Advisory report
RLG 06/1a: Outsiders and Epitomes
Advisory report on megabusinesses in Dutch agricultural sectors
Summary
Request for advice
The Minister for Agriculture, Nature and Food Quality requested advice from the Council for the Rural Area about the expected developments related to megabusinesses in the various agricultural sectors. The request for advice induced the Council to map out the actual developments of megabusinesses, to test the current negative and positive images, and to consider what role the government must play in this respect. At the Minister's request, the Council focused special attention on the entrepreneurship, the commercial dimension, the position of the businesses in the chain, and the effects on the landscape.
Demarcation
To deal with the issues, the Council demarcated the megabusinesses; the criteria opted for is the economic size of the business . The economic size of a business is expressed in Dutch size units (nge - Nederlandse grootte-eenheden) , a measure based on the difference between the profits and the related specific expenses. The lower limit of megabusinesses is set at 500 size units. In 2004, this was equivalent to nearly six times the average size of all agricultural and horticultural businesses. This demarcation represents about 340 hectares in arable farming, 3,5 hectares in greenhouse horticulture, 320 dairy cows in dairy farms, 12,500 meat pigs in pig farms, and 160,000 laying hens in poultry farms.
Position of megabusinesses
The number of megabusinesses in agriculture and horticulture has almost tripled between 1994 and 2004, and the share in the production capacity has more than tripled. Even so, megabusinesses, with the exception of greenhouse horticulture, still constitute a modest share in the total number of agricultural businesses (1.6%) and in the total production capacity (17%). In arable farming and cattle farming, the share of megabusinesses of the total number of companies is limited to only some tenth parts of percentages; the share in the production capacity amounts to 0.5% for dairy farming, and to 4% for arable farming. (Glasshouse) horticulture shows quite a different picture. This sector is usually large-scaled; the share of the megabusinesses with 12% of the total number, and with 44% of the production capacity is by far the highest of all sectors. Dutch megabusinesses are small if compared with megabusinesses elsewhere in Europe, the United States and Australia where these companies are more important, both as to their numbers and as to their share in the total production capacity.
The power of the megabusiness
The dominance of the family business in agriculture and horticulture is easily explained by labour costs. Work in agriculture is mostly seasonal and does not have different kinds of activities of which each must be carried out simultaneously and throughout the year. This makes it expensive to organise agricultural work, especially if the business must do with workers from outside the family and who need constant supervision. Organising the work is more straightforward within the family; the members often have the same interests in the performance and the continuity of the business. Consultation in family businesses takes place around the kitchen table, so to speak, where also the tasks are allocated.
Vis-à-vis the average family business, the megabusiness is more privileged the more the production is manageable and controllable, the more the work to be carried out is less seasonal and the more specialisation in work is possible. Relatively simple and routine activities make it easier to work with workers from outside the family. The costs of managing and supervising the employees are then relatively low. These aspects explain that, especially in greenhouse horticulture with more and more crops all year round, we can see a quick development into large businesses.
The organisation of the work in intensive livestock farming can match the large-scale and continuous character of the production process, though in practice the development into businesses with many non-family-related work is less strongly visible. More promise for automation in the cattle-farming sector may play an important part in this. Automation makes it possible to take care of large numbers of animals even with limited manpower.
From the social angle, the megabusiness offers the advantage of more possibilities in the division of labour and more common working hours and working conditions, including taking the weekend off at times. This is particularly true for dairy farming, but it may also be realised in the somewhat bigger family business, whether or not with the help of employees or a milking robot.
The 'megabusiness' and the 'family business' are no opposites. With its economic size and importance, the Dutch megabusiness shows all characteristics of the Dutch medium-sized and small-sized businesses that can combine and give value to the strong points of the family business and the advantages of a large-scale business.
The mega-entrepreneur can be distinguished from other agricultural entrepreneurs by his specific conviction of the necessity for growth in his own business, the pursuit of controlling other links in the chain himself, developing his knowledge, his ability and his desire to manage his own staff, and his own forms of broadening the business. The entrepreneur of a megabusiness also exhibits involvement in the product and the production process, and affinity with his animals.
Perspective for the megabusiness
The business structure in agriculture and horticulture will change further, on the one hand into large-scale agriculture, but also into small-scale or broadened agriculture. Megabusinesses will also have a place within this broad range, made up of one business or function or as a combination of a number of businesses. Although the Council sees prospects for megabusinesses in our country, it does not expect the undeniable trend to expansion to result in a broad development of such businesses..
The share of megabusinesses, both in size and in number in the Netherlands, will probably increase, but this increase will be very limited with the exception of glasshouse horticulture. The family structure will be dominant in the land-related sectors. However, the Council expects a further increase in megabusinesses in the glasshouse horticulture. They mainly involve businesses in the west of the Netherlands, such as Greenports Westland, Oostland, Aalsmeer and environs, in the southwest and elsewhere in the Netherlands where concentrations of glasshouse horticulture businesses are feasible.
On account of the difference in the basic principles and the preconditions of the policy, the Council expect a number of land-related businesses to grow into megabusinesses, especially north of the Alkmaar-Zwolle line, southwest of the Rotterdam-Breda line and in the Flevo Polders.
Recommendations
The productivity in the present megabusinesses is roughly twice as large as in the average family business. With a structure of only megabusinesses, this would mean that only half the manpower is needed for the same production as in a structure of only family businesses, the megabusinesses excluded. However, the Council deems it inexpedient to protect agricultural employment by imposing restrictions on the size of the business, the way it is done in Denmark. Such policy will have the opposite effect as it will impinge on the competitive power of the sector.
The influence that agriculture in all its diversities has on landscape, nature, water, air or animal welfare does not follow from the difference between family business and megabusiness, but is mainly decided by the difference in management. Hence the government must not make a choice between either the family business or the megabusiness, but must offer development prospects to both the megabusiness and the other family businesses side by side.
The objectives pertaining to the maintenance and the enhancement of the quality of the rural area can lead to objections against establishing a megabusiness in certain areas. Emission by a huge pig or poultry farm in the form of odour, ammonia of fine dust can create a heavy environmental burden in the vicinity and in nature areas. The construction of huge buildings for large land-related cattle farming or arable farming and the rationalization of the plots necessary for running these farms could be contrary to the ambition of maintaining the surrounding small-scale landscape. The Council recognises these objections, but does not advocate an addition to legal and administrative instruments focussed on megabusinesses.
It is particularly important how the government, the province and the municipalities apply the parameters related to spatial planning, transport, the environment and nature and landscape, and subsequently fit this in with spatial planning and with the landscape. When applying the preconditions it will become evident that the possibilities of establishing a megabusiness will differ per area and per type of business. Whereas one area may offer good prospects for establishing a megabusiness, some parts of a national landscape will not welcome it due to the large buildings and/or transport activities.
For its size and complexity, the issues related to the establishment of one or more megabusinesses will go beyond the local level, and demand a serious consideration of landscape and spatial aspects from the authorities.
For these reasons, it is advisable that the decision-making about whether to allow megabusinesses or not takes place on the regional level, with an important role for the Province.
In this, the Council links up with the possibility that Provinces get in the new Spatial Planning Act for laying down general rules for the plans of lower authorities and for drawing up a structural concept to provide a framework for the provincial policy.
In view of the bottlenecks that the establishment and the extension of megabusinesses cause in the rural area, the Council deems it advisable that authorities tackle the way in which they can ensure that agricultural businesses fit in with spatial and landscape aspects, and guarantee a responsible enforcement policy. The Council advises the Minister of Agriculture, Nature Management and Food Safety to facilitate the development of knowledge in the field of a socially responsible adaptation of megabusinesses.
On the regional level, it is especially the aspects connected with the choice of the location of megabusinesses that are important, including the required zoning around megabusinesses. On the local level, important issues are the space a megabusiness needs for the buildings, the design of the buildings, the layout of the premises and the stables, the fitting in with the landscape and the enforceability of the licensing policy. The Council furthermore believes that research is needed into the possibilities of large-scale farming in small-scale landscapes by means of cooperative businesses.
The development of agriculture and horticulture will always go hand in hand with new issues in the field of spatial planning, transport, the environment and the landscape. This will constantly require appropriate attention from the various levels of authorities.