Business development in care farming in the Netherlands

On the right track and heading for further professionalisation Katrin Oltmer and Gabe Venema Agricultural Economics Research Institute (LEI) Burgemeester Patijnlaan 19, 2585 BE Den Haag, The Netherlands katrin.oltmer@wur.nl + 31 70 3358325

1. Introduction In the Netherlands, care farming on family farms is a relatively new, but quickly developing branch in multifunctional agriculture. According to Steunpunt Landbouw en Zorg (Care farm foundation), the number of care farms in the Netherlands has increased from 75 in 1998 to 720 in 2006 and there are more farms that intent to start up care farming in the future (Steunpunt Landbouw en Zorg, 2006). The Dutch Ministry of Agriculture, Nature and Food Quality is interested in the business development and the investment behaviour of farmers who diversify their farms with a care farm activity. Questions that have come up are whether business development is aimed at growth of the agricultural activity or at growth of the care farm activity. Other questions relate to the relationship between origin and use of the profit, and to the motives on the one hand and the obstructions on the other hand to further invest in the care farm activity. The objective of this study is hence to get insight into the investment behaviour of farmers with care farm activities and into the ways in which the development of these activities is financed. The reason why the Ministry of Agriculture is interested in this matter concerns the vitality of rural areas. To be precise, to what extent can care farming contribute to family farm income, such that farms stay viable and continue contributing to the rural economy. The research is based on information from the Dutch census of agriculture (Landbouwtelling), on existing literature and Internet resources and on interviews with advisors, financiers, care farmers and other experts in the sector. The paper is organised as follows. The second paragraph gives a short overview of the structure of the farms with care farm activities in the Netherlands. The third paragraph offers a description of business development in care farming in practice. Paragraph 4 goes into the importance of entrepreneurship of care farmers. Paragraph 5 closes this paper with some conclusions and recommendations. 2. Description of the sector Care farms are characterised by a large diversity. This diversity arises, among others, through the differences in target groups the farm is focusing on, the type of care offered and the size of the care farm activity. The major part of the farms with a care farm activity are cattle farms, among which dairy farms and other farms with grazing animals. Most of the farms with a care farm activity are smaller than 70 nge1. It can be
1

nge = Nederlandse grootte eenheid, a Dutch Size Unit for measuring the economic size of an agricultural holding (1 nge = 1,400 euro).

assumed that the importance of the traditional agricultural activities of these farms is decreasing and that the care farm activity is already more, or at least as, important as the agricultural activities. However, there are also care farm activities on farms larger than 150 nge, which still have a positive perspective for traditional agricultural activities (table 1).
Table 1 Number of farms with care farm activities by farm type and size, 2005* Small farms Medium farm Large farms All farms (< 70 nge) (70-150 nge) (> 150 nge) Dairy farms 63 117 14 194 Other grazing cattle farms 114 20 5 139 Mixed farms 58 18 5 81 Horticultural farms 45 11 17 73 Arable farms 19 7 3 29 Pig and poultry farms 13 9 4 26 All farms 312 182 48 542 Source: CBS-Landbouwtelling (Dutch agricultural census) *) These are the most recent census data. They differ from the data by Steunpunt Landbouw en Zorg since they only include farms that are registered as an agricultural holding, whereas Steunpunt Landbouw en Zorg also includes other institutions with care farm activities.

3. Business development in care farming in practice Care farm activities are in most cases initiated by the farmers wife, who often has work experience in health care. Important motives are idealism and personal interest in a particular target group. Along with these social motives, the care farm activity is also supposed to contribute to farm income. It should, however, not be seen as a mean to keep up unprofitable agricultural activities on the farm. Initiating and expanding care farm activities are gradual processes. In the beginning, small groups of clients just join usual family live, which does not require major investments. Small investments are mostly financed by own resources. Only when groups of clients get larger, major investments are needed, for example for separate canteens or sanitary facilities. If major investments in favour of the care farm activity have been taken, the farmer should consider the effects of this investment on farm results: what are the expected revenues, what are the costs and remains after costs have been subtracted from revenues? The revenues generated by care farm activities are rather well known, for example from official health care charges. There are different forms in which Dutch care farms receive the revenues for the care they offer, depending on the way in which the care farm activity is organised. The most important forms are shown in table 2. Table 2 shows that most of the family care farms in the Netherlands are independent farms that either cooperate with a health care institution or receive their revenues through the personal budget of clients (PGB). Considering the strong growth, receiving revenues via the PGB seems to be the most popular form among care farmers. One reason for this lies in the fact that, due to higher flexibility, net-revenues may be higher than in cooperation with a health care institution. The high flexibility of the PGB-form implies a higher self determination concerning the choice of the clients. It does, however, also include a higher responsibility concerning the occupation of the available places.
Table 2 Forms of receiving revenues in Dutch care farming, 2001 and 2006

2001

2006

Part of health care institution 77 87 Own AWBZ* recognition 16 41 Independent farm, cooperating with health care 145 206 institution + 42 Independent farm, revenues through PGB ** 45 279 + 520 Others 39 44 + 13 Source: Steunpunt Landbouw en Zorg, calculations LEI *) AWBZ (Algemeen Wet Bijzondere Ziektekosten): Exceptional Medical Expenses Act **) PGB (persoongebonden budget): Personal budget of clients

verschil (%) 2001-2006 + 13 + 156

Although still small in absolute numbers, the number of farms with an own recognition of the Exceptional Medical Expenses Act (AWBZ) is growing rapidly. These care farms have more of less the same status as other health care institution. In other words, they can be considered as independent health care institution. These farms are usually larger, with more places for clients than the average care farm. Business development is here mainly concentrated on the development of the care farm activity. Whereas a picture of the revenues is rather easy to obtain, there is only little insight into the costs of care farm activities. Without knowledge of the costs, it is also difficult for the farmers to get a picture of the economic position of the care farm activity within the whole farm. It is hence also difficult to say anything about the contribution of the care farm activity to family farm income and about the payback capacity in cases of external financing. Therefore, moneylenders mostly take the value of the whole farms as a basis for their financing assessment, yet under the condition that the care farm activity will indeed be started and generate revenues. 4. The importance of entrepreneurship Along with economic aspects, entrepreneurship is an important issue in multifunctional agriculture and hence also in care farming. Entrepreneurship implies the capability to strategically determine the position of the farm. This includes a) the position of the farm in the market taking into account technology and consumer demand and b) the position of the farmer within the own business under consideration of the farmers preferences and character (Ploeg and Spiering, 1999). It has to be pointed out that entrepreneurship is different from skills and management. Skills imply the ability to perform the technological processes necessary to run a farm (workmanship). Management implies the ability to optimise the processes on the farm. An entrepreneur creates the circumstances under which the workman and the manager operate, taking into account the demands and preferences of the consumers and society as a whole (Verstegen and Lans, 2006). Concerning care farming, entrepreneurship implies that the farmer needs to be aware of his or her own qualities and the qualities and characteristic of the farm. More practical, which target group and type of care suits best to the characteristics of the farm and the farmer and what is the surplus value of the farm for the clients in comparison to other care farms. In other words, how can the farmer differentiate his or her own care farm activities from other care farms. Not only the clients want to see a clear picture of the care farms characteristics and values. Also, moneylenders are starting to take a critical look at the motivation of the

farmer for starting up a care farm and at the suitability of the farm for offering care farm activities. Starting a care farm without a clear concept, just following the trend since it seems to be a good opportunity to generate extra income, is hence not sufficient. The should be clear in the beginning why a farmers focuses on a particular target group and type of care, what extra value the farmer can offer to the clients and why the farm is suitable for the particular target group and type of care. 5. Conclusions and recommendations Concerning professionalisation, care farming in the Netherlands is on the right track. First evidences of this development are the possibility for care farms to obtain their own Exeptional Medical Expenses Act-license (AWBZ erkenning) and the introduction of a quality mark for care farms. However, the lack of an outline of the costs hampers further professionalisation of care farming. A solution would be the development of a method for cost price calculation for the care farm activity, such that total costs can be divided between care farm activity and agricultural activity. A solid economic foundation of the care farm activity is a sound basis for investments decisions and also for negotiations with other institutions of the health care system. A further professionalisation also include the development of entrepreneurship, which implies that farmers need to be aware of the position of their farm in the market and of his or her own positions in within the farm. If care farmers want to become an equal and fully accepted partner within the health care system, it should keep the good and continue to professionalise. The good refers to the quality of health care. The development of entrepreneurship and insight into economic data, such as the cost price, could be facilitated by the government within the framework of the so-called LNV-network programmes. In these programmes farmers with care farm activities are made conscious of their entrepreneurial competences and the economic consequences of the choices they made concerning business development. Furthermore, there is a need for monitoring the economic data of care farm activities, such as return and cost prices. Currently, a lack of this information hampers monitoring. Along with the income effect of the care farm activities on farm level, it would be interesting to get insight into the economic effects of these activities outside the agricultural sector, on rural economy as a whole. In other words, what are the effects of care farm activities on rural vitality in the long term?

References
CBS-Landbouwtelling, Land- und tuinbouwbedrijven; verbrede landbouw [online database] http://statline.cbs.nl, consulted on 9 januari 2007. Ploeg, B. van der en C.J.M Spiering, Is het mogelijk om 2 dingen goed te doen? Verkenning van sociale factoren in verbrede bedrijfsontwikkeling. Rapport 4.99.19, LEI, Den Haag, 1999. Steunpunt Landbouw en Zorg, Landbouw en zorg groeit [online report], <http://www.landbouwzorg.nl/index.php?pagid=55&dg=&hb=72>, consulted on December 1 2006. Verstegen, J.A.A.M. en T.L. Lans, De kunst van het zien en realiseren. Rapport 06.02 LEI, Den Haag, 2006.

Interviewees - Han Swienink (LTO Noord Advies), advisor - Derk Pullen (LTO Noord Advies), advisor - Jaques Roumen (Buitenkans), advisor - Bart Yntema (Rabobank), financier - ABN AMRO, financier - Hans van Stokrum (Steunput Landbouw en Zorg), expert - Coby en Wim van Ginkel (de kleine weide), farmer and expert - A number of other care farmers