Quality and sustainability: the twin strengths of Dutch livestock farming

Observing recent developments in domestic pig, poultry and dairy farming, Director Food & Agri Netherlands at Rabobank Ruud Huirne concludes that Dutch livestock farmers will be able to maintain their leading international position if they focus on quality and sustainability and find new ways of dealing with price fluctuations.

As shown in the dairy market report published by Rabobank recently, sharp price fluctuations in this market are one of the trends that increasingly affects livestock farmers. After international market conditions drove up milk prices in 2014, prices have dropped by 25 percent since, with no recovery at sight just yet.

The other priority issue in livestock farming is sustainability. In a recent report on poultry farming, Rabobank notes that in the coming years between 30 and 40 percent of Dutch poultry farmers will need to make ‘strategic choices’ where quality and sustainability are concerned.

International leader

‘The question to answer is: how can Dutch livestock farming remain competitive in the international market while at the same time retaining public approval at home?’, says Ruud Huirne.

The Netherlands is a major exporter of meat, eggs and dairy products. These exports contribute to the Dutch economy and the global food supply. For example: the Dutch dairy sector generates 45,000 full time jobs and 8% of the Dutch trade surplus. Huirne: ‘The Netherlands leads the way internationally in innovation, efficiency and sustainability. We must make sure to maintain that strong position.’

‘The question to answer is: how can Dutch livestock farming remain competitive in the international market while at the same time retaining public approval at home?’

Ruud Huirne, director Food & Agri Netherlands at Rabobank.

‘However, if you are looking for the lowest production costs, there are other countries where conditions are more competitive’, says Ruud Huirne. And that is not only due to the scarcity of the land and high land prices, but also because there are few other countries where the general public, the media and politicians are so concerned about issues such as chicken breeding, the health and welfare of cows and pigs and the size of the barns. Huirne: ‘The Netherlands is one of the most progressive countries in the world when it comes to public opinion on livestock farming. Initiatives to improve animal welfare in the Netherlands right now will spread to other countries over the next five to ten years.’

Improved flavour and quality

Meanwhile, the farmers themselves are both embracing and driving some of the changes sweeping the farming world. Poultry farmers are switching to more sustainable and animal friendly production methods while at the same time improving the taste and quality of their eggs and meat. Pig farmers are cooperating with Rabobank and the Ministry of Economic Affairs in developing ways of improving practices and increasing profits in their sector. In anticipation of the milk quota abolition on 1 April of this year, dairy farmers, for their part, invested heavily in expansion of scale (nowadays on average 94 milking cows per farm). Some of the sector’s key concerns include outdoor grazing, improving animal health and controlling fertiliser production.

Rabobank is actively involved in these changes, both across the sector as a whole and through its relationships with individual farms. The bank’s total loan portfolio in the dairy farming sector reached 12 billion euros in 2014, while those for pig farming and poultry farming totalled 2.4 billion and one billion, respectively.

Better meat merits higher prices

Ruud Huirne: ‘The process of improving quality and sustainability in these sectors should also translate into higher prices for farmers, since they would not be able to keep their heads above water otherwise. I think we all agree that if you are going to produce more sustainable chicken and pork and grass-fed milk, you are entitled to charge higher prices for your products. but the fact is that such a price hike runs counter to the prevailing downward price trend for supermarkets and consumers.’

Market position

The key is for farmers and agricultural processing companies to come up with products for which supermarkets and consumers are willing to pay a higher price. Dutch dairy farmers are united in agricultural cooperatives, which enjoy a strong position internationally and are able to secure higher prices based on the superior quality of Dutch milk products. The pork and poultry sectors, however, show a somewhat different picture. Poultry farmers and slaughterhouses are looking to negotiate higher prices for more sustainable, higher-quality meat with Dutch supermarket chains. But the Netherlands Authority for Consumers and Markets, which monitors compliance with laws and regulations in the free market, has yet vetoed this initiative, the purpose of which is to promote sustainable production methods in livestock farming. Individual supermarkets are now taking the initiative themselves.

Sharp fluctuations in income

Farmers operating in these open international markets are inevitably affected by unstable yield prices. Huirne: ‘When prices have been riding high for a while, farmers need to be aware that these conditions may change overnight and they need to prepare for those changes by bolstering their reserves. Milk prices may have exceeded expectations in 2014, but a large global supply and lagging demand have since pushed prices down again to slightly below the long-term average. Of course, farmers are aware that this situation will turn around again and that there are flusher times ahead. These cycles are visible in pig and poultry farming.’