Sustainable agricultural production

Publication number: 2011-37
Authors: B. Baarsma, R. van der Noll, I. Akker
Commissioned by: Ministry of Economic Affairs, Agriculture and Innovation
Published by: SEO Economic Research
ISBN: 9789067336109

There is little investment in sustainability beyond what is legally required in the pig and greenhouse vegetable sector. Moreover, not all currently or soon to enter into force legal sustainability requirements are met yet. There is still a long way to go. What's in the way?

Producers and their representatives in the agro food sector blame restrictrions on competition especially on the retail side for the lack of possibilities to pass on cost increases resulting from legally required investments in sustainability to consumers. That costs cannot be fully passed, however, has nothing to do with restrictions, but with:

  •  An information backlog of consumers. Consumer cannot distinguish sustainable products from regular products. A way to overcome this information backlog is to make chain agreements on sustainability hallmarks. This happens in practice, but product differentiation and chain cooperation are possible on a larger scale.
  • An overcapacity in the sector. Given the environmental space defined in the European context, the Dutch pig and greenhouse vegetable sector are too large. Apart from the overcapacity defined by the environmental space, there is also overcapacity resulting from government support in the past. Inefficient companies survived, so there is more supply than demand. A retailer who does not get good supply, can find the desired supply elsewhere in the market. It is therefore necessary in order to reduce the overcapacity. 
  • A fragmented organization of farmers against an integrated organization of retail. Compared with producers, retailers are more concentrated, and in the pig sector is the same applies for the slaughterhouses. There are different ways to increase the bargaining power on the production side of the agri-food chains. Cooperation may include formation of (cooperative) associations of producers or an association of producer organizations. Europe has consciously created the possibility of the Association of Producer Organisations (APO) because of differences in concentration in agrifood chains. In practice, the lack of willingness to give up independence stands such cooperation in the way.

This report is written in Dutch. 

Category: 2011