The yield of Dutch growers should increase by 20%, but researchers expect a decrease

An average Dutch greenhouse grower will have to cope with an increase in costs this year, in the ‘best’ case of 9 euros per hectare. square meters. To cover rising costs, the average grower needs a 20% increase in yield.

Rock hard figures, which the Ministry of Agriculture, Nature and Food Quality has mapped by Wageningen Economic Research in a study of possible income effects of the war in Ukraine for companies in agriculture and horticulture. For greenhouse horticulture, researchers do not expect (full) compensation for the costs. Sooner or later, growers risk getting into financial trouble if the current crisis situation does not change. The research confirms once again that the sector is going through very difficult times. And still waiting.

Liquidity cultivator
In their research, the researchers look, among other things, at the liquidity position of greenhouse horticultural companies. This liquidity position is of great importance for business continuity in the short term. For greenhouse horticultural companies, the liquidity position was good for most companies. In the greenhouse horticulture sector, 85% of companies in 2021 had sufficient financial resources to pay all bills on an annual basis.

Energy costs
The researchers also map the costs. Costs that have risen sharply. Based on the insights of the first quarter of 2022 is an increase in
net energy costs of 96% compared to expected 2021. On average, net energy costs accounted for 14% of producers’ costs in recent years, with peaks of 20%. Energy costs are currently at a historically high level.

According to researchers, the differences in the increase in energy costs vary from about 2.50 EUR per. m2 for the most extensive companies to more than 25 EUR per. m2 for the most intensive. The effects will be different between companies because not all
Greenhouse nurseries use the same energy supply. There will be a difference between companies with and without cogeneration, with and without connection to external heat and with and without access to the use of renewable energy.

The share of renewable energy is increasing and in 2020 accounted for more than 10% of total energy consumption. In most cases, the use of sustainable energy is hot, and this remains limited
to the base load. The intermediate load and the peak power are supplied from common sources.

In addition to energy costs, the costs of, among other things, fertilizers are rising. These have also been mapped by the researchers. With regard to fertilizer, it is pointed out that in the short term (<6 months) there is sufficient availability of fertilizer with the exception of individual products.

In a response to the report, LTO Nederland points out that practices sometimes already overtake the ‘most pessimistic scenario’, for example with regard to the rise in diesel prices. It is now 50% (against 30% in the pessimistic scenario).

Fertilizer prices remain higher and are expected to rise further. Industry experts indicate, the researchers write, that prices had already risen 25-40% by 2021. It is estimated that the war has caused fertilizer prices to rise a further 25-50%.

Decrease in income
If there was no increase in dividends, a sharp fall in income per capita must be expected in all scenarios. m2 glass. The extra costs vary from € 9 per person. m2 glass for
optimistic scenario up to € 13 per. m2 glass.

The researchers have examined how far yields should increase if an average greenhouse horticultural company is to be able to compensate for the increased costs. The table below shows that a 20% increase in revenue is sufficient to offset the negative consequences of increased costs on an average company.
compensate. But initial indications suggest, the researchers point out, a decline in yields rather than such a necessary increase.

At worst, a 15% increase in revenue is enough for 52% of companies. In the ‘best’ case for 74% of companies. This means that more than a quarter of companies will still lose revenue. In 2021, the income per square meter of glass averaged 12 euros.

Bad prospects, difficult negotiations
Researchers are not worried about whether greenhouse horticulture in addition to a declining income will run into financial problems. In the sector itself, the percentage of 40% of growers who are at risk of liquidity problems is often mentioned. What the researchers are doing is pointing out that the negative dividend scenarios for greenhouse horticultural companies, based on expert knowledge and the sparse data, are more plausible than the positive ones.

They also point out that in the field of energy, the share of fixed energy prices for 2023 is estimated by experts to be significantly less than for 2022. This makes it clear that as long as the situation continues, companies can not look forward to more manageable energy costs at the level before mid-2021.

It is important, as everyone has now gotten there, that the costs be passed on. Negotiations on prices with the retail trade are in full swing, the researchers write. The sounds are that it is difficult. The trend is towards an increase in weekly contracts rather than long-term contracts. The Dutch consumer now pays 20-30% more than in the spring of 2021, but the Spanish growers are still dominant in the winter period. It is therefore unclear who will be allocated that margin. Greenhouse Horticulture Holland estimates that the cost increases will not be fully covered by additional prices in 2022. Researchers were not yet aware in early April whether retail price supplements would be applied. If that is the case, the question is what the grower will ultimately see in return, we are free to comment.

Read the full survey here.

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