Focus on the Netherlands

by World Grain Staff
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Two things distinguish the Netherlands demographically. It is the most densely populated country in Europe (among those with over 500,000 inhabitants), and somewhat counter-intuitively for such a crowded land, its people are the tallest in the world. From these facts one might conclude another two things: that the Dutch are particularly well-nourished and food production is intensive.

And, indeed, this is the case. According to United Nations Food and Agriculture Organization (FAO) data, the people of the Netherlands get 30% of their calories from animal products, compared to an average of 20% in all developed countries. Milk production, at more than 11 million tonnes per year, exceeds grain production (1.7 million tonnes) by nearly six times, and food processing is a U.S.$20 billion industry.

A large, highly sophisticated feed industry is a crucial link in the food chain that enables the country not just to put meat, eggs and cheese on its tables but to also generate significant surpluses for export. Total compound feed production is 12.5 million tonnes, which on a per capita basis is one of the highest in the world. It has been stable for several years.

About 45% of industrially produced feed goes to pigs, 25% to cattle and 25% to poultry, according to the Nevedi, the feed producers association whose members account for nearly all domestic output. The industry generates €2.5 billion (U.S.$3.25 billion) in annual sales and employs 5,000 people.

Cooperatives and private companies make up nearly equal parts of production. Competition is fierce, with no entity holding more than a 15% share. However, six of the seven largest producers have formed an alliance called Trusq, which has developed a set of safety standards for feed ingredients and inspects and certifies suppliers around the world. These six Trusq members, consisting of two private companies and four cooperatives, control about two-thirds of the Dutch feed supply.

Thanks in part to the intense competition on their own soil, Dutch feed companies do well outside their borders. A significant share of production is exported to Belgium and Germany, and in recent years Poland and Hungary have become important markets. Some companies have established manufacturing subsidiaries in the new European Union (E.U.) member states to the east.

Provimi, a publicly listed company based in Rotterdam, is one of the largest international suppliers of premixes, concentrates and specialty feeds, with more than 100 plants in 30 countries and 9,000 employees. It has a strong presence in central and eastern Europe and owns seven feed producers in Russia, where it is a market leader. The company boasts that its products are used in 40 million tonnes of feed annually.

Further burnishing the international credentials of the Netherlands’ feed industry is a large number of feed equipment manufacturers doing business globally. Finally, the city of Utrecht hosts the triennial Victam International feed industry conference and trade exhibition, the premier event of its kind, which took place May 8-10 this year.

At first glance the relatively small amount of grain and oilseed production in the Netherlands would seem to be a competitive disadvantage for feed production. But as resource-poor places are prone to do, the country has lived by its wits and turned this shortage into an advantage. Due to E.U. price supports for grain growers, feed grain prices have traditionally been high in relation to imported ingredients, not just grains and oilseeds, but also alternative sources of starch and proteins like corn gluten, tapioca meal, copra, palm expellers, sugar beet pulp and citrus pulp. Consequently, the short distance of most feed companies to the country’s two major ports, Rotterdam and Amsterdam, has played a key role in the industry’s growth. Two other major ports, Gent and Antwerp in Belgium, are nearby.

Rotterdam, the world’s largest bulk port, with 250 million tonnes per year of total cargo, is especially important. The port handles 10 million tonnes of so-called "agribulk," the biggest part of which is for feed use. The port features 450,000 tonnes of grain silo capacity, including 18 floating grain elevators.

It is not surprising that the world’s two biggest grain and oilseed trading and processing companies have staked out major positions at the largest Dutch ports. Archer Daniels Midland Co. (ADM) owns a large oilseed crushing plant in Rotterdam that was originally built by Unilever. In 2004, ADM acquired one of the Rotterdam port’s largest grain and oilseed terminals, adjacent to its oilseed plant at Europoort, which is the western portion of the Rotterdam port where grain and oilseeds are concentrated.

Cargill has a multi-faceted presence in the country, with much of it clustered at or near the port of Amsterdam. This includes the Netherlands’ other large oilseed crushing plant and the IGMA grain terminal, not to mention major corn and cocoa bean processing plants, a malting plant and a food ingredients company.

A big part of the edible oil and oilseed meal producted locally by both companies is sent in river barges up the Rhine and its network of canals, or it is re-exported to Scandinavian and Baltic countries, including Russia.

Total grain imports to the Netherlands are about 8 million tonnes, to go with 1.7 million tonnes of domestic production. About 2 million tonnes of grain is exported. The competitive advantage enjoyed by the Dutch feed industry rests on twin pillars. The first is the proximity to major ports and imported ingredients from around the world. The other is the availability of a wide range of by-products from the Netherlands’ diversified food processing industry. Potatoes, maize, sugar beets and processing in many oth- er sectors generate low-cost substitutes for grains and oilseed meals in animal feed. FLOUR MILLING

One industry where Netherlands does not enjoy a particular advantage is flour milling. In fact, the country accounts for nearly half of the 1 million tonnes of intra-European trade in flour, importing 450,000 tonnes annually, primarily from mills in Germany and Belgium.

Despite this import competition, the three biggest milling companies hold a 75% market share, making the Dutch industry the most consolidated in Europe. The number one player, Meneba, ranks third among European flour millers with 1.3 million tonnes in annual production at just three mills, which are among the largest in the E.U. Closure of a mill in 2005 has raised the company’s capacity utilization to close to 90%. The rapid decline in export demand for European flour in the last 10 years has hurt the Dutch millers as it has other European producers. However, restructuring has been swifter in the Netherlands, as witnessed by the current high levels of industry concentration and capacity utilization.

Myriad domestic food processors provide Meneba with a wide customer base for all kinds of higher-value specialty flours, and the feed industry means steady local demand for bran.

The biofuels fever sweeping Europe has not left the Netherlands untouched. There are at least six ethanol projects in various stages. While these are mostly based on traditional grain feedstocks, the Netherlands may take a course different than other European countries. Rather than importing barley, feed wheat and triticale, which are the normal feedstocks for ethanol in Europe, Dutch ethanol producers could join the feed industry as a consumer of by-products of the food processing industry. A recent Rabobank report estimates that the Netherlands’ output of 6.7 million tonnes per year of potato waste, citrus and sugar beet pulp, molasses and many other types of agribusiness biomass sidestreams could yield enough ethanol to replace 3% to 4% of the gasoline burned in the country. Cattle numbers have fallen steadily since 1997, and the food industry would certainly welcome a new source of demand for its secondary products.

Will greater demand and higher prices for these by-products improve profitability of food processors and help keep prices stable for their main products? At the same time, could they result in increased prices for meat and dairy products via higher feed ingredient prices? The food-for-fuel debate could take a new twist in the land of wooden shoes and windmills.

David McKee is a grain industry consultant providing market research and other services to companies seeking to initiate business in new markets. He can be reached by e-mail at