Your business continues to run, even without an Agricultural Agreement

There will be no agricultural agreement 'for the time being', it became clear last Tuesday. This was apparently already foreseen by the cabinet. In the letter of 12 June, in which the cessation scheme was explained in detail to livestock farmers who are considering it (both peak loaders and non-peak loaders), it became painfully clear in the end that continuators will not get clarity until autumn 2023 at the earliest. About the goals, the way to get there and the support of resources and arrangements to make the transition to those goals.

There is no robust revenue model for the future, as outlined with nature and climate requirements. Foreign products entering the Netherlands do not have to meet these requirements. And the government does not want to pay for the nature and climate services that the agricultural Netherlands can provide. Carbon credits and biogas, the biggest pluses that livestock farming can provide for climate and energy, are not allocated to the agricultural sector. The change of course in nitrogen policy (from deposition to emission, making a difference between ammonia (NH3) and nitrogen oxide (NOx) and using innovation for reduction) has also not materialised.

A solution for emission-reducing stables is a long way off and the licensing counter for livestock companies throughout the Netherlands is closed until further notice. Whether there is a solution for PAS reporters is partly determined by the participation of livestock farms in the cessation scheme after 3 July. There is also no prospect of the allocation of artificial fertilizer substitutes (renure). A grassland standard of 2,85 LU in 2035 and, if possible, 25% skimming for trade in phosphate/animal rights was on the table. Just like the mandatory manure processing that was already announced in parliamentary letters in the autumn of 2022.

Larger gap between government and the agricultural sector
At the same time, there is great disappointment that no agricultural agreement will lead to a longer period of uncertainty and an even greater gap between the government and the agricultural sector, as a result of which additional regulations are built up even more on the basis of mistrust (measures). In addition, the transition will be initiated later, so that provinces will keep the application for permits for livestock farms even longer. Banks are also delaying financing applications even longer. And the whole of the Netherlands will later get rid of the permit lock, with all the consequences that entails for housing and other projects.

Provinces, possibly with the BoerBurgerBeweging (BBB) ​​everywhere in the coalition, are expected to map out how they want to give concrete and local interpretation to the nature, climate and water goals. Minister Christianne van der Wal also expects such a 'business plan' from peak loaders who want to continue their business. Livestock farmers must make it clear how they want to achieve the desired reduction of emissions via which tracks (livestock, feed, manure, stable, cultivation or energy) and while retaining the revenue model.

Financial resources for the transition
Van der Wal has indicated that, despite the lack of an agricultural agreement, the desired reductions will be determined this autumn. The measures that the government recognizes to achieve the goals will also be presented, and what part of the budget of €25 billion is available for the transition. It is important to realize that subsidy schemes are already open at various provinces for investments, whereby you secure your subsidy amount and can carry out the implementation later (with more clarity). Some continuators therefore want to know whether they are a peak loader, in order to secure financial resources for the transition of their own company in time. Although this is not necessary for several provinces. In addition to what is missing, things have also become clear. For example, that the Active Substances Balance (the robust part of the Mineral Declaration System) will be used to decide which part of the reductions can be achieved with management choices. For some livestock farmers this is a reason to look up the appendices of the mineral balance again and to get a clear picture of where their company stands.

Still buying or selling phosphate rights?
We also know that the price that the minister will set for peak taxers on animal/phosphate rights on 3 July can have a major impact on the market. Is it wise to buy or sell before July 3? In the meantime, it is realistic that the value of the phosphate rights can run out until the end of 2027. You can, however, coordinate a possible shortage of rights through cooperation with a stopper. This also gives you longer time to pay. Some continuators are already anticipating this.

Scared how much manure has to be removed
The fact is that too little manure was removed this spring due to a wet and late season. Some forerunners are shocked by how much manure still needs to be removed this year. It may make sense for some livestock farmers to invest in a manure storage or bag, so that part of the surplus can be carried over to next year.

If we look at a robust revenue model, it appears that intensification is increasingly difficult to calculate. At the same time, we see that milk with high components actually calculates very well. This also applies to milk with a low CO2 value via, among other things, the PlanetProof label and the Beter Leven quality mark. It is even possible to achieve a high milk production with high components. We do see that other roughage and concentrate substitutes are playing an increasingly important role in this. This concerns, for example, field beans and other leguminous plants. This also results in lower feed costs. Coincidentally, it is also a crop with which you may achieve 'gold' under the eco-scheme of the Common Agricultural Policy. Some continuators are already busy with this.

'Farming is feeding' is a term often used by livestock farmers. And it is precisely in this area that we see major differences. It is striking that the top 25% of livestock farms mainly distinguish themselves in better feed efficiency. As a result, these companies often score best in terms of high mineral efficiency and low emissions of ammonia and methane. Livestock farmers with high feed efficiency stand out especially in dry years. Of course, as a continuator you know exactly where you stand, but especially how you want to improve that even further. Precisely in the years in which the price of maize seems to exceed € 100, this also produces hard euros.

Continuers approach potential stoppers
We are also seeing continuators approaching potential stoppers, who want to keep the land as arable farmers, to discuss whether they can mean something to each other. It is a fact that extensification is on the agenda and livestock farmers need more land. Continuers are also approaching arable farmers for manure-feed partnerships. The focus here is on concentrate substitutes with favorable side effects for the animals, the soil and farm payment. We also see continuators sometimes expanding their area of ​​land use through purchase, but with the current interest rates often try first with (ground) lease, rent or cooperation. There are also continuators with latent permit space. Then it is important to think extra carefully about what is still possible now and, if possible, not anymore. Where the permit counter for stables is closed, it is often open for mono-fermenters. Certainly not for all continuators, but for some it is interesting to now arrange a permit and secure SDE. You can really decide whether you want to realize that later.

Particularly with continuators, the wishes are often greater than the size of the current account. Because of all the investments, there is sometimes the feeling that no profit is being made. While the annual figures do show the profit. Fortunately, since this spring there is more room for flexible tax solutions with simple hybrid BVs. As an entrepreneur you have to see the sun through the clouds at the start of such projects. But above all, together ensure that the above initiatives are realized, especially now without an agricultural agreement. Get on with it now, start the discussion as partners and make sure that you decide together and, above all, implement it. The agricultural sector continues to challenge, but above all very beautiful with always possibilities! Make sure you have a clear vision of your own future with a plan B.

Lubbert van Dellen

Senior Business Advisor & Market Director agro at Flynth Advisors and Accountants

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