Due to well-known causes, volumes in Dutch horticulture were five percent lower this year. For next year, ABN AMRO expects growth again: 5 percent for horticulture. Ornamental horticulture may count on 7 percent growth in 2024, according to the bankers.
The bank forecasts volume growth for 2023 and 2024 for all agricultural subsectors. Overall, the bank concludes that many agricultural companies had a good year in 2023 due to lower costs and increased prices compared to last year.
Volume development year on years: dairy cattle, agriculture, pigs, floriculture, greenhouse horticulture, fisheries
Greenhouse vegetables: Good year despite lower volumes
After a significant drop in volume in 2022, greenhouse vegetable horticulture faces another decline this year. The main reason for this is the fact that a number of operators quit and several did not or hardly turned on the lights last winter. This is due to higher energy prices at the beginning of this year.
Because gas prices are now lower and less volatile, ABN AMRO does expect production to increase again in 2024. The acreage and, thus, cultivation will remain lower than before the energy crisis, however, as not all of the acreage of those who left the industry has been
taken over by other companies.
Although the kilogram of product produced is lower, many greenhouse vegetable growers have had a good year. First, in fact, the reduction in production has led to higher prices of greenhouse vegetables, such as aubergine, peppers, and tomatoes. Over the whole year, almost all greenhouse vegetable prices are at a high level. However, the price of cucumbers is now much lower again after peaking at the beginning of this year.
Importance of CHP
In addition, greenhouse growers have benefited from the difference between gas and electricity prices. This so-called sparkspread provides greenhouse farmers with money because they generate electricity via cogeneration plants and supply it back to the grid to keep the electricity grid stable. The heat produced is used in the greenhouse. This will keep the income of vegetable growers at a reasonable level.
In particular, the larger modern companies that have invested in CHPs and sustainability will have been able to realize a good income this year. These entrepreneurs not only realize a higher income by generating electricity, but also by reducing costs. This is because they are able to produce more efficiently. The advantage that more modern companies have over companies that have invested less in sustainability will continue to increase in the coming years.
Demand remains stable
The demand for greenhouse vegetables will remain stable. Purchasing power will improve next year, ABN AMRO expects, and healthier food will continue to be a theme for consumers in the coming years, two factors that will have a positive impact on the demand for greenhouse vegetables.
The increase in volumes could possibly depress prices somewhat. On the other hand, a number of costs are actually rising. For example, labor costs are increasing, interest rates have risen, and greenhouse growers face a possible burden increase due to sustainability legislation. Other costs, such as fertilizer and gas, are lower and less volatile.
Sustainability task
Horticulture faces a major task to become more sustainable. The sector, like many other energy-intensive sectors, is coming under increasing social pressure to use less fossil energy. This pressure comes in the form of government measures phasing out the reduced tariff and limiting the exemption for electricity generation limits. For businesses, this means an increased burden. On the other hand, subsidy schemes offer scope for investing in energy-efficient greenhouses and using renewable energy.
Floriculture: expected increase in volume
After a 5.4 percent drop in volume in 2022, ABN AMRO expects volumes to fall by 5 percent this year. A number of companies stopped growing flowers and plants late last year, and others have adjusted their growing strategies by reducing lighting, planting later, or switching to crops that are less energy-intensive. The consequence of those who ceased trading and adjusted cultivation strategy is also evident in production volumes this year, especially in the first half of this year.
After 2023, ABN AMRO expects volumes to increase. A number of reasons underlie this. First, ABN AMRO does not expect huge volatilities in the gas price for next year. Many growers have signed contracts again at a lower gas price. This means that growers will have less limited lighting and will, therefore, produce more again. This has the added advantage that, in some cases, the demanded quality can also be delivered again. After all, it is important for buyers to get consistent quality. Consequently, volumes will increase in the spring of 2024, ABN AMRO expects.
Second, several companies have invested in making cultivation more sustainable, for example, with the help of LED lighting and dehumidifiers. These growers will again be able to produce in abundance. In particular, more modern large companies that have room to invest will then have an edge.
Under pressure
Whether volumes will rebound all the way back to previous levels remains to be seen. The acreage for agriculture and horticulture is under pressure and is in competition with housing, recreation, and nature. This also applies to some extent to the ornamental plant cultivation area. As a result, the acreage will not increase much and may even shrink slightly. More intensive cultivation can still result in higher production, but extensification can lead to lower volumes.
In addition, production volumes depend on demand. For now, despite lower purchasing power, demand still seems in line with available supply. After all, pricing is reasonably good. For 2024, uncertainty remains. ABN AMRO expects disposable income in the European Union to increase in 2024. On the other hand, employment is expected to decline next year, and the support given during the energy crisis is being phased out. Below the line, then, is only meager growth.
Moreover, retailers are reluctant to make large orders because they do not want to be left with excess inventory. This is also the case in many key-selling countries such as the United Kingdom and Germany. Furthermore, the geopolitical situation in Ukraine and the Middle East is affecting the demand for cut flowers. In addition, sustainability may play a more important role in consumers' purchasing decisions. Cut flowers and flower bulbs, in particular, are regularly in the news negatively as a result. Transparency in production methods and the use of crop protection can help maintain the position in the market and with consumers.
Source: ABN Amro