Compound feed sales Ems-Vechte level off after rapid increase

In conversation with director Albert Weersmann about the announced merger, volume developments in compound feed, the financing of agricultural companies and the impact of the shrinking interest rate difference between the Netherlands and Germany, he also discusses the development that food security is again becoming a spearhead in German politics, which is shifting to the right. 

Tell us more about the recent merger with Raiffeisen-Waren Ringe-Wielen-Georgsdorf, is there actually no question of a disguised takeover since Ems-Vechte is the much larger party in this?
"The merger is a logical next step in the collaboration that has lasted for at least twenty years. There is absolutely no question of a takeover. Takeovers cost money, with mergers there is added value for both parties in the merger. That is truly the cooperative approach. We have already worked very closely with Ringe-Wielen in many areas. For example, the marketing and purchasing of the retail chains of both companies were already under joint responsibility and that also applies to, for example, the sale and advice of arable products. Moreover, our activities also fit together nicely geographically. This allows us to create clear synergy benefits, both logistically and administratively."

Are there also many mergers and acquisitions in the shrinking German compound feed market?
"Yes, we certainly see that happening here too. The compound feed market in Germany is shrinking and that has consequences for the occupancy rate in the factories. Companies with low fixed costs (often with old production capacities) can survive for a relatively long time. If your cost level is higher, a lower occupancy rate is a dangerous development. In addition, we notice that it can also become more difficult for small companies to operate on other fronts. How do I find good staff? How do I keep my ICT systems up to date? How do I meet requirements regarding sustainability reports and criteria? These are all matters that ensure that parties seek more cooperation with each other."

According to the German statistics office Statista, compound feed production in Germany shrank by around 10% over the past four years. How is Ems-Vechte doing in this shrinking market?
"The developments differ greatly per sector. The decline in pig farming has been really significant. In the past ten years, our sales of compound feed to pig farmers in Germany have decreased by almost 30%. This is in line with the decline in the sector. However, we have been able to fully compensate for this decline with growth in other areas. For example, sales to Dutch livestock farmers have grown considerably and we now produce 100.000 tonnes of organic feed. All in all, we have achieved growth as a company despite the shrinking German pig population."

The Dutch livestock industry has also been shrinking for several years now. How is the sale of compound feed to Dutch companies developing?
"After several years of strong growth, sales in the Netherlands shrank slightly for the first time in 2024. The total sales of feed in the Netherlands are now around 140.000 tonnes of feed. The total sales of compound feed amounted to around 724.000 tonnes last year, this volume was around 2023 tonnes in 740.000."

Can Ems-Vechte adequately anticipate the changes and shrinkage in the sector?
"We try to use the factory occupancy as best as possible, but we also look at what is needed to produce what is required in the market. For example, about ten years ago we focused the factory in Klein Berssen entirely on the production of pig feed. This was with a view to the use of processed animal protein in pig feed. However, it is now apparent that the actual use of these flows in practice is more complex than expected. There are strict requirements for processing and the raw material is very expensive. In our view, applying this on a large scale is therefore not interesting at the moment. We have therefore decided to move the pig feed production from Klein Berssen to our factories in Laar and Dörpen. In Klein Berssen, the production is fully equipped to produce organic feed. This offers us the opportunity to relieve the burden on our other factory for organic feed and to better serve the organic market. In Klein Berssen we will soon be able to produce organic 'Verbands' feed in addition to the EU organic feed. For these biolines, the use of local raw materials is an important factor. We can better accommodate this with additional capacity. As a company, you always try to adapt your business operations to the circumstances. It helps that we have multiple production locations at our disposal."

An important part of the company is your banking activities. In our last interview did you indicate that there is a lot of demand from Dutch livestock farmers. How is that going at the moment?
"The great demand from the Netherlands has somewhat disappeared in that respect. However, we are still financing good plans. In my opinion, the decline has to do with the fact that the interest rates in the Netherlands and Germany have converged somewhat, the differences are smaller. We are happy to look at good plans with sufficient certainty. Sufficient certainty is a basic condition for this, and of course the cash flow, no different than with other banks. We have the agricultural knowledge in-house to assess plans properly."

And a cattle farmer who wants to expand his livestock. Expansion is sometimes sensitive for Dutch banks and plans for sustainability themes must be explicitly explained. What is Ems-Vechte's position in this?
"As mentioned, the basic principles are important to us: good solvency and cash flow. These are the most important conditions for a plan for us. A good plan that involves expanding the livestock population is therefore simply financeable for us, provided that the permits are in order."

Regarding pig farming. In our previous conversation in November 2021 predicted you a peak in pig prices. This came. How do you look at the pig market now?
"If you had asked me this question two weeks ago, I would have given a completely different answer than I do now. Foot-and-mouth disease (FMD) and the associated trade restrictions have disrupted the market. It is difficult to estimate how this will develop in the coming period. However, I was positive before the FMD outbreak. I expect a stable supply of pigs with reasonable demand in the coming twelve months. I therefore hoped that we would have a stable year at a reasonable price level. Hopefully, the FMD outbreak will fizzle out and prices can recover somewhat. Incidentally, it is essential for the stability of the pig sector to achieve a decent price level for pigs and piglets in the coming years. Otherwise, with the further tightening of animal welfare regulations in mind, the sector will become much smaller in the coming decade."

Is business development still possible, also in terms of permits?
"In Germany, the odour pollution of livestock farms is an issue for the environment. However, there are certainly opportunities for companies that want to switch. For example, in recent years we have seen more pig farms switching to poultry or regular livestock farms switching to organic farming. We employ consultants who guide companies in this. It takes some time, but it is technically possible from a permit point of view."

Why are companies switching?
"First of all, there is of course the revenue model, which has been very good for many poultry branches in recent years. In addition, labor also plays a very important role. Fitting labor into a sow farm is complex and requires knowledge. The idea is often: with the poultry I can plan this part more easily."

Finally, Germany has had a 'green' coalition for several years. The polls hinted at a shift to the right. What does this mean for the agricultural sector?
"In January at the Grüne Woche (agricultural, horticultural and food industry trade fair, ed.) we spoke to the agricultural spokesperson of the CDU/CSU, possibly our new Minister of Agriculture. This conversation made me feel positive. The spearhead of the CDU/CSU: the agricultural sector and its efforts to be self-sufficient in our food supply are of crucial importance to our country. This is a clear signal. For our livestock farmers it is also time for clarity. Politics, but also social developments require major investments on farms. Entrepreneurs must then be certain that the investments they make 'retain value'. If politics outlines clear frameworks, this can have a positive effect on the prospects."