Family business remains a strong organisational form in the agricultural sector

19 November 2014 - Almost all Dutch farms are family-owned businesses. The formula has been at the heart of the Netherlands’ agriculture and horticulture industry for decades. And family-owned businesses are set to stay in the driving seat. Ever-higher operating standards are, however, being demanded from agricultural entrepreneurship, says Ruud Huirne, Director of Food & Agri Netherlands at Rabobank.

The family-owned agricultural business will be put in the spotlight on 20 November at the Rabobank Auditorium in Utrecht (the Netherlands). It will be the stage for a conference on the future of the family-owned agricultural business held by the NAJK contact organisation for young Dutch farmers. Her Majesty Queen Máxima of the Netherlands will honour the gathering with her presence. 2014 is the United Nations International Year of Family Farming.

Since 1898

Family-owned businesses are rich in history, sometimes going back centuries. The NAJK conference will include an announcement of the name of the Netherlands’ oldest family-owned agricultural business. Rabobank has been part of all this history since 1898. The cooperative bank was founded to help small farming businesses develop. Today more than 80% of the Netherlands’ 67,000 farmers and growers are Rabobank customers. ‘In a sense, we’ve grown with those family-owned agricultural businesses’, explains Huirne, who himself was from a farming family.

Business skills

Huirne thinks ‘professionalisation’ will be an important trend for family-owned agricultural businesses. Farming families will increasingly have to combine their passion for their work and way of life with business skills. Huirne: ‘That passion has proved the strength of farming families for decades. Because when the going gets tough, they can pull together like no one else. That’s the reason they can deal with the odd setback.’

Capitalising on market developments

Huirne has no doubt that the demand for milk, potatoes, flowers, vegetables, plants and other agricultural products will remain strong in the future. Analysis, including that conducted by Rabobank, demonstrates that there will have to be a 60% increase in global food production by 2050 to feed the world’s growing population. The Netherlands holds a strong position in this case. Market developments in agricultural and horticultural products however, do demand a more enterprising approach from farmers. ‘Globalisation, the transparency of markets and information will make price movements in agricultural and horticultural products more volatile. This will mean that entrepreneurs will have to be more flexible in order to capitalise on changes in the market and to deal with risk and liquidity management for example’, explains Huirne.

‘That passion has proved the strength of farming families for decades. Because when the going gets tough, they can pull together like no one else.’

Ruud Huirne, Director Food & Agri Netherlands Rabobank

Risk-bearing capital

Financial buffers are more necessary now than ever. Larger companies also make it more difficult for a single person to provide the risk-bearing capital alone. Huirne: ‘The size of companies leads to new initiatives with people providing risk-bearing capital who do not necessarily work within the business. But this often means that these financiers often want to see a return on their risk. And it goes without saying that they are less patient than the business owners who provide their own capital.’

Connection with the community

Developments in society as a whole are also set to increase the demands on agricultural entrepreneurs in the future. Huirne: ‘Family-owned businesses are getting bigger and the communities within which they operate are constantly raising the standards governing how business should be done. An important factor is making a company more sustainable. To accomplish this, entrepreneurs must have an open attitude and good communication skills.’ Huirne is positive about the fact that more farmers’ wives have jobs outside the family business. ‘They often remain very involved in the company’s strategic decisions. They ensure a spread of income and bring in expertise from outside. This also gives rise to new connections with the community.’

Providing access to knowledge and networks

Can the younger generation of farmers rise to all these challenges? Huirne sees the potential and is optimistic: ‘The level of training is getting better and the Netherlands is strongly orientated towards the international scene. It is no longer a given that children follow their parents into the family business. Giving more thought to how a business should be taken over is a good thing.’
Rabobank is helping here as well by providing access to knowledge and networks. The Rabobank Successors’ Perspective programme has been set up in the Netherlands and over 1,000 young famers have already taken part in it. Rabobank has also recently launched quantitative research into the success factors at play when a farming business changes hands. The results will be available early next year and will allow us to see how Rabobank can better help businesses going through this process. Rabobank also regularly organises international master classes for agricultural entrepreneurs. The 2014 edition was held in Australia last week with five Dutch farmers taking part.