Agriculture is extremely important to the Dutch economy. The agricultural sector, including fishery, food processing and related industries, employs more than 500,000 people, or about 11% of the work force, and the sector and its secondary industries accounted for more than 10% of the total economy in 1996.

A member of the European Union, the Netherlands adheres to the principles and programs of the E.U. Common Agricultural Policy. The free access to other European countries' markets is highly advantageous for the Netherlands, as its agriculture relies on exports.

The Netherlands is the world's third largest agricultural exporter behind the United States and France. More than 50% of Dutch agriculture's income is earned through exports, and eight of the country's top 10 export products come from agriculture and the food processing industry.

The Netherlands' land area is only about 34,000 square kilometers, and 70% is devoted to agriculture, making production among the most intensive in the world. Horticulture, including bulbs and flowers, is a major sector, along with the livestock and dairy industries, which include slightly more than 100 million chickens, 4 million head of cattle and 14 million pigs.

A shortcoming to this intensive system is the development of significant environmental problems, including manure surpluses, ammonia emissions and phosphate and nitrate leaching in soil and ground water. According to E.U. statistics, the Netherlands has an oversupply of 27 million kg of nitrate, with about 60% coming from the pork sector, 30% from the poultry sector and 10% from cattle holdings.

For more than a decade, Dutch officials have been working to address these problems and meet increasingly stringent environmental regulations. An ambitious policy adopted in the mid-1980s called for a phased program that would result in an end to the manure problems by 2000.

The first two phases established manure production rights and use standards and called for programs to achieve a reduction in existing surpluses. By the end of the third phase, initially expected in 2000, mineral inputs (fertilizers and animal feeds) and output (products and manure) were to be in equilibrium.

But by the mid-1990s, officials after much study determined the equilibrium goal and its timetable were unrealistic, and new policies were adopted. These included a minerals accounting system involving registration of inputs and output and levies applied to surpluses above an allowable standard.

Over time, a general consensus has formed that meeting environmental goals will require reducing Dutch livestock numbers. A major issue has been the level of compensation for the loss of production.

The first effort to cut animal inventories was a restructuring law requiring farmers to reduce their swine herds by 10% by September 1, 1998. The swine industry, saying the law would cost U.S.$450 million in losses, won a court challenge in January 1999, but in January of this year, a higher court ruled that the Dutch government may order the 10% reduction and that no compensation is required.

The government also has decided to restrict growth in the poultry sector, which means the number of layers, broilers and turkeys will not be allowed to increase beyond the current level of 100 million units. A new law is expected to be passed in the near future that will specify the exact number of birds a farmer can maintain.

Along with these issues, the Dutch livestock industry in recent years has been confronted with animal welfare concerns. Sparked by a change in consumer attitudes as well as the environmental problems of intensive agriculture, farmers' use of non-intensive production, or the so-called "free range" system, is increasing. The downside includes the costs associated with the area needed for range reduced per-unit yields and smaller total production.

Another major issue in the Dutch agricultural sector is genetically modified organisms, which are the subject of much public debate throughout the European Union. The Dutch government is encouraging the establishment and development of biotechnology companies in the Netherlands. In April 1999, the Dutch parliament voted against a moratorium on the testing of biotech varieties, an action that allows continued research on and field testing of GMO crops.

FLOUR MILLING. The Netherlands has a mature and modern flour milling industry and a moderate degree of vertical integration with the baking industry. Wheat flour production is concentrated in five milling companies operating eight mills that account for more than 95% of Dutch milling capacity.

Wheat flour production between 1994 and 1998 averaged about 1.1 million tonnes a year, according to statistics from the Dutch commodity board. Per capita wheat flour use was 69 kg in 1996, 62 kg in 1995 and 66 kg in 1994. Some 60% of total flour consumption is for bread.

The use of domestic wheat for milling is on the decline, with Dutch wheat accounting for only about 17% of milling industry supplies in 1996-97, compared with 37% in 1992-93. Local demand for wheat for feed use, as well as quality concerns, have encouraged mills to import wheat, primarily from other E.U. producers.

LIVESTOCK AND FEED. The size and economic importance of the Dutch livestock sector has led to the development of a highly efficient and sophisticated animal feed industry. Compound feed production in 1999 is estimated at 15.175 million tonnes, of which pig rations accounted for 46%, poultry feed accounted for 25% and cattle feed accounted for 24%.

The 1999 production figure was up 0.1% from 1998, offering the feed industry a reprieve from the recent trend of declining production. In 1995, Dutch compound feed production totaled 16.7 million tonnes, and until 1999, production had fallen each year.

Despite the increase in 1999, the downward trend is expected to resume. Output this year is projected at 14 million tonnes and is expected to fall to 13.5 million by 2002. The declines will result from carrying out the mandated reductions in swine numbers, the cap on poultry units and slackening cattle feed demand based on improved milk productivity and declining beef consumption. These factors are expected to bring an end to decades of expansion in the Dutch feed industry.

Traditionally, the compound feed makers have used a significant percentage of imported non-grain feed ingredients such as tapioca and corn gluten feed. This ingredient usage pattern has been encouraged by the proximity of the Rotterdam port to compound feed plants. Typically, the duty-free import of non-grain ingredients was attractive compared with grain imports from other E.U. origins.

Grain's share in animal feed is expected to increase to as much as 20% through 2001, based on historically low grain prices and the increasing use of on-farm mixed feed. Additional reforms to the E.U.'s Common Agriculture Policy could cut E.U. grains prices further, encouraging more use of imported grain.

Dutch compound feed exports total about 1 million tonnes a year, most of which is shipped to Germany, Belgium and the U.K. As the domestic use of animal feed continues to slip, exports will become more important to the industry, but high transport costs may limit the potential for export expansion.

In 1999, the Dutch government called for tougher legislation concerning feed ingredients in response to the E.U. Commission's call for member states to implement stricter rules. These actions came in the wake of the dioxin contamination of feed in Belgium, "mad cow" disease problems and other food scares, and the Dutch government wants to ban the use of all animal products in feeds by July 1, 2001.

Also at issue is the use of corn gluten feed derived from GMO maize varieties. Because specific E.U. regulations remain under debate, the Dutch government decided to order maize varieties tested by the Dutch Institute for Quality Control. Although the government, based on the test results, authorized the use of corn gluten feed in animal rations, it continues to monitor developments in this area, including implementation of any new E.U. regulations.

OILSEEDS. The Netherlands has a highly developed oilseeds crushing and processing industry and is one of the largest importers of oilseeds in the world. The country's biggest crushing facilities are operated by the U.S.-based companies Cargill, Inc. in Amsterdam and Archer Daniels Midland in Rotterdam.

The Netherlands annually imports about 5.5 million tonnes of soybeans, which make up about 84% of total oilseed imports.

About 90% to 95% of all imported oilseeds are destined for the crush industry, and the food industry accounts for about 75% of all vegetable oil products. The compound feed industry consumes about 300,000 tonnes of soybeans, 650,000 tonnes of sunflower seed, 130,000 tonnes of rapeseed and 100,000 tonnes of flaxseed.

According to preliminary statistics, imports of soybean and sunflower meal in 1998 dropped by about 30% from the 1997 marketing year, based on competitive prices for other feed ingredients. Projections for 1999-2000 suggest further cuts in meal imports because of an expected decrease in oilmeal demand from Belgium. Longer term, demand for meal among other European countries, particularly Poland, Hungary and Slovakia, is promising.

Melissa Cordonier Alexander, formerly an editor of World Grain, is now a consultant providing information research services for agriculture.