was complete in the 90s. The German consumer had had enough of Dutch tomatoes for a while and also switched to Spanish lettuce. For too long, the focus in the Netherlands was mainly on production and production costs, too little for the customer who does not Water bombs more happy. Competition from Spain, including the Canary Islands and Morocco increased, resulting in overproduction and auction turnover.

At the same time, working conditions were terrible and illegal workers were used on a large scale. The surface water in the Westland was heavily polluted by discharges of fertilizers and pesticides. The low gas price was considered too high by the gardeners, but at the same time it was a form of state aid that the European Commission and competitors objected to. And the landscape of the Westland was at the bottom of the lists of most attractive landscapes.

Enforce changes
But, as Van Duijn notes, crises are often necessary to enforce changes. There was a lot of focus on technical innovation. Tastier varieties with new sales chains, energy saving, closed systems, biological control and much more. As a result, after 2015 (almost a generation and a financial crisis later) high incomes are being achieved. At least by the companies that are still left. Since 2000, the number of companies in greenhouse vegetable cultivation has decimated to 30%. The remaining growers became directors of a BV where, incidentally, not all social problems have been definitively solved.

Pig farming followed a similar path. The dairy sector will also be fine. The ministry is also focusing on technological solutions here. It is anyone's guess how they will turn out: the cow may stay indoors more often in a closed system. The manure is processed into renure. Good for the animal feed sector. The robot mows grass and if it can be weighed properly and assessed for quality, the farmer can also leave that to specialized plant growers. Just like young cattle, which can be reared by specialized companies in extensive areas near nature. The decline in the number of companies may be rapid, but still slightly slower, than in horticulture. Land is expensive. Whether such a business model is socially attractive is another question; this seems to be the direction.

Shining examples for dairy farming
For the sector, the development in horticulture and pig farming is a shining example. It will all work out one day. And it seems that the ministry and the business community are strongly pushing for this, the successful development model from the past is not up for discussion. Unfortunately, it is at the expense of many companies. The stronger the technological innovation, the fewer will remain. Their salvation lies partly in nature management and other services. Just like many greenhouse vegetable growers switched to flowers. The government is also investing money in this development.

In these uncertain times, many dairy farmers have to make difficult choices around Christmas and in the new year. A look at other sectors can help. In that respect, Van Duijn wrote a current history book.

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.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.