The profitability of organic farmers is under pressure, ACM recommends set of measures

Organic farmers do not always recoup their extra costs for sustainable production. This is one of the findings of the new Agro-Nutri Monitor of the Netherlands Authority for Consumers and Markets (ACM), which was conducted by order of the Dutch Ministry of Agriculture, Fisheries, Food Security and Nature (LVVN). This is a trend break from previous years. Farmers that produce under non-organic sustainability labels are, on average, able to recoup their costs, yet 6 in 10 farmers indicate that this does not fully cover the costs.

In addition to the Agro-Nutri Monitor, ACM publishes two other studies: one into collaborations in connection with sustainability efforts, and one into the options for international benchmarking of sustainability labels. On the basis of these three studies, ACM has given the Ministry of LVVN recommendations on how to make the food chain even more sustainable. With these recommendations, ACM wishes to help create well-functioning markets where farmers and businesses receive a fair price for making their production sustainable, and where consumers continue to be able to choose between affordable products.

Most important findings of the Agro-Nutri Monitor 2025

For the 2021-2023 period, the Agro-Nutri Monitor 2025 studied the price-formation process in the production chains for potatoes, tomatoes, milk and cheese, pork, apples and apple juice, as well as fresh and processed green beans. The most important findings are:

• Organic farmers are not always able to recoup their sustainability costs for these products. That is because their costs for organic production increased more sharply than their profits did.
• Farmers that make their production more sustainable in accordance with other sustainability labels are, on average, able to recoup their sustainability costs, yet 6 in 10 farmers indicate that this is not sufficient.
• Larger agricultural businesses usually earn higher margins than do smaller businesses.
• Benchmarking of Dutch and foreign labels improves the export opportunities for products with Dutch (non-organic) sustainability labels.
• Collaborations between producers offers advantages, such as reducing costs and strengthening the bargaining position vis-à-vis buyers.
• Collaborations between market participants within the production chain offers the opportunity to charge a premium and to spread the production risks better, such as weather damage and poor harvests.
• The limited willingness-to-pay among consumers as well as the resulting lagging demand for sustainable products continues to be a bottleneck for taking further steps towards a full-scale sustainability transition.
• Uncertainty about the Dutch government’s sustainability policy means that farmers are more reluctant to make investments. This slows down their sustainability efforts.

ACM’s recommendations

With the publication of the 2022 Agro-Nutri Monitor, ACM recommended the Ministry of LVVN a set of measures on how to make the food chain in the Netherlands more sustainable. At the time, it was revealed that, among other findings, the willingness-to-pay for sustainable products among consumers was limited.

In a letter to the Minister of LVVN, ACM again emphasizes that an integral strategy coming from the ministry is necessary. ACM gives the Ministry of LVVN the following recommendations and points for attention:

• Measures are needed that reduce the price difference between conventional and organic products. This can be achieved, for example, by lowering the VAT on more-sustainable products or through subsidies for producers. The recommended measures were also included in the Agro-Nutri Monitor 2022 (in Dutch).
• Stimulate that the number of sustainability labels is reduced to a limited number of clearly recognizable labels for consumers, for instance, through the introduction of a label that is supported by the Dutch government and that is aimed at sustainable production in the Netherlands.
• Promote the sale of more-sustainable food also in channels other than supermarkets. The government can also help by procuring more-sustainable products for the restaurants and cafeterias of government organizations (including semi-governmental ones).
• Urge the sector to benchmark labels internationally, and bring this topic to the attention of the European Commission.
• Help the food production sector seek out collaboration opportunities, and stimulate collaborations between producer organizations. Producer organizations can collaborate with other producer organizations in Associations of Producer Organizations to take further advantage of economies of scale, and to exert more countervailing power against larger buyers.

Follow-up study

ACM has already launched the fifth Agro-Nutri Monitor. In it, ACM looks into, among other topics, the question as to why organic as well as other sustainable farmers are not always able to recoup their sustainability costs.

See also

• Agro-Nutri Monitor: price-formation process and obstacles to the sustainability transition | ACM (in Dutch)