Better a new iPhone than good food

In the Netherlands we have been spoiled for decades with rock bottom prices for almost the entire supermarket shelf. Food prices will rise irrevocably due to sharply rising production costs for the producer. That begs the question: what should good food cost?

Recently I sat at the table at a dairy farm. The conversation quickly turned (literally) to the current problems within Dutch agriculture. The dairy farmer and his wife sighed under the regulatory pressure that they have to deal with on a daily basis. It quickly takes away the pleasure of farmers. Most farmers simply didn't become farmers to sign up plots for three days in the office. That task now rested on the farmer's wife.

No money, no rules
"Actually, we're better off without all the agricultural subsidies," she told me. "After all, whoever distributes the money can also determine the rules. I spend days accurately drawing up all our plots so that the Combined Statement is correct and so that we receive the correct subsidy amount. If we no longer receive a subsidy, I will be out of all those administration and "they" can no longer interfere with anything. Look, there is a modest windmill at the back of our yard. We received a subsidy for that. There is a scheme and you are stupid not to participate in it. All your colleagues do it too. But we would have built it even without a subsidy." The crux of the problem soon surfaced. Subsidies are nothing more than a production fee for the farmer, so that the consumer has access to cheap food. In addition, it is a wonderful steering tool. The dairy farmer and his wife also confirmed this. "If we can produce at a fair price, the subsidies can be stolen from us."

Subsidy for the citizen, not the farmer
"What if we turn it around and provide our subsidies to the consumer," suggested the farmer's wife. "When they spend the money on Dutch products, the farmers ultimately receive a better price for their products and we don't need that money." The best ideas are often the simplest, but here I immediately saw a major objection. My response was therefore: that subsidy amount is immediately spent on a holiday to the sun or a new iPhone. Those are much higher on the list than spending more money on groceries. The farmer and his wife nodded. We had exposed the problem of our food chain.

The emotion of food
Under the motto 'never hunger again', the post-war agricultural sector has raised the bar ever higher. Producing even more at even lower prices. That is not entirely a Dutch phenomenon. Even the greatest dictator knows that without food his people will riot, a seed merchant once told me. That is why we still export seed to all war zones and conflict zones. A person who eats well is a satisfied person. That is why the price increases of food hit so hard. One or two cents more for a liter of milk, cup of fries or pork chops touches the consumer's heart. At the same time, an amount of more than a thousand euros is paid for a new smartphone or other luxury goods. An interesting piece of consumer psychology.

Very cheap
Food is emotion and that is also apparent from the above. However, the Dutchman takes the cake when it comes to frugality in terms of food. As one of the richest countries, we spend shockingly little on food. That's in our character. The Burgundian southern lifestyle is not for the down-to-earth Dutchman. In 2019 households spent according to CBS figures, about 13% of their income is spent on food and beverages. This percentage has increased slightly in recent years, partly due to an increase in the VAT percentage. In 1969 went a quarter of the income still to food. Incidentally, a percentage of 13% is average within the EU. This relatively small share must also be sought in the prices of products in the Netherlands. Nowhere in Western Europe is food so cheap in the supermarket. A constant supermarket war and the arrival of many discounters will ensure that. We have become accustomed to rock bottom prices, always the lowest and hoarding. Entire generations – including mine – are raised with the idea that groceries should be as cheap as possible.

Value distribution
Now I am not looking forward to filling Ahold, Jumbo and Superunie with higher profits, but I give the producer – who makes the most effort and runs the highest risk – a fair sandwich. That is also the average image of the citizen, according to research after research. Nearly three quarters of all consumers trust the farmer the most in the food chain, according to the EIT Food Trust Report† It may not even be necessary to increase the price of food, but it is more about value distribution in the chain.

Not at any price
It will take a long time to break this consumption pattern. That starts with a sound food system and ends with the customer's shopping cart. Everyone has a part in that. From policy makers in Brussels to the consumer and also the farmer. For example with house sales to involve consumers closer to the food chain and thus increase the value(s). We desperately need to be able to have safe and good food in the Netherlands for a hundred years to come. The certainty of well-stocked shelves is perhaps our greatest business miracle, but not one that we have to sell at any price.

Niels van der Boom

Niels van der Boom is a senior market specialist for arable crops at DCA Market Intelligence. He mainly makes analyses and market updates about the potato market. In columns he shares his sharp view on the arable sector and technology.

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