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Costs Rising for Dutch Farmers

by 5m Editor
23 February 2009, at 7:26am

NETHERLANDS - Dutch farmers are coming under pressure from rising costs as the result of, among others, higher environmental costs. Denmark is now the lowest-cost producer in the EU.

Production costs in the Dutch pig farming sector will continue to increase in the coming years, primarily as a result of regulations pertaining to animal welfare and the environment, according to a report from Wageningen University Research. In several other European countries, these costs will also increase but not as much. These are some of the conclusions presented by LEI in a study carried out for the Livestock and Meat Product Board and the Ministry of Agriculture, Nature and Food Quality.

The production costs calculated for a typical Dutch pig farm in 2007 were €1.40 per kg slaughter weight, excluding VAT and production rights.

In 2007, the Netherlands and Denmark had the lowest production costs for farming pigs of all the European countries studied. However, if the cost of production rights purchased is also taken into account – €0.05 per kg – the Netherlands lags behind Denmark in terms of production costs. France has a solid third position on the list, whereas Germany, Poland and Spain – where production costs are around €0.20 higher – are quite far behind the numbers one and two in Europe. The production costs in the US and Brazil are significantly lower than in Europe.

In spite of the high cost of stalls, labour, disposal of manure etc., the production costs in the Netherlands are relatively low due to higher productivity and production efficiency.

Effect of regulations on costs

The differences in production costs between various countries are also affected by differences in regulations between these countries. Differences in government regulations are often the result of differences in the amount of space available. In the Netherlands, important cost items include disposal of manure, reduction of emissions to the environment, production rights and animal welfare measures. In 2007, the additional costs attributable to government policy in the Netherlands amounted to a total of €0.20 per kg of slaughter weight. These additional costs are expected to increase to €0.26 by 2013. In other countries, these additional costs are not as high, and they are also not expected to increase as much by 2013.

By 2013, the cost of production (including the cost of production rights and extra costs due to policy measures) in the Netherlands is expected to increase to €1.51 per kg, thereby surpassing the expected cost of production in Denmark and France (€1.44 and €1.49 per kg respectively). Although some of our EU competitors also face increasing production costs as a result of policy measures, the conclusion is that the production cost position of the Dutch pig farming sector will be weakened somewhat.

In order to maintain a good level of competitiveness within the EU, it is important to have a common set of regulations in place as well as a similar interpretation and implementation of these regulations. There are also other factors besides production costs which influence the competitive position of the Dutch pig farming sector. The level of professional and entrepreneurial skill, the knowledge and information infrastructure, the availability of capital, and an export-oriented meat industry all deliver significant advantages to the sector.

Present EU policy on genetically modified crops and meat-and-bone meal plus the lack of Non Trade Concerns within the framework of the WTO negotiations have had a negative impact on the production costs and competitiveness of the European pig farming sector relative to non-European countries, concludes the Wageningen UR report.

Further Reading

- You can view an English summary of this report by clicking here.