The worlds of agriculture and chemical move towards each other

A soft drink bottle or vitamins made of vegetable material? While collaboration between the agricultural sector and the chemical industry provides opportunities, it does require finding a business model that both entrepreneurs and financiers see as advantageous. Rabobank is involved in this quest that is being undertaken by entrepreneurs and researchers in the agricultural sector and the chemical industry.

The chemical industry is actively seeking alternatives to the oil it currently uses. This is necessary in order to reduce costs and to address the issues of sustainability and the recyclability of raw materials (circular economy). Farmers and processing companies are in turn looking for new sales opportunities in addition to food. This is the case with, for example, sugar and sugar beets.

Rabobank is taking part in this quest?

Yes. In late September 2014, 400 people brimming with ideas, experiences and questions came to Rabobank in Utrecht (the Netherlands) to attend the ‘Agri meets chemicals’ conference. This event was organised by Deloitte, in close association with Rabobank. Deloitte also presented a research study in the afternoon. The 400 participants represented small and large companies, with names including Cosun, Corbion, DSM and Akzo Nobel, research institutes and governmental services. Rabobank has clients in both the agricultural sector and the chemical industry and is engaged in initiatives relating to the circular economy. Rabobank is partner in the SHIFT Investment fund, aimed at companies which contribute to ‘Sustainability and Health Impact through Food & agri Transitions’ (SHIFT).

What is this topic all about?

Deloitte presented this afternoon a study into the opportunities for the fermentation-based chemical industry in Northwest Europe. Fermentation involves yeasts and micro-organisms fermenting vegetable matter, such as sugar beets, sugar cane, maize, grain and tapioca, in order to make ‘chemical products’, such as material for soft drink bottles, antibiotics, vitamins and insulin for diabetics. The purer and more refined the raw material, the higher the price and the less the chemical industry will have to invest. ‘There is consequently a lot of debate about the turning point,’ says Vincent Oomes of Deloitte. This turning point depends on technical specialists finding the right micro-organisms.

"This is a massive programme for the entire industry"

Ton Runneboom, Chairman of the Dutch Biorenewables Business Platform

But won’t this come at the expense of food production?

‘How do we use the agricultural land? For food or for other applications? Or for both with a view to serving the circular economy as well? The agricultural sector must ensure consistent quality in order to meet the demand of the chemical industry. Something great can be brought about in Northwest Europe if industry, science and the government work together’, Rabobank Executive Board Member Jan van Nieuwenhuizen said at the opening of the ‘Agri meets chemicals’ conference.
Coert Beerman, who is responsible for wholesale clients in the Netherlands and Africa at Rabobank: ‘As a bank we have introduced the Banking4Food programme and are indeed now talking about not for food.’ Beerman emphasises that the use of biorenewables in the chemical industry is also important with respect to liveability in rural areas. This is because the related processing will have to take place close to the crop in the rural areas given the fact that transporting agricultural raw materials over long distances is so expensive. And the issue at hand is: higher productivity in agriculture, which is vital for the food supply, depends on whether or not there is sufficient income for farmers and horticulturists. Agricultural production for new applications could help support the income for farmers and horticulturists.
Growing crops for energy production takes up much more land than growing crops for chemical applications.

Will this be attractive in Europe?

Absolutely. Analyses carried out by Deloitte reveal that sugar from Northwest Europe is highly competitive thanks to the good quality and the high yields per hectare. ‘I am proud that people have such positive things to say about sugar beets. We have been working on this improvement for more than 100 years’, says Albert Markusse, CEO of Cosun subsidiary Suiker Unie. The European Union’s sugar policy will change in 2017 and this will mean farmers in Europe will be able to grow more sugar beets. The Netherlands also has potential due to the well-developed sugar industry and chemical industry in the country.

If there is such a good outlook, why are there not currently more activities in this area?

Processing sugar into chemical products requires even greater investment than making white crystal sugar does. ‘This is a massive programme for the entire industry, from Rotterdam to Ludwigshafen’, says Ton Runneboom, Chairman of the Dutch Biorenewables Business Platform.
Coert Beerman (Rabobank) says that three processing plants costing 300 million euros each will be needed over the coming ten years in the Netherlands alone. ‘A business case is needed’, says Beerman. A business case is gradually coming closer and closer and is almost in place for some products. Arnold van de Ven of Corbion: ‘There is not one single party that has everything it takes to bring this about. So collaboration is crucially important.’

What is holding investors back?

The so-called risk of supply security is important with respect to projects. Investors in a plant will need to limit the risk of non-supply of raw materials or overly high prices.
The chemical sector says it cannot live with the sugar sector’s premise that the market price for sugar is the benchmark. ‘If the sugar price goes up 40%, I will have a real problem making a profit, because the market price for PET doesn’t move in tandem,’ says a biorenewables processor.
‘Or the bank will have to start hedging’, says Albert Markusse of Cosun of the Sugar Beet Growers Cooperative. He is referring to the futures contracts that hedge price risks.
Or the European government must introduce measures to promote the use of biorenewables in the chemical industry.
Or ….
The key issue is addressed by Oomes of Deloitte: ‘The worlds of agriculture and the chemical industry have to come together.’


These 4Fs are important: Food, Feed, Fuel and Functional molecules. In other words, using agricultural products for nutrition for people (food) and animals (feed), fuel (fuel) and increasingly also for functional applications in the chemical industry, such as matter for soft drink bottles, antibiotics, vitamins and insulin for diabetics. The 4Fs are all interconnected.