Rabobank’s choice: true value as a financial model

New true-value-based business models contribute most to the transition to a sector that produces within the available environmental space, makes a substantial contribution to the concept of broad prosperity and leads to a good revenue model for farmers in the agri-food sector. We will not achieve this scenario by merely fine-tuning the existing frameworks; this transition calls for systemic change.

Below we outline what Rabobank understands by this system change:

Environmental space determines the size and location of sectors

Going forward, the available environmental space will determine the size and location of sectors. Less space will lead to a higher production price, which have to be compensated. The government’s spatial planning becomes the determining factor here. Intensive livestock farms have a place in the more sparsely populated areas where circular feed production is possible. For the rest, all dairy farming is completely land-bound in places where the soil is unsuitable for crop farming, such as peatlands and dry sandy soils. Land-based sectors make an important contribution to environmental and landscape management. The crop sectors are significantly reducing the use of plant protection products, by using precision technology and creating resilient plant systems, among other things. The cropping plan is expanded by including break, protein and fibre crops. The sector is also an important contributor to the protein transition, both for human and animal consumption. Greenhouse horticulture is fully climate neutral or even climate positive. 

Strong chain management

We are moving from supply-driven to demand-driven production. This will allow the industry to reduce environmental losses, cut costs and get better prices by responding better to consumer demands. Being profitable is still essential, but the balance between production and the natural environment in which it takes place is taken into consideration. There is widespread awareness that this balance equates to value and should be taken into account in pricing. This is in the interests of all stakeholders in the chain. It requires tighter chain management when it comes to sustainability requirements, the production volume and securing that volume, setting the price and monitoring agreements between organizations in the chain. Another consequence of tighter chain management is that farmers can avoid competition on the world market to some extent, because, as suppliers, it is not that easy to replace them. As the Netherlands does not have the lowest production costs for more and more products, the agri-food sector will be more inclined to opt for the value-added sector.

Transparency and verifiable data

This model is also the most likely to reward sustainability. Many farmers decide to opt for the value-added segment in this model. That means that mutual dependency between the primary sectors and the chain will increase. Chains need to be able to respond to less supply (contraction) and more fragmented demand. In many chains, this also calls for greater transparency on the origin and method of production based on verifiable data. Experience will be gained, and there will be opportunities to export to countries that are also sustainable.

Circular livestock feed

Regional production of circular feed renders the importing of feed from outside Europe, such as soya, largely superfluous. Importing less nitrogen and phosphate will lead to a more closed recycling of minerals in Northwestern Europe. Regional production of protein crops and better utilization of residual streams will greatly alleviate dependency on soya. 

Green-blue services

To improve the spread of the costs and benefits of nature and landscape management, the government will pay for enviromental and landscape management based on long-term contracts. Wherever high land prices drive up the cost of public services, the government will bear the cost of “green depreciation.”       

European level playing field

Europe plays an important role in all this, given its position in the export of agriculture. Europe is much more normative than it used to be when it concerns the supply of raw materials and the marketing of products and – with that – for nutrient cycling. Aligning sustainability requirements and their monitoring takes place at that level. The European playing field is a level playing field. Because of this, Dutch farmers can stand out among their European counterparts when it comes to certain sustainability aspects. True value should preferably be applied in a European context. That said, the Netherlands can take steps in this regard, for instance through its tax system and green-blue service schemes.    

We are convinced that, in this scenario, the Netherlands will retain sufficient scale across the entire chain to remain a guiding light for the rest of the world in terms of innovation and knowledge. 

Agricultural transition research
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