Haifa Feng Interne Nota 491

AGRICULTURALDEVELOPMENT INTHENETHERLANDS
An analysis of the history of Dutch agricultural development and its
importance for China

;
July 1998 L-5-HC^i
C
CONTENTS

Page

TABLES 5

FIGURES 6

ABBREVIATIONS 7

PREFACE 9

ACKNOWLEDGMENTS 11

1. INTRODUCTION 15
1.1 Statement of concern 15
1.2 Objectives of the report 16
1.3 Approach 17
1.4 Structure 17

2. GENERALAPPEARANCE OFDUTCHAGRICULTURE 19
2.1 Natural background 19
2.1.1 Favourable points 19
2.1.2 Unfavourable points 22
2.2 Current situation 22
2.2.1 Productive level 22
2.2.2 Production structure 23
2.2.3 Regional concentration 25
2.2.4 Farmstructure 26
2.2.5 Farm income 29
2.2.6 Trade capacity 30
2.3 Contribution to the national economy 33
2.4 Position inthe world's scoreboard 34

3. LONG-TERMTREND 36
3.1 Pre-modern times: before 1880 36
3.2 First modernization phase: 1880-1950 38
3.2.1 Introduction of modern input factors 39
3.2.2 Institutional factors 41
3.3 Second modernization phase: 1950-1980 42
3.3.1 Mechanization 44
3.3.2 Scaleenlargement 45
3.3.3 Specialization 46
3.3.4 Intensiveness 47
3.4 Sustainable growth: after 1980 47

4. MAIN FEATUREOFDUTCHAGRICULTURAL DEVELOPMENT 49

4.1 Land ownership andtenure system 49
4.1.1 Typesof land ownership andtenure system 49
4.1.2 Strong points 51
4.2 Freetrade system 53
 Page

4.3 Cooperative system 53

4.3.1 Agricultural cooperatives 54
4.3.2 Methods of agricultural cooperatives 55
4.3.3 Defence of the cooperative interests 55
4.4 Financing system 56
4.4.1 Financing sources 57
4.4.2 Financing methods 59
4.4.3 Major agricultural financial institute: Rabobank 61
4.5 Marketing system 65
4.5.1 The major points of marketing system 65
4.5.2 Auction inthe marketing system 68
4.6 Organizational system 68
4.6.1 Thestructure of farmers'organizations 69
4.6.2 The main points of farmers' organization system 70
4.7 Education, research and extension system 71
4.7.1 Education system 71
4.7.2 Researchsystem 73
4.7.3 Extension system 75
4.8 Government policy system 76
4.8.1 The aspects of the Government function 76
4.8.2 Somestrong points of the Government policy system 78
4.8.3 The policy priorities for the coming years 78

5. SIGNIFICANCE OFDUTCHAGRICULTURAL DEVELOPMENT EXPERIENCE

FORDEVELOPMENT ECONOMICS 79
5.1 Concept about Dutch already in Development Economics 79
5.2 Cananother concept about Dutch besummarized in Development
Economicsfrom Dutch agricultural development experience 80
5.3 Thecontent of Dutch Model 80

6. ENLIGHTENMENT OFDUTCH EXPERIENCEOFAGRICULTURAL

DEVELOPMENTTOCHINA 81
6.1 Sino agriculture compared with Dutch 81
6.2 Main obstacles of Sinoagricultural development 81
6.3 What China can learn from the Dutch experience 82

LITERATURE 83

VITA 88
TABLES

Table 2.1 Structure of agricultural production in 1994

Table 2.2 Number andtype of farms in 1995
Table 2.3 Percentual distribution of farms in relation to farm area size in 1995
Table 2.4 Percentual distribution of farms in relation to farm economic size in 1995
Table 2.5 Average farm size in 1995
Table 2.6 Percentual distribution of farms in relation to farm size measured in number
of livestock per farm in 1995
Table 2.7 Farm income in 1995
Table 2.8 Structure of agricultural imports and exports by products in 1995
Table 2.9 Structure of agricultural exports and imports by countries in 1995
Table 2.10 Contribution of agricultural sector to national income
Table 2.11 Comparison of agricultural productivity with European countries
Table 3.1 Agricultural wages and rents andyield per cow around 1810
Table 3.2 Long-term development of agriculture, 1810-1880
Table 3.3 Number of people by 100 people working in agriculture infour countries
Table 3.4 Numberof landuserswho usedartificialfertilizers asapercentageofthe total
number of land users byfarm size,around 1888
Table 3.5 Agricultural growth, 1950-80
Table 3.6 Growth of gross production per agricultural subsector, 1950-80
Table 3.7 Growth of agricultural exports, 1950-80
Table 3.8 Growth of agricultural productivity, 1950-80
Table 3.9 Agricultural workforce, 1950-80
Table 3.10 Increase in agricultural machinery, 1950-80
Table3.11 Scaleenlargement according to area, 1950-80
Table 3.12 Average size of farms according to area, 1950-80
Table 3.13 Development inthe number of animals per farm and per type, 1960-80
Table4.1 Position of owner-occupied and rented land
Table4.2 Type of landtenure system according to holdings
Table 4.3 Type of landtenure system according to land area
Table4.4 Type of rented land system
Table4.5 Typeof rented land system
Table4.6 Capital structure of agriculture
Table4.7 Principal types of finance in agriculture
Table4.8 A model of the integrative functions of marketing inthe seed potato industry
Table4.9 Agricultural research organizations and their share in the total budget for
agricultural research
FIGURES

Figure 2.1 Map of the Netherlands

Figure 2.2 Land use structure
Figure 2.3 Agricultural land use structure
Figure 2.4 Concentration of agriculture
Figure 2.5 Structure of working population
Figure 2.6 Structure of grossdomestic products
Figure 4.1 Individual farmer's process
Figure 4.2 Cooperative activity
Figure4.3 NRCasan umbrella organization
Figure4.4 Management of local Rabobank branch office
Figure 4.5 Management of central Rabobank office
ABBREVIATIONS

LEI-DLO Agricultural Economics Research Institute in t h e Netherlands

DLO Agricultural Research Department
LNV Ministry of Agriculture, Nature Management and Fisheries in t h e Netherlands
EU European Union
EC European Community
VNO-NCW Confederation of Dutch Employers
TFP Total Factor Productivity
AWU Annual W o r k Units
ECU European Currency Unit
CPB Central Planning Bureau in t h e Netherlands
CBS Statistics Netherlands
SDU
NSU Netherlands Size Units
NLG (f) Dutch guilder
NCR National Cooperative Council f o r Agriculture in t h e Netherlands
VOC
OECD Organization of Economic Cooperation and Development
NATO North Atlantic Treaty Organization
ALGF Agricultural Loan Guarantee Fund in t h e Netherlands
VECO Union of t h e Netherlands Seed, Seed Potato and Trade Potato Marketing
STOPA Surplus Buying Agency in t h e Netherlands
LTO Dutch Federation of Agricultural and Horticultural Organizations
WTO W o r l d Trade Organization
AUW Agricultural University in Wageningen in t h e Netherlands
DLV Agricultural Extension Service in t h e Netherlands
SEV Social-economic Advisory Service in t h e Netherlands
ADRF Agricultural Development and Reorganization Fund in t h e Netherlands
CAP Common Agricultural Policy of EU
PREFACE

InNovember 1995the Chinese Minister of Agriculture, Mr. LiuJiang,and his Dutch

counterpart Mr. J.J.vanAartsen agreed on aLetter of Intent of Agricultural Cooperation
between both ministries.Part of it was anAgreement between the ChineseAcademy of
AgriculturalSciences(CAAS)andthe NetherlandsAgricultural ResearchDepartment(DLO-
NL)on cooperative research inagricultural economics.Onthe basisof thisAgreement the
Institute of Agricultural Economics (IAE-CAAS) andthe Agricultural Economics Research
Institute (LEI-DLO) have formulated threejoint research projects. One is'Onthe experi-
enceof Holland Agricultural Development and its importance to agriculture inthe Peo-
ple's Republic of China'.
Thetwo major objectives of these projects are:
a) to revealthe causesof the large difference between agricultural productivity in Chi-
naandthe Netherlands andto find waysto improve the efficiency of Chinese agri-
culture;
b) to analysethe developments inChineseagriculturewith specialreferenceto market
opportunities for Dutch agribusiness.
Theproject will startwith somebasic reviews on the development of agriculture in
the Yangtze Delta since 1978and inthe Netherlands inthe last century.
Prof. Dr. Feng Haifa,assistant director of IAE-CAAS,and visiting scholar at LEI-DLO
from November 1996to May 1997,haswritten areport called 'On DutchAgricultural De-
velopment'. Thisreview hasprovento beanexcellent step inthe project. Evenfor Dutch
readers it will be interesting to learn from the developments in the past. Prof. Feng re-
ferredto oneof threefamous Chineseexpressionsto illustratethis: 'Taking history asmir-
ror,the upsand downs canbe understood correctly.' It isevident and of great relevance
to learnfrom past developments.
Lookingforthe effect of different economic,socialand institutional factors in differ-
entstagesof agricultural development opensthe opportunity to learnfrom successesand
failures.It isclear,alsofrom this study,that there isnever just one singlefactor involved.
From the Dutch experience it isalso clear that the agricultural development isa never
ending story andtherefore its adjustment isaconstant issue.Nevertheless, it ischallen-
gingfor agricultural economiststo provide relevant information to policymakers,farmers
and agribusinessesto prepare for their decisions and actions.We expectthat the results
of the projectwill provide an important contribution to the benefitsof both nations.The
questionsto be answered inthis project challenge Chinese aswell asDutch scientists.
It hasbeenareal honour and pleasurefor LEI-DLOto have had prof. Feng Haifaas
visitingscholar.Thanksto hisintensive effort, inonlysixmonths hehasoffered asubstan-
tial contribution to the project. In myopinion he hastouched the right aspects in Dutch
agricultural development. Hiswork consisted of reading reports and consultations with
many Dutch experts. Iwould liketo thank allthese informants for their efforts.
Assaid before,this study should be regarded asan important step in the project.
Many stepshaveto follow. Future cooperation with Prof. Feng Haifa and his colleagues
will bean interesting and pleasant challengeto all of us.

The dire

The Hague,July 1998

ACKNOWLEDGEMENTS

InChina,myspecialist researcharea isagricultural development and policy. Besides

the researchwork, Iamalsoapart-timeteacher inthe Postgraduate Schoolatthe Chinese
Academy of Agricultural Sciences (CAAS).Iteach Development Economicsto postgradu-
ateswho are majoring in agricultural economics andfarm management.
During myresearchandteachingcareer,Ihavereadsomematerial on Dutchagricul-
tural development and Ialready knew that Dutch flowers areveryfamous inthe world.
Not for nothing isDutch net agricultural trade volume second only inthe world only to
the United States.Ihave always asked myself why the Netherlands isableto make such
great achievements inagriculture andwhat the underlying factors andthe driving force
are behind the prosperity of Dutch agriculture. My postgraduate students sometimes
asked meto explain these issues,but unfortunately there islittle information in print in
Chinaabout Dutchagricultural development.Icannotfullyanswerthesequestions,either
to the satisfaction of the postgraduates or myself.
Before Isetfoot on Dutch soil,Ionly knewthat the Netherlands had avery healthy
agricultural industry, but what Idid not know waswhy and how Dutch agriculture had
becomesohealthy.The reasonsfor the successesof Dutch agricultural development are
a mazefor me,aswell asfor almost all of the Chineseagricultural economics researchers
andagricultural policy-makers. BecauseChina isalargecountrywith the largest develop-
ing agriculture intheworld,it goeswithout sayingthat Chinawill haveto speed up agri-
cultural development asmuch aspossible inthe near future. Andto transform itstradi-
tional agriculture into amodern one,Chinawill needto take heed of allthe agricultural
lessons learned in other countries.
Theexperience of Dutchagricultural development will without doubt bevery useful
for China in itsjourney toward agricultural modernization. Soexploring and explaining
the miracleof Dutchagricultural successhasbecome one of my most important research
goals. Ihad been longingto visit Netherlands andto analysethe course of Dutchagricul-
tural development, andto translate the Dutch model to the situation in China.
I have now achievedthis goal. According to abilateral cooperation plan between
the Dutch Ministry of Agriculture, Nature Management and Fisheries and the Chinese
Ministry ofAgriculture, Ilivedinthe Netherlandsfor sixmonthsfrom late November 1996
till late May 1997 asavisiting scholar. Eventhough six months isnot avery long period
comparedwith one's lifetime,and isnot enoughtime for oneto revealthe full picture of
the experiencesof Dutchagricultural development, it did provide mewith agood oppor-
tunity to drop in onthis 'low country' andto investigate itsagricultural development. No
matter how you count it, whether in months, days or hours,the time Ihadto complete
my work israther limited.Time isa precious treasure and,asthe saying goes,time and
tide wait for no manand procrastination isthe thief of time. For me,the first important
issueisto seizethe opportunity and makethe best useof the limitedtime.SoI threw my-
self intotheoceanof information andconcentrated onthetopicwhichwasalready at the
top of my research agenda assoon asIhad stepped onto this beautiful 'low land'. This
report isthe main resultof myvisiting researchwork, and although it isin myopinion by
no meansperfect, Idaresaythat it isthe fruit of mypainstaking labours during mytimes
inthe Netherlands.
Although Istudy the issueof Dutch agricultural development inthe Netherlands,I
consider it a pity that Ido not understand Dutch. Fortunately, eventhough the Nether-
lands isnot an English-speaking country, almost all Dutch people can understand English
andmostofthem canspeak itfluently.What impressedmemost isthat Dutchfarmerscan
understand andspeak English,asthis isunthinkable inChina.There isabundant literature
written in English inthe Netherlands, andsoIcould alwaysfind what Iwanted. Idid not
feel any inconvenience during everydaywork and life.Fromthis point of view, the Neth-

11
erlands isan ideal country inwhichto work and live,not onlyfor itsown people but also
for anyworld citizen.The Netherlands isnot an English-speaking country, butthe English
language issopopular in Dutch society that Ithink this may explain why Dutch agricul-
tural development hassucceeded.
Itwould beabsolutely impossiblefor meto readallthe material available on Dutch
agricultural development in my limited time. Ihadto confine myself to the field of how
Dutchagriculture hasdeveloped and especiallythe underlying reasonswhich have made
Dutch agriculture asuccess.Iselected asfar aspossible related materials to read anddi-
gest,and Ithen expressedthe processed research result assoon asIcould in accordance
with my own ideas and beliefs. So my report is based only on selected materials. With
regard to the structure of the report, Ihave given priority to the needs of the Chinese
reader soasto beconsistentwith the main mission of my research visit. However, the re-
port isnot intended only for Chinese consumption. The analysis in my report should be
helpfulto thosewho areworking far awayfrom Western Europeand interested in Dutch
agricultural development and may have little immediate prospect of visiting the Nether-
lands,particularlythose indeveloping countries.AndevenDutchreadersmaylearnsome-
thing from aChineseview of their agriculture, becauseinChinathere isafamous saying:
the onlooker seesthe game best.
Duringthe courseof myresearchvisit, Ihave beenfortunate to receive alot of sup-
port and help, in oneway or another, from various people and organizations. Financial
supportfrom the IAC(International Agricultural Centre inthe Netherlands) is gratefully
acknowledged; without this support it would have been impossible for meto visit and
stay in the Netherlands. Financial support from LEI-DLOfor publishing my work isalso
gratefully acknowledged,aswithout it my life inthe Netherlandswould have been more
difficult and my research report would not have been published in English.Iwould also
liketo expressmythanksfor afellowship granted by LEI-DLO.Asthe central organization
in the Netherlands for socio-economic research into agriculture, horticulture, fisheries,
forestry and rural areas,LEI-DLOhasfirst-classfacilities and anexcellent scholastic climate
for research.What Ihavegainedfrom LEI-DLO isnot only information about Dutch agri-
cultural development, but Ihavealso learned howto manage amodern institute, which
will help me in my management activities after my return to China.
Iammost indebtedto Prof. Dr.V.Zachariasse,the Director of LEI-DLO,who not only
gave mealot of helpon indoor work andfieldtrips,but also ineveryday life.Itwas Prof.
Dr.V.Zachariassewho arrangedthe comfortable apartment for medespite hisvery busy
schedule.Discussionswith himon Dutchagricultural development, institute management
and other issues profited me a good deal, his erudition on agricultural economics and
farm management gave meafavourable impression,and his probing comments on the
draft of myreport havecontributed greatlyto the successful completion of the final ver-
sion. Ishall notforget the marvellous times Ienjoyed with him and hiswife,viewing the
beautiful Dutch landscape during the lastweekend before Ileft the Netherlands.
Iamalsomost indebted to Jaap Post,head of the General Economics and Statistics
Departmentof LEI-DLO,thedepartmentwhere Iworked.Hiscarefularrangement allowed
myresearchwork to progresssmoothly. Healsotook meto visitfarmersandtypical Dutch
sightsbybikeattheweekends inspiteof hisvenerable age.Wealsodiscussed Dutch agri-
culturaldevelopmentandother issuesandhiscarefulreading andcommentsonmy report
draft benefited me a great deal. His kindness, modesty and hospitality impressed me
deeply, and I shall not forget the enjoyable times of Christmas Day last year, my first
Christmas Dayoutside China,which Ienjoyed in his home.
Iamsincerelygratefulto Dr.J.C.Blom,Deputy Director of LEI-DLO,for hisgreat help;
and Iamalsograteful to C.J.A.M.de Bont, H.Verbeek and Gabe S. Venema. Mr De Bont
took meon avisitto theAgricultural Commodities Boardandthe NCR.MrVerbeek acted
asmyhostduringavisittothe FlowerAuction andflower growers,whichgavemeagood
impressionofthe Dutchflower industry.MrVenematook metovisitRabobank Nederland
in Utrecht.
Ialsobenefited agreat dealfrom discussionswith L. Douw (Head of the Social Eco-
nomicsDepartmentof LEI-DLO),IdaJ.Terluin,PaulJ.J.Veenendaal,C.van Bruchem,S.van
Berkum,W.JosBijman,J.Muskens,John F.M.Helming,P.Salz,M.D. Hack,J.Luijt, H.J.Sil-

12
vis,B.Pronk, F.Brouwer, W.vanVeen,K.Geertjes, D.Verhoog, P.Diederen, H.Tai-A-Pin,
J.W. deWilde, J.Bade, P.Hellegers, B.M. Kamphuis, B.W. Zaalmink, D.Verhoog, M. van
Leeuwen,H.Kelholt, F.Godeschalk, H.Tap,D.Verhoog,T.DeKleijn,C.V.Rijswick.Thanks
are also due to the experts outside LEI-DLO, R.A. Bosch(Ministry of Agriculture, Nature
Management and Fisheries(MLNV)),G.Meester (MLNV), P.J.M. Keet (MLNV),G.A.M.van
der Grind (Agricultural Commodities Board),J.J.Helder (NCR),W. van Oosterom (Rabo-
bank Nederland), M.L de Heer (LTO-Nederland),A. Oskam (AUW), N. Heerink (AUW),J.
Bearda (IPC),G.H.E.Beltman (Rabobank Rijnsburg). Deserving of aspecial mention isIda
J.Terluinfor herconstructive comments on mystudy outline about the stages of the his-
tory of Dutch agricultural development andfor hercomments on the draft of my report.
I am also grateful for the constructive comments from W.JosBijman onthe draft of my
report, which profited me agreat deal.
Lastbut not least,aspecialword ofthanksto D. Engelen,the Secretary of LEI-DLO;
shegavealot of effort to arranging mywork and life inThe Hague,from the reservation
of ahotel andchoosing myapartmentto registeringwiththe policeand local authorities.
Finally, athank you to myfamily. Iwould liketo express mygrateful thanksto my
wife Dr.LiWei,who herself borethe burden of looking after our lovelysonwith hisstudy
and life, in addition to her busy professional life.Without her selfless support it would
have been impossible for meto work for sucha long time outside China.
Needlesstosay,Iremain responsiblefor alltheviewsexpressed inthisreport and for
any errors and omissions which may remain. Iwould be glad to hear any comments or
criticisms.Ishallcontinue mystudy of some of the aspectswhich have perhaps not been
explored in detail inthis report.

13
1. INTRODUCTION

1.1 Statement of concern

Agriculture isthe cornerstone of a national economy and this isan objective eco-
nomic law of universal applicability. Mankind could not exist and non-agricultural sectors
could not bedevelopedwithout agriculture. It isquiteclearthat amodern economy and
society cannot be based on a backward agriculture. Intoday's world there isno lack of
examplesthat show that the national economy of one country iscrippled owing to the
backwardness of agriculture orto not having paidsufficient attention to agricultural de-
velopment for itsdevelopment strategy and plan; but we cannot seeany example of an
advanced agriculture being accompanied by backward non-agricultural sectors or bya
crippled national economy. If agriculture islessdeveloped inone country, it isimpossible
for anadvancedeconomy andsocietyto bedeveloped, even if in some casesa relatively
advancedindustry industrial subsectorcanbedeveloped.However, ifthere isan advanced
agriculture in one country, it follows there must be an advanced national economy and
society. The importance of agriculture has determined that more attention has to be
placedon agriculture inthe course of economic development; agriculture cannot bene-
glected at any rate in acountry's development strategy and plan.
Therearedifferences in agricultural development level among countries. Of course
differences in natural endowments,suchasclimate,location,andsoiltype, etcetera, play
an important role inthese agricultural differences. Butthe experience of world agricul-
tural development hasshownthat it isthe socio-economic institutional resources,suchas
land ownership andtenure, finance, marketing, education, research and extensionsys-
tems, and government policy, namely the manmade resources,which have determined
the differences inagricultural development level among countries, especiallythe differ-
ences between developed countries and developing countries.The natural endowment
isunmoveable,eventhough the social resources can betransferred from one country to
another andfrom onesectorto another.Thismeansthat developing countries can over-
cometheir agricultural differences by learning from developed countries.This so-called
learningeffect in Development Economicshasalreadycomeinto bloom insomedevelop-
ing countries.
China isthe largest developing country inthe world now, and itsagriculture isstill
very backwardcomparedwith developed countries.The most important issue isfeeding
China's vast population - more than 1.2 billion people \ nearly a quarter of the total
world population.There isno doubt about the importance of agriculture andthe need
to develop it inChina.Nowadaysthere isincreasedworldwide concernwhether China will
be able to feed its people in the next century. According to the projection made by
Mr. Lester R.Brown,the Director of World Watch Institute inthe United States,in 2030,
China's grain production will be 263 million tons, dropping 20% against 1990,whereas
China'sgrain consumption will riseto 641milliontons andthere will bea378 million ton
deficit between grain production and grain consumption in China, which amounts to
about 60%of the total grain consumption. Nevertheless,world grain exportswill be only
about 200million tons,which isfar lessthan the amount needed byChina. If China will

'Accordingtoanauthoritative projection,China'spopulationwill increase

steadily inthe next three decades.The population will be 1.3 billion in 2000,
1.4 billion in 2010, 1.6 billion in 2030; this is projected as China's peak
population.Consequently, itisclearthatChineseagriculturewill beconfronted
with the burden of agrowing population.

15
notfeed itspeople andthe world will notfeed China either, who will feed China '? Ibe-
lieve Mr. Brown's conclusion isa pessimistic one, but it is a good warning for China. It
means that if proper attention isnot paid to agricultural development, China will face
seriousproblems in itsfood economy.China hasmadeamagnificent planfor developing
itsnational economy inthe nextfifteenyears.Nevertheless,whether this plancanbeexe-
cuteddependsonthe levelof agricultural development. Only if agriculture hasimproved,
canChina reach itsestablished goal well.An improved agriculture will layasolid founda-
tion for Chinese economic and social development inthe next decades, but agricultural
deterioration will result inafailedeconomic development. Nor isthisall,sincethe signifi-
cance of developing Chinese agriculture soon has already extended beyond China. It is
clearthat if abig country like Chinawantsto maintain its balance in supply and demand
of food byapproaching the international market, itwill definitely causeastrong fluctua-
tion in international grain market and prices. It might not be agood thing, neither for
domestic producersandthefinanceof grain exporting countries, nor for the food deficit
nations.
However, it isnosimpletaskto improveChina'sagriculture.Undoubtedly,thedevel-
opment of Chineseagriculture mustrelyon China'sown efforts.Usingthe successfulexpe-
rience of other countries, especially developed countries, however, is indispensable for
China:what Chinagenerally lacksisnot naturalresources,but institutional aspects.Gener-
allyspeaking,China hasnot established effective institutional systems,suchassystemsfor
landuse,finance,marketing,cooperation,education-research-extension,structuralsystem
and government policy, requiredfor developing agriculture until now.Asmentioned be-
fore, institutional systemscanbetransferred from onecountryto another country,which,
of course,isnotthe casefor natural resources.Thetransferability of institutional systems
provides Chinawith anopportunity to usethe experience of other countriesasapoint of
referencefor agricultural improvement. Italso provides apossibility for developed coun-
triesto translate their experiences to developing countries.
The Netherlands isadeveloped country and itsagriculture isrenowned throughout
theworld.Whenforeigners mentionthe Netherlands,they areboundto mention flowers
first,oneagricultural sector2.Tosomeextent,the flower isthe symbolof the Netherlands
because agriculture isamajor part of the Dutch economic miracle.The Netherlands has
set up successful institutional systems enabling itsagriculture to flourish. It is important
and necessaryto summarizethe experience of Dutch agricultural development and apply
thisexperienceto Chinaandother developingcountries.Itisalsoverysignificantto derive
a new theoretical concept and model from the Dutch experience for Development Eco-
nomics.
The Netherlands isaverydensely populated country. Agricultural development has
demonstrated that the moredenseacountry is,the more successfulthe economic devel-
opment, especially in agriculture. Though lessdensethan the Netherlands, China isalso
adensely populated country. Fromthisviewpoint, Dutchagricultural development issuit-
ablefor China.
Eventhough Dutchagricultural development isbasedon afree market economy, it
ispossibleto applythe experienceto China becauseChina hasgiven uptheir centralized
planningeconomyandisstrivingfor amarketeconomywith Chinesecharacteristics.China
hashadthe soilto grow Dutchexperience.Therewill not be any institutional barriers to
introduce the Dutch experience to China.

1
Lester R. Brown, WHO WILL FEED CHINA, World Watch,
September/October 1994.
It is said that there are three treasures in the Netherlands: tulip,
windmill, and clogs.Thesethree treasures are all associated with agriculture.
Tulip,ortheflower industry, isone of the sub-sectorsof agriculture; windmills
were usedto mill grain (agricultural product processing) and to pump water
out of farmland; these were important power factors in agricultural
production; clogs, being waterproof, are useful for farmers and fishermen
alike.

16
1.2 Objectives of the report

Themainobjectiveofthisreport isto summarizethe historyof agricultural develop-

ment in the Netherlands and to apply the Dutch experience to China soasto trans-
form

17
Chineseagriculture.Another keyobjective isto deriveanew concept from Dutchagricul-
tural development for Development Economics.Theobjectives of the report are fivefold:
first,to dissectthe Dutch agriculture from abird's eyeview soasto present the ma-
jor features and symbols of Dutch agriculture;
second,to analysethe process of Dutch agricultural development from a historical
view point;
third,to summarize Dutch agricultural development basedonthe features and pro-
cessesof Dutch agricultural development so asto bring the factors leading Dutch
agricultural development to successto light;
four,to tryto deriveanewconceptabout Dutchagricultural development for Devel-
opment Economics,thereby showingthe significance of Dutch agricultural develop-
ment in Economics;
five,to apply Dutch expertise inagricultural development to Chineseagriculture,so
asto transform it.

The report concerns Dutch agricultural development and its importance to China.
Themainemphasisisonexploringthe development. Ultimately,this report intendsto use
Dutchexperience asapoint of referencefor optimally transforming Chinese agriculture.

1.3 Approach

An approach isatool of research.Ifthe approach usedisnot appropriate, it is diffi-

cultto reachthe goal. The approach, however, isnot omnipotent. The best approach in
any research isone which isconsistent with the research purpose, not just the most ad-
vanced approach. Eventhough an approach isthe most advanced from the point of its
own function,it could not beagood one if it doesnot hold consistent with the purpose
of research.My philosophy inselectingamethod isthatthe simpler one isbetterthan the
intricate one if they both havethe same result. Simple methods functioned better than
intricate methods in many researchprogrammes which have already been carried out. In
socio-economic research, we should not fall into the trap of using a method for the
method'ssake.
Thisreport ismainly basedon desk research.Abstracting scientific concepts and the
essence in things from their outward appearance, isthe fundamental approach I have
used.Comparison asaresearch method iscontinually used inthis report.
Nomodelling work waselaborated inthe framework of my research. But my study
wasmainly basedon many researchconsequences,someof whichwere basedupon mod-
elling work that had been done on Dutch agricultural development. Modelling work is
the indirect basisof my study.
What must be mentioned concerning the methodology isthat in the Netherlands
fisheries isnot included inagriculture accordingto the Dutch Standard Industrial Classifi-
cation, unlike in mostcountries.Thisrequired adjustingthe database by including fisher-
iesto enablecomparisons. Exceptfor the caseswhere nodata isavailable,all agricultural
counts inthis report include data on fisheries. Fortunately, there islittle deviation when
Dutchagriculture iscompared directlywith other countries becausefisheriesonly makes
up asmall part of agriculture inthe Netherlands.
To present agricultural policymakers in China with ageneral framework of Dutch
agricultural development andto helpthem obtain acomprehensive understanding of all
major aspectssoasto establish aproper institutional systemfor Chinese agricultural de-
velopment, Ihaveattemptedto includeasmanyaspectsaspossible.So,both broader and
more general issuesmake upthis report.

1.4 Structure

Thereport consistsof sixchapters.Chapter 1isaboutthe statement of researchcon-

cern and objectives. Chapter 2 focuses onObjective 1.Thegeneralappearanceof Dutch

18
agriculture, includingthe natural background,the current situation,the contribution to
the whole economy, andthe position inaworldwide context, isdiscussed inthis chapter.
Chapter 3dealswiththe analysisof long-term agricultural development.Thefunda-
mental subject ishow Dutch agriculture gradually improved.The issuescovered include
the distinguishing features of eachdevelopmental stage and the accompanying changes
in institutional systems.Generally speaking,this chapter corresponds to Objective 2.
Chapter4 isconcernedwith summarizing Dutch agricultural development.The insti-
tutional systemsthrough which Dutch agricultural development met with success,includ-
ingsystemsof landownershipandtenure,finance,marketing,cooperation,farmers'orga-
nization,education, researchand extension,and government policy are described exten-
sively.Thischapter isthe most important part of the report.
Chapter 5handlesObjective 5.Anattempt ismadeto abstractanewconcept,i.e.the
Dutch Model,for Development Economicsfrom Dutch agricultural development.
Chapter 6 translates the Dutch experience to Chinese circumstances. The focus is
placedonwhat Chinacanlearnfrom Dutchagricultural development.Thelag indevelop-
mentofChineseagriculturecomparedwiththe Netherlandsandthe mainobstaclesfacing
Chinese development are also discussed briefly inthis Chapter.

19
2. GENERALAPPEARANCE OFDUTCH AGRICULTURE

Byunderstanding the general appearance of Dutch agriculture, Dutch agricultural

development can beexploredwell.A general picture of Dutch agriculture will be drawn
by looking at the natural background,the current situation,the contribution to the na-
tional economy, andthe position on the world's scoreboard.

2.1 Natural background

Agriculture, unlike other industries,reliesmuch on natural resources. In agriculture,

landnotonlyfulfillsthe roleof alocationfactor asitdoesfor manufacturing industry and
other non-agricultural industries, but it isprimarily an indispensable production factor.
This isespeciallytrue for arablefarming,horticultural field cropsand stockfarming. Only
inthe caseof modern operations involved in intensive animal husbandry and greenhouse
horticulture,which are similar to industrial operations, does land mainly fulfill the func-
tion of location factor. Other so-called Ricardianfactors \ including climate,soil fertility,
supply channels (such asharbours) or distribution areas, also play an important role in
agricultural production.Afavourable natural background isan assetfor acountry's agri-
cultural development.
Ingeneral,the Netherlands hasamore favourable natural background for agricul-
tural development, but there are alsosome unfavourable factors.

2.1.1 Favourable points

The following is a list of favourable factors for agricultural development in the

Netherlands.

Flat land

AsapartofthecoastalplainofWestern Europe,situatedaroundthe estuariesof the

rivers Meuse, Rhine and Scheldt,the Netherlands, onthe whole, isapredominantly flat
country.Therearenomountains,not evenanything remotely likeamountain.Onlyinthe
eastern part and inthe extreme south near Maastricht, where the Maastricht Treaty was
signedwhich ledto theformation of the EU from the EC, canafew hillsfound.The high-
estpoint, only 323mabovesealevel,isnearVaals.Along the coastsand-dunes and flood
barriers protect the country against flooding. Dikes have also been built along rivers to
prevent inundations.
Many tourists always complain there isno mountainous landscape in the Nether-
lands. But from the agricultural point of view, the Netherlands isa rare place.The flat
land iswell suited for farming, because it ishighly accessible;also,because it isconve-
nient

1
D. Ricardo, British classical economist, created the concept of
ComparativeAdvantages in Economics.Hestressedthat the trade flows result
from comparative advantages, i.e. the relative, rather than from absolute
profitability. In this view, these advantages are linked to a favourable
geographic position andthe availability of natural resources.These immovable
production factors arecalled Ricardianfactors.

20
for mechanization, there is little soil erosion and consequently no loss of considerable
amounts of minerals for crops \

Moderate climate

Although it issituated inlatitude 54°~51°North,dueto the proximity ofthe seaand

the warm North Atlantic Gulf Streamwhich passescloseto the coast,the Netherlands has
amoderateseaclimate,characterized bycoolsummersandmildwinters.Thetemperature
doesnotfluctuate greatly inthe courseof adayor ayear;the average January tempera-
ture is2°Centigrade andthe average Julytemperature is 17°Cin July.The average year
temperature is10°C, the lowesttemperaturesoccurring inJanuary(-1°C)andthe highest
inJuly(+22°C).
Precipitation,averaging about 800 mm, isfairly evenly distributed throughout the
year.Ground frost does not occur frequently. Variations in climate between regions are
small.Thedistance of morethan 300kmfrom northto south hassomeinfluence on tem-
perature, andthe influence of the seadecreasestowards the east.
The mild, damp climate isbeneficial for pastures neededfor stock breeding and for
horticulture in the coastal regions. Fisheries suffers very little from ice during the mild
winter.

Convenient communication

The Netherlands hascountless linkswith the European hinterland.Three large rivers

flowing intotheworld's busiestseahavemadethe Netherlandsoneoftheworld's largest
and most important centresoftransport anddistribution.All seaports,from Delfzijl in the
northeast through Amsterdam and Rotterdam to Vlissingen andTerneuzen inthe south-
west, are interconnected by acomplex system of inland waterways which give accessto
and from Germany, Belgium, France and beyond. For decades Rotterdam has been the
largestseaport intheworld:everyyear some32,000ocean-going shipsmoor at this port,
transporting almost 300milliontonsof cargo.Present plansforesee an increaseto about
400milliontons bytheyear 2010(VNO-NCW, December 1995).Morethan aquarter of all
seacargo destined for Europe istranshipped in Rotterdam.Afleet of 6,000 inland water-
way craft,the largestof itskind inthe world,carriestwo-thirds of EUwaterborne cargo.
The canalswhich are part of the main drainage system arealso of great importance for
inland shipping.
The extensive rail network links up with foreign railways at a great number of
points. Inthe near future,the railway link between Rotterdam and Germanywill be up-
graded andthe high speed railway from Parisand Brusselswill be extendedto Amster-
dam;trains travelling at up to 300 km per hour will connect Amsterdam and Rotterdam
with Brussels,Parisand London.Therelatively dense Dutch road network ispart of anet-
work of European motorways. Dutch airports provide accessto everycorner of the world.
The largest airport in the country, Schiphol, isregularly voted best European airport in
opinion polls.All this hasearned the Netherlands the name 'Gateway to and from Eu-
rope'.
Theconvenient communication provides Dutch agricultural products accessibility to
the world market. Freshflowers canreachconsumersoutsidethe Netherlands inasingle
day. Convenient transportation also helps adjust production structures by importing
cheaperfeedstuffsto developextensiveexport-orientedstockbreeding.Undoubtedly, the
favourabletransport conditions arethe solidfoundation for the outward oriented Dutch

'For example, in China mountain areasaccount for about 70% of total

land area.Owingto the soilerosion in unflat land, many minerals suchasN, P
and Kare lost every year. These N, Pand K minerals lost every year are the
equivalent of thousands of tons of chemical fertilizer. Soil erosion not only
makesfarmland infertile, but alsoraisesthe costof agricultural products. Even
more,soil erosion raises riverbeds, resulting in easier destruction of farmland
through flooding.

21
agriculture.

22
Strategie location

Geographically,the Netherlands hasan extremely favourable strategic location.As

figure 2.1shows,the Netherlands isnot only agateway to andfrom Europe, but also in
the Europeaneconomiccore region.Thisstrategic location makesthe Netherlands cater
well for the needs of a large part of Europe, amarket with millions of consumers.

Fcor">mital[rancfss,nEuope fcuropean economic .,., .^^

cor , e i w N
E D E m p w n Unon * 9 !* C V $ ^ ~ *
W i EasternEtiiope 'Sun-Belt'-t-gion } \ £ .
[""IgFfA Sonne.Em^pnif.iWlarketingData. 6tU.Eutomfaniürt
^a.^rrrry>

Figure 2.1 Thelocation of the Netherlands in Europe

Dutch agriculture already benefitted substantially from this location in the past.
From 1900onwardsthe neighbouring countries United Kingdom,Germany, Belgium,and
France,experiencedanincreaseddevelopment of manufacturing industries.Theyattained
aneverhigher levelof prosperity, andtheir demandfor high-priced agricultural produce,
including not only butter, cheese,eggs, bacon and vegetables, but also other products
suchasbulbs,flowers,ornamental shrubsandforced early crops,increased considerably.
Agricultural development inthese countries, however, lagged behind other industries.
There was even atendency to revert to less-intensive farming as many people left the
rural areasto seekfor better-paidjobs inthe towns.Thisprovided the Netherlands with
agood opportunity to export agricultural produce to these countries.
Lookingto the future, Dutch agriculture will probably benefit morefrom this loca-
tion. Political changes in Eastern Europe in 1989 have created a combined market of
about 800 million consumers.The political barriers blocking Dutch agricultural produce
from entering EasternEuropeancountrieshavenotalreadyexisted.Undoubtedly,thiswill
give Dutch agriculture more chances to send its products into these areas. In fact, the
Netherlands hasalready recognizedthis point and isseizingthis opportunity to promote
itsagriculture to develop further.
We have listedthe favourable points of Dutch agriculture in natural background as
above. But it needs to saythat although the Netherlands has more favourable natural

23
background, the favourable natural background could not become realistic economic
achievement automatically ifonecountrycannot makethe bestuseofthem.Thevaluable
point isthat the Netherlands hasseizedthose opportunities well and made the best use
of them.

2.1.2 Unfavourable points

There are alwaystwo sidesto everything. Dutch agriculture alsofaces some unfa-
vourable points in natural background.

Threat from thesea

Theseacanbefriendly, but isalsothe greatest enemy inthe Netherlands.There is

a love-hate relationship between the Dutch and water.
The Netherlands isalow country.The lowest point inthe country issome 6.7 m be-
lowsealevel.Although morethan 25%ofthetotal areaofthe country isbelow sealevel,
about 60% ofthetotal population liveintheselow-lying areas.About 40% ofthe country
would becoveredwith water at regular intervals if the dunesand dikesdid not exist.The
threat from the water, especially from the sea, istremendous. Theflood disaster of the
stormtide ofthe night of January 31,1953, isaclear indication.A permanent vigilant atti-
tude towards the sea isnecessary.
Threatfromtheseato agriculture ismanifold.Highspringtideswere oftenthecause
of dikebreaks,extensive inundations,temporary andsometimes permanent lossof land.
Seawater can also flood the farmland via estuaries and inlets. For example, about
150,000ha of farmland were lost inthe flood disaster in 1953.
Thankstothesea,there isafaircloudcover inthe Netherlands.Theaverage number
of hoursof sunshine isonly 1,570.Inthe summer there istoo little sunshinefor the pro-
duction of certaintypesof crop.Toacertain extent the shortage of sunshine placessome
restrictions on Dutch agricultural development.

Pressure from the density

Although the Netherlands isasmall country which covers only41,526 square kilo-
metres, it hasapopulation of more than 15.5 million. Lessland and more people make
the Netherlands one of the most densely populated countries in the world.With more
than 450 people per square kilometre, which isabout ten times the world average, the
population density issecond highest inthe world.Population densities areeven consider-
ably higher inthe 'Randstad' conurbation 1inthe western Netherlands.
The high density exerts more pressure on the limited (agricultural). Consequently,
agriculturaldevelopment ismoreintensive,ashistoryhasshown.However,more intensive
agriculture isbound to have negative effects on the environment. This results in Dutch
agriculture beingfaced with anew kind of challenge.

2.2 Current situation

Dutch agriculture isoneof the few leading agricultural systemsinthe world with its
own distinguishing features.

2.2.1 Productive level

Normally the indicators of partial productivities, such aslabour productivity, land

1
'Randstad' conurbation is made up of the cities of Amsterdam, The
Hague, Rotterdam, and Utrecht, and anumber of smaller cities between the
former ones.It isthe economic heart of the Netherlands.

24
productivity and capital productivity, andtotal factor productivity (TFP)areusedto dem-

25
onstratethe productive levelof agriculture. Dueto the limited data,only labour produc-
tivity and land productivity are used here to reflect Dutch agricultural productive level.
Ingeneral,Dutch agriculture hasahigher level of labour productivity and land pro-
ductivity.Calculatedfrom Eurostat data,agricultural labour productivity, i.e. grossvalue
addedat 1990priceandexchange ratesperAWU 1 peryear,was41,223 ECU2inthe Neth-
erlands in 1994.Asshown below (seesection 2.4),this level setsthe tone in Europe.Set-
ting 10European member states3at 100,the agricultural labour productivity index in the
Netherlands was 215 in 1975, 199 in 1980,and 234 in 1985 (Terluin, 1990).These levels
were alsothe leading ones in Europe.Accordingto FAO,calculated in 'International U.S.
Dollar' (IUSD),the agricultural labour productivity inthe Netherlands in 1991was44,339
IUSD, ranking among the highest inthe world. In 1995 inthe Netherlands, on average,
cereal production per man-year in agriculture is5,741 kg,meat production is11,260kg,
and milk production is52,465 kg.
Dutch agricultural land productivity isamongthe highest inthe world.In 1991, pro-
duction value per hectare was2,468 IUSD,which ismuch higher than United States and
France. For 1995,arable production per hectare wasasfollows: winter wheat 8,800 kg,
sugar beet 56,000kg,potatoesfor consumption 41,000kg,spring barley 5,700 kg,fodder
corn 11,500 kg 4.All of these rank among the world's highest production levels. In the
horticulture sector, especially glasshouse horticulture, land productivity issohigh that it
isevenmeasured persquare metre.Tomato production per square metre isabout 45 kg
and cucumber production per square metre isabout 66 kg in 1995;per hectare, tomato
production reaches450,000kgwhereascucumber production reaches660,0005.TheNeth-
erlandshasahighlydevelopedglasshousehorticulturewithaconsiderableland productiv-
ity.Consequently,the Netherlands isalsoknown as'GlassCountry', and partsof it belong
to 'GlassCity'. Inanimal husbandry, milkyieldper cow is6,596 kgandthe number of eggs
per layer is306 in 1995.

2.2.2 Production structure

Fromastructural point of view, Dutchagriculture isstill dominated by livestock pro-

duction, asshown in figures 2.2 and 2.3 and table 2.1. This isa major feature of Dutch
agriculture which differs from China.
From figure 2.2,we can clearly seethat the agricultural land index in the Nether-
landsisnear 60%.It ishigher than most in mostcountries.There ishardly anydesert land
or other landwhich cannot beusedfor agriculture.Thisreflectsfrom another angle that
Dutchagriculture hasagood natural background aswe havepresented above.Figure 2.3
showsthat of total Dutch agricultural land use,grassland,which isusedfor animal hus-
bandry, amountsto morethan half, arable land amounts to about two-fifths, and horti-
cultural landcovers lessthan 6%. Evenof arable landthere isaconsiderable part which
isusedfor foodstuff production.Land usefor livestock breeding,then, dominates Dutch
agricultural landuse.
Looking atthe grossvalueof agricultural production,we seethat Dutch agriculture
isalso dominated by livestock production.Table 2.1 tells usthat more than 55% of the
grossvalueof agricultural productioncomesfrom livestock production.Theshareof horti-
culture inagricultural production is35%andfor arable production theshareisonly about
10%.

1
AWU, i.e. annual work units, is a standard agricultural labour input
measurement unit usedin EUmember states.2,200 hoursof work eachyear is
one AWU. In 1995, the volume of total labour input in agriculture in the
Netherlands is221,400AWU.
ECU, European Currency Unit, isavirtual currency used in EU member
states.One ECUis2.15827 NLfin 1994.
Germany, France, Italy, the Netherlands, Belgium, United Kingdom,
Ireland, Denmark, Greece,andSpain.
In dry weight.
5
On LEI-DLO'ssample information system database.
26
 (2.0%)
(15.0%) • Water
• Woodland
1=1
Residentialarea
• Naturearea
1=1
Infrastructure
(59.0%) i^iRecreation
(4.0%) • Industrialarea
(2-0%)
(1.0%) = i Agriculturalarea
• Other

Figure 2.2 Land usestructure in the Netherlands

Source:CBS.

(5.8%)

• Horticulture
(53.3%) V \ k (40.8%) • A r a b l e land
n Grassland
v x
Crrx>
Figure 2.3 Agricultural land usestructure in the Netherlands
Source: CBS.

However, it should be borne in mindthat if we compare the sharesof agricultural

land use and agricultural production value, the livestock production, which dominates
Dutch agriculture, isnot the sector with the highest comparative land productivity \ On
the contrary, horticulture,which despitecovering only 3.5% of total agricultural landac-
countsfor 35%oftotal agricultural production,hasthe highestcomparative land produc-
tivity.Thecomparative land productivity of arable production isonly 0.25,which ismuch
lessthan 1;the comparative land productivity of livestock production is1.03;for horticul-
ture thisfigure is6,which is24timesthe level of arable production and 6timesthat of
livestock production.Thesecomparative land productivity figuresshowthat the land pro-
ductivity of arable production isfar lower than the average land productivity, and that
comparative landproductivity of horticulture ismuch higherthan average land productiv-
ity. Fromthisviewpoint, arable production isnot of economy in land utilization. It isuse-
ful to recognizethis aspect for the adjustment of Dutch agricultural structure.
Regarding the production structure of each sub-sector, we canseefrom table 2.1
that arable production isdominated by potatoes,with ashareof about 56%of total ara-
ble production. Horticulture isdominated byflower production (almost 55%of total hor-
ticulture production), and livestock production is dominated by dairy cows and cattle

Comparative landproductivity isdefined asthe production value share

of one sector in total production value divided by its land useshare in total
landuse.

27
breeding (58% of total livestock production). These three dominating production catego-
ries, i.e. potatoes, flowers, and dairy cows and cattle breeding, contribute more than 55%
t o t h e gross value of agricultural production.

Table2.1 Thestructure of agricultural production in the Netherlands in 1994

Grossvalue Share in grossvalue

Million NL/

Total arable production 3,862 10.23

Of which: Cereals 371 0.98
Potatoes 2,163 5.73
Sugar beet 640 1.70
Onions 200 1.82

Total horticulture 13,115 34.74

Of which: Vegetables 4,002 10.60
Fruit 570 1.51
Flowers and plants 6,022 15.95
Flower bulbs 1,064 2.82
Hardy nursery stock 812 3.86

Total livestock production 20,780 55.03

Of which: Cattle (excluding calves) 4,463 11.83
Milk 7,566 20.04
Pigs 6,099 16.15
Poultry 1,336 3.54
Eggs 875 3.47

Source:CBS/LEI-DLO.

2.2.3 Regional concentration

Dutch agriculture has been mainly concentrated in specific geographic locations.

Each region has its o w n specialized production items which are consistent w i t h t h e re
gion's relative advantages. This geographical concentration, i.e. regional division of agri-
culture, is beneficial not only t o effective farmland utilization and land productivity, but
also t o labour productivity. High specialization in regions consists of one of t h e major dis-
tinguishing features of Dutch agriculture.
Generally speaking, asshown in figure 2.4,there are three main belts of geograph-
ical concentration:
the west, along t h e coast, comprises the horticulture belt, especially f l o w e r produc-
tion;
the central area,the dairy production belt. Dairy cows, also cattle and calf, are spe-
cialized in this area;
the east and more southern area: intensive livestock production,together w i t h dairy
f a r m i n g , namely pig and chicken production.

Arable production isscattered int h e southwestern, northeastern, and central polder

areas, which is also where arable f a r m i n g is specialized.

28
 Ä 6 Exvnsi» grassland( >35«)
A lotofgrassland(50-35 tt)
^ ^ Grass- and hortjcultual 1and
^ ^ AlotofhoHculturalland^SO»!)
• Ü Extensive «-ableland (. 30W)
Ä A lotof « r a H * land (j. 50 « )
ÜHs órass- and arabkland
Mixedgrafï-, herticultjral and araHe land

Figure 2.4 Theconcentration of agriculture in the Netherlands

Source:SDU.

2.2.4 Farm structure

Individual private family farms arethe basicfoundation of Dutch agriculture. Farm

structure isdefined asthe ratio of each kind of farms intotal farms. Itwill be described
herefrom farm type view andfarm sizeview.

Farmtype structure

Dutchfarmtype structure isshown intable 2.2.It isclearthat Dutchfarmsaredomi-

nated by livestockfarms,including grazing livestockfarms,pig and poultry farms \ mixed
livestock farms and mixed crop-livestock farms.There are nearly 70,000specialized live-
stock farms excluding mixed crop-livestock farms in 1995.The share of specialized live-
stockfarmsintotalfarmsis62%,morethan48percentage pointshigherthan horticulture
farmsandalmost 50percentagepoints higherthan arablefarms.Thefarm typewith pre-
dominantly livestock production isconsistent with the agricultural land useandthe gross
value of agricultural production.
Table2.2alsoshowsusthat the shareof part-time farms inthe Netherlands islow,
on average lessthan 18% of which permanent crops farms have the highest degree of
part-time farms,itsratio morethan 25%,itmeansthat morethan onequarter ofthe per-

1
Pigand poultryfarms arealsocalled intensive livestock farms or factory
farms inthe Netherlands.

29
manent crops farms isnot full-time farms; yet, t h e horticulture farms have t h e lowest de-
gree of part-time farms, its ratio lesst h a n 8%.

Table2.2 Number and type of farms in the Netherlands in 1995

Farm type Farm of which Share of each Ratio of

number fulltime kind farms in fulltime
farms total farms farms

1 1 % %

Arable 14,663 11,947 13.0 81.5

Horticulture 15,884 14,651 14.0 92.2
Permanent crops 5,750 4,247 5.1 73.9
Grazing livestock 54,613 44,008 48.2 80.6
Pigsand poultry 10,414 8,584 9.2 82.4
Mixed cropping 2,484 2,066 2.2 83.2
Mixed livestock 4,561 3,752 4.0 82.3
Mixed crops-livestock 4,828 3,621 4.3 75.0

Total 113,202 92,876 100.0 82.0

Source:CBS/LEI-DLO.

Itseemst h a t the low number of part-time farms inthe Netherlands could change the
traditional theory about part-time f a r m i n g . Some economists have concluded f r o m t h e
situation in eastern and southeastern Asian countries t h a t a large number of part-time
farms isan inevitable trend of agricultural development in densely-populated countries.
For t h e Netherlands, t h o u g h , this is clearly not t h e case.

Farm size structure

Dutch farm sizes are expressed in area sizes and economic sizes respectively. In ani-
mal husbandry, the number of dairy cows per f a r m and t h e number of pigs or pork pigs
per farm are also used t o reflect f a r m size.

Table2.3 Percentualdistribution of farms(including part-time farms)in relation to farm areasize

in the Netherlands in 1995

Farm type Farm size in hectare

<5 5-10 10-15 15-20 20-30 30-50 50- 100 or

100 more

Arable 10.4 16.0 9.8 7.4 13.1 21.2 18.4 3.7

Horticulture 81.7 9.1 3.9 1.8 2.0 1.0 0.5 *)
Permanent crops 61.5 17.4 10.2 5.4 3.5 1.4 0.6 *)
Grazing livestock 18.6 15.8 10.9 10.9 19.9 18.5 5.1 0.3
Pigsand poultry 67.2 18.4 8.7 3.2 2.0 0.5 .-*) 0.0
Mixed cropping 26.2 17.0 12.0 9.2 14.1 13.4 6.7 1.4
Mixed livestock 21.3 25.0 20.5 13.4 12.2 6.1 1.3 0.2
Mixed crops-livestock 18.5 23.7 14.2 9.9 12.7 12.7 6.7 1.6

Total 33.3 15.9 10.1 8.2 13.3 13.0 5.4 0.8

*) Lessthan 0.1.
Source:CBS/LEI-DLO.

30
Table2.4 Percentual distribution of farms (including part-time farms) in relation to farm eco-
nomic sizein the Netherlands in 1995

Farmtype Farm size inNSU

3- 12- 20- 32- 50- 70- 100 or

<12 <20 <32 <50 <70 <100 more

Arable 25.8 10.5 10.4 12.2 12.8 13.6 14.7

Horticulture 7.2 5.7 7.6 10.2 10.1 12.7 46.5
Permanent crops 15.2 10.2 11.9 15.9 12.6 14.2 20.0
Grazing livestock 24.4 9.1 7.7 9.5 12.4 18.0 18.9
Pigsand poultry 10.4 7.6 10.2 14.5 17.6 19.4 20.3
Mixed cropping 13.0 10.8 14.4 15.4 11.9 13.8 20.7
Mixed livestock 14.5 11.9 12.3 12.9 13.5 15.7 19.2
Mixed crops-livestock 33.2 14.5 11.5 9.5 8.3 9.8 13.2

Total 20.2 9.1 8.9 11.0 12.5 16.1 22.2

Source:CBS/LEI-DLO.

Table2.3andtable2.4showfarm sizesinthe Netherlands in 1995.On average, the

farmsizeis17.4ha.Morethan one-third offarmshaveanareaof lessthan 5ha;the num-
ber offarms largerthan 20ha isalmost one-third,whereas farmswith 100or more hect-
aresislessthan 1%. But if we observe eachof the sub-sectors,the situation isvery differ-
ent. Thegeneral trend, asshown intable 2.5, isthat the arablefarms,grazing livestock
farms,mixedcroppingfarms and mixedcrop-livestockfarmsarelarger, butthatthe horti-
cultural farms, pig and poultry farms, and permanent crop farms are smaller. In arable
production,the averagefarm isabout 34ha,the number of farms with anarea of more
than 20ha is56.4%,whereas4%offarmsarelargerthan 100ha.Inhorticultural produc-
tion,the averagefarm sizeisonly 3.8 ha.Morethanthree-fifths of farms aresmaller than
5ha.Of all horticultural farms,the shareof farms with an area between 0.01 and 1hais
30.3%;the share of farms smaller than 0.01 ha is2.3%.This meansthat in horticultural
production about one-third of farms are smaller than one hectare.

Table2.5 Average farm size (including part-time farms) in the Netherlands in 1995

Farmtype Farmsize in hectare Farm size in NSU

Arable 33.9 53.5

Horticulture 3.8 133.0
Permanent crops 6.3 68.0
Grazing livestock 20.4 58.1
Pigsand poultry 4.6 71.8
Mixed cropping 20.2 68.8
Mixed livestock 13.6 62.3
Mixed crops-livestock 20.6 46.2

Total 17.4 69.7

Source:CBS/LEI-DLO.

31
 Theaverageeconomicsizeis70NSU1; theshareof farmslargerthan 50NSUismore
than 50%and the share of farms smaller than 50 NSUislessthan 50%.However, there
isconsiderable difference ineconomic sizeamong the sub-sectors. For alltypes of farms,
horticulturalfarmswiththesmallestareasizehavethe largesteconomic size;arablefarms
(including mixed crop-livestock farms) which according to area size are among the five
largest categories, havethe smallest economic size.
In absolute terms, ascan be seen in table 2.5, arable farms have the largest area,
whereas horticultural farms havethe smallest sizes.Thearea sizeof arable farms isnine
timesthat of horticultural farms.Theeconomic sizeof horticultural farms is2.5times that
of arablefarms.It isclear that horticulture produces more net output with lessland and
that the accompanying land use ishighly efficient.
Table2.6presentsthe absolutesizemeasured in numbers of livestock inanimalhus-
bandry. In 1995,the average number of dairy cows per farm with dairy cows is46;35%
of farmswith dairy cowshave between 50to 100dairycows;the average number of pigs
per pigfarm is620,40% of pigfarms have morethan 500pigs. Morethan 20% of farms
have morethan 1,000 pigs.Over 7,000 farms have more than 75sows;about 4,000 have
morethan 150sows.8,000farmshavemorethan 300pork pigs,1,300 ofwhich morethan
1,000.Eachyear almost 20 million pigs are slaughtered in 32 slaughterhouses.

Table2.6 Percentualdistribution of farmsin relation to farmsize measuredinnumberoflive-

stocksperfarmintheNetherlandsin 1995

Farmswith dai iry cows Farmswith pigs Farmswith pork pigs

number of share of number of share of number of share of

dairy cows farms of pigs farms pork pigs farms
per farm per farm per farm

1- 10 9.0 1- 100 17.9 1-100 31.9

10- 20 9.0 100- 300 27.6 100-300 30.6
20- 30 12.3 300- 500 14.7 300-500 14.6
30- 50 30.1 500-1,000 18.9 >750 22.9
50-100 35.1 >1,000 20.9
>100 4.5

Source: CBS/LEI-DLO.

2.2.5 Farm income

Farmincome isabasic indicator of agricultural development. Dutchfarm income is

shown intable 2.7.On average,entrepreneurs in horticulture under glass have a higher
income per entrepreneur. Potted plantfarms havethe highest income per entrepreneur,
which isalsothe highest among allfarmtypes.There islittle difference inaverage income
per entrepreneur among farmtypes,though this doesnot meanthere are no differences
amongfarmsatall. Infact,there isconsiderablevarianceannually.Thisvariance motivates
farmers with higher incomes to do even better, and also causesfarmers with lower in-
comes to carry through improvements in their business.So,the adjustment of farms in

1
NSU, Netherlands size units, is an economic size unit based on the
balance per livestock speciesand per hectareof crops,for whichstandardgross
margins (sgm)are calculated bysubstracting specific costsfrom the yield. The
sgm = financial results minus direct non-factor costs. Direct non-factor costs
includesowing seed, fertilizers andpesticides,energyfor heating and lighting,
and other direct costs.Thesgm isexpressed in ECUand revised regularly. The
NSUin 1995equalsansgmof 1,320 ECU. Anexampleforthe baseperiod 1995:
1ha.Winter wheat =0.89 NSU,1dairy cow = 1.33 NSU.

32
income andfinancial result istowards more efficiency.

33
Table2.7 Farmincome in the Netherlands in 1995 *)

Farmtype Output per Family farm income

ƒ 100costs (in f 1,000 per
entrepreneur)

Accounting year May/April **)

Dairy farms 79 49
Intensive livestock farms 89 48
Arable farms 88 53

Accounting year Jan./Dec.

Horticulture under glass 91 53

of which: vegetables 88 37
cutflowers 92 63
potplants 94 72
Mushroom holdings 88 44

*) Averagefor lastthreeyears,not including the smallestfarms; **) Output perƒ 100costson ten-
ancy basis.
Source:LEI-DLO.

Asfar ascostproductivity isconcerned,t h e highest o u t p u t per ƒ 100costs in horticul-

ture under glass is91 guilders; 88 guilders f o r arable farms and 79 guilders f o r dairy farms.
Thevariance among farm types, and also among farmers, isobvious.There isaclose inter-
relationship between farm income and farm return t o cost.The farms w i t h higher returns
t o cost have higher income levels,t h e farms w i t h lower returns have lower income levels.

2.2.6 Trade capacity

Trade 1isthe most brilliant page in t h e book of Dutch agriculture. The international
orientation isthe most important feature of t h e Dutch agricultural sector. Dutch agricul-
tural development cannot be really understood w i t h o u t an understanding of Dutch agri-
cultural trade.
Dutch agricultural trade features more imports and much more exports, asthe tables
below show. In 1995,the proportion of agricultural imports t o total agricultural produc-
t i o n reaches 1.05,and the proportion of agricultural exports t o total agricultural produc-
t i o n comes t o 1.80;t h e value of agricultural exports is 1.7times t h e value of agricultural
imports. Agricultural trade accounts for almost 80,000 man-years each year. The model of
more imports and much more exports means t h a t Dutch people have given full play t o
their favourable communication advantages, and obtained more value added by import-
ing products, especially raw products, which have less comparative advantages in t h e
Netherlands and by processing them soast o make t h e m high value products. These prod-
ucts are t h e n exported. This ist h e essence of Dutch agricultural trade.

Import flow

The structures of agricultural imports (including coffee beans, cocoa beans, tobacco)
by products and by countries is listed table 2.8 and table 2.9, respectively. In t h e same ta-
ble, w e f i n d t h e structure of exports. More t h a n one-third of t h e imports is arable pro-
duce, about one- f i f t h is livestock, horticultural imports ranking t h i r d . Most of t h e arable
imports concerns products which are not g r o w n in t h e Netherlands. Animal foodstuffs
amount t o 21% of total arable imports. More than 95% of agricultural imports is destined

1
Trade means foreign trade in most of t i m e in my report.

34
for the processing industry. Inturn, most of the processed goods are destinedfor export
andfinal consumption; only 3% goesto agriculture.
The European Union isvitalto Dutch agriculture asasourceof agricultural trade,as
canbeseenintable 2.9.Morethan two-thirds of Dutch agricultural imports comes from
thesecountries,ofwhichthe importsfrom Germanyamountto nearly one-third.Germany
isthe largest source of Dutch agricultural imports. Outside EU,the United States isthe
biggest source of Dutch agricultural imports, itsshare isnear 9%. Of the EUcountries it
isinthe Netherlands that imports a lot of agricultural products from outside theEU.

Table2.8 StructuresofagriculturalimportsandexportsbyproductsintheNetherlandsin 1995

*)

Product Import Export

value share value share

in min. NL/ in% in min. NL/ in %

Arable products 14,359.3 36.5 21,970.1 32.6

grown inthe Netherlands 2,732.7 6.9 1,615.3 2.4
exotic products, drinks 6,584.1 16.7 10,560.8 15.7
animal feed 3,077.3 7.8 3,830.1 5.7
preparations 1,965.2 5.0 5,964.0 8.8

Horticultural products 7,387.9 18.8 17,525.6 26.0

grown inthe Netherlands 3,304.7 8.4 13,605.7 20.2
other horticulture products 3,056.9 7.8 2,170.9 3.2
preparations 1,026.3 2.6 1,749.0 2.6

Livestock products 7,961.7 20.2 18,583.6 27.6

livestock and meat 2,117.3 5.4 8,127.7 12.1
poultry and eggs 908.1 2.3 2,866.1 4.3
milk and dairy 4,936.3 12.5 7,589.7 11.3

Fishery products 1,520.7 3.9 2,363.1 3.5

Margarine, fats and oil 4,810.2 12.2 3,215.2 4.8

Other products 3,337.4 8.5 3,740.0 5.5

Total agricultural products 39,377.1 100.0 67,397.6 100.0

destined for agriculture 1,299.2 3.3
destined for industry and
consumption 38,077.9 96.7
virtually unprocessed 19,410.5 28.8
processed 30,396.3 45.1
non-Dutch 17,590.8 26.1

*) Registeredtrade only,actualtrade isestimatedto be10-15% higher.

Source: CBS/LEI-DLO.

Export flow

In 1995, Dutch agricultural export totals 67,400 million Guilders. This makes the
Netherlands the third largest agricultural exporter inthe world, after the United States
and France.Thevalue of agricultural exportsexceedsthe grossvalue of domestic agricul-
tural production byfar. Itisamiracle,aworld miracle.Morethan half oftotal agricultural

35
output from withinthe Netherlands isexported.Agricultural exports have becomeaprin-
cipal pillar of the Dutch economy.
Arable produce forms the main part of Dutch agricultural export, its share being
about 33%. Livestock products rank second,followed by horticultural exports and then
livestock product. Exotic products, sonot the products grown inthe Netherlands, domi-
nate arable product exports.Among horticultural exports, on the other hand, products
grown inthe Netherlands are most important. More than 45% of exports isprocessed,
whereaslessthan30%isvirtually unprocessed.Non-Dutch productsamountto aboutone-
fourth.
Germany is by far the largest consumer of Dutch agricultural produce, receiving
about one-third of exports. All EUcountries together account for nearly 80% of Dutch
agricultural exports.Outsidethe EU,North andSouthAmerica aremayorclientsfor Dutch
agricultural products; Eastern Europe isbecoming increasingly important for Dutch agri-
cultural exports. Nowadaysthe Netherlandsfocuseson developing the Eastern European
markets.

Table2.9 Structuresofagriculturalexportsandimportsbycountriesin theNetherlandsin 1995

*)

Country Imports Exports

value share value share

in min. Nif in % in min. NL/ in%

World 39,377.1 100.0 67,397.6 100.0

EU-15 23,663.5 60.1 52,824.6 78.4

France 4,173.1 10.6 8,047.7 11.9
Belgium and Luxembourg 5,249.0 13.3 6,787.3 10.1
Germany 7,236.0 18.4 20,646.8 30.6
Italy 937.9 2.4 4,869.1 7.2
United Kingdom 2,174.6 5.5 5,540.8 8.2
Ireland 1,135.4 2.9 467.8 0.7
Denmark 547.1 1.4 1,002.8 1.5
Greece 161.7 0.4 1,385.9 2.1
Portugal 136.4 0.3 421.9 0.6
Spain 1,085.1 2.8 1,674.5 2.5
Sweden 443.7 1.1 865.5 1.3
Finland 289.3 0.7 317.6 0.5
Austria 94.3 0.2 796.9 1.2

Third countries 15,713.6 39.9 14,573.0 21.6

USA 3,312.5 8.4 1,825.3 2.7
Restof OECD 1,107.5 2.8 2,443.2 3.6
Arabian countries in Middle
Eastand Iran 71.8 0.2 1,465.1 2.2
Eastern Europe 754.4 1.9 2,971.7 4.4
Other countries 10,467.4 26.6 5,867.7 8.7

*) Registeredtradeonly,actualtrade isestimatedto be10-15% higher.

Source: CBS/LEI-DLO.

Tradebalance

The Netherlands isamajor net exporter of agricultural products: exports far exceed
imports.Agricultural trade surpluswasnearly 17,000million U.S.Dollars in 1995, ranking
second largestintheworld,just behindthe United States.Dutchtotal agricultural exports

36
aresmaller than France's, but its net agricultural exports are higher. For asmall country
suchasthe Netherlands,this isremarkable.
Almostallproducts,exceptarableproductsgrown inthe Netherlands,other horticul-
tural products,margarine,fatsand oil,havetrade surplus.The products with the highest
trade surplus (137%) are horticultural products.Livestock products havethe second high-
estsurplus, 133%. Exportsexceed imports by 53% in arable products.
Germanyisthemostimportant sourceof Dutchagriculturaltradesurplus.Nearly half
of Dutch agricultural trade surpluscamefrom Germany in 1995.Inthe EU,every country,
except Ireland,contributes to the Dutch agricultural trade surplus.Asawhole, EU coun-
triesaccountfor allthe Dutchagriculturaltradesurplusbecausethe surplusfrom EU coun-
triesexceedsthetotal surplus.Thismeansthat Dutch agricultural trade balance isin defi-
cit outside EUcountries asawhole.The United Statesisthe biggest source of Dutch agri-
culturaltrade deficit. Exportsto the United Statesisonly 55%of importsfrom the United
States inthe Netherlands in 1995.
Onaverage, Dutch net agricultural exports per hectareof cultivated land amounted
to about 16,000U.S.Dollar; per agricultural labour force attained around 67,000 U.S.Dol-
lars in 1995.These are world records. It isclear that Dutch agriculture hasthe highest
tradecapacity intoday'sworld.Ofcoursefood industry,transport, andtrade,among oth-
ers, play avery important role inthe export of agricultural products.

2.3 Contribution to the national economy

As a modern developed economy, the Netherlands hasthe samefeature asother

developed nations,i.e.arelatively smallshareof agriculture,agricultural labour and agri-
culturalvalueaddedinthewhole economy. Figure2.5andfigure 2.6showthat nowadays
inthe Netherlandsthe shareof the agricultural working population inthe total working
population islessthan 5% andthe shareof agricultural value added inGDPisabout 4%.
Although inthe Netherlands,comparedto thewhole economy,agriculture isasmall
sector, it isan important contributor to the national economy.Agriculture provides work
for more than 250,000 and an annual national income of almost 8,800 million guilders.

(5.0%)

(24.0%)

(71.0%) riculture
rUindustry

Figure 2.5 Structure of the working population in the Netherlands in 1994

Source: CBS.

More important isthat the net agricultural exports amount to about 90% of total
netexports (excluding servicesexports).Soeventhough agriculture isnotthe major sour-
ce of national income, undoubtedly it isthe major source of trade surplus and foreign
exchange inthe Netherlands. It isunthinkable for the Netherlands to maintain the bal-
anceof international payments without agriculture.

37
 (4.0%)

(27.0%)

(69.0%) ^agriculture
^industry

Figure 2.6 Structure of grossdomestic product in the Netherlands in 1994

Source:CBS.

Toget an insight intothe economicsignificanceof agriculture for the nationalecon-

omy,however, it isnecessaryto payattention not onlyto the shareofjustthe agricultural
sector in the national income, but also to the income share of those sectors connected
with agricultural production.Inthiscontextweshould mention the subcontracting indus-
try,which suppliesthe raw materials and services,and the industry, which processes and
distributes agricultural products.Theincomeof these industrial sectorsnowadays exceeds
that oftheagricultural sectorconsiderably.Theincomeshareof allthesesectorstogether,
includingagriculture,isestimatedto bearound 10% ofthe Dutch national economysince
1970,asshown intable 2.10.That meansthat approximately one-tenth of Dutch national
income has been earned in connection with the production and sale of nationally pro-
duced agricultural commodities.

Table2.10 Contribution of sectors *) directly or indirectly related to agriculture to national in-

come in the Netherlands

Income earned in % of national income

1970 1975 1980 1985 1990 1995

Agriculture 5.8 4.6 3.2 3.8 3.7 3.2

Food industry 2.0 1.7 1.3 1.4 1.4 1.1
Supply industry 2.4 2.4 2.3 2.3 2.4 2.3
Distribution stage **) 2.4 1.8 1.3 1.3 1.2 1.2
Capital goods industry 1.0 0.9 0.7 0.8 0.8 0.8

Total 13.6 11.4 8.8 9.6 9.5 8.6

*) Excludingthe processing of foreign raw materials;**) Trade,transport etc.between food indus-

try andthe consumer.
Source:CBS/LEI-DLO.

2.4 Position on the world's scoreboard

Dutch agriculture takesaleading position inthe world.Asmentioned before, total

Dutch agricultural exports rank third and net agricultural exports ranks second in the
world. However, asfar as land area isconcerned, the Netherlands is positioned some-
where after thefirst hundred or so.Forasmallcountrythis ismost remarkable and shows
the significance of the Netherlands' contribution.

38
 Withinthe EU,the Dutchagricultural sectortillsabout 1.6%of alllandundercultiva-
tion, while comprising 1.7% of the total number of holdings and producing about 8% of
the overall gross production value of the Union's agricultural sector. Dutch agriculture
producesmoreoutputwith lesslandandlabour,whichshowshow efficient Dutchagricul-
ture is.
Insection 2.2.1, we presented an overview of Dutch agricultural productivity. Asa
comparison,table 2.11mirrors more clearly the position of Dutch agricultural efficiency
inwestern Europe,which isone of the world's leading agricultural areas.Dutch agricul-
tural production, labour output and land productivity, hasbeenthe highest of 10Euro-
pean countries. Dutch agricultural labour productivity and land productivity was 115%
and 181% higher respectively than the average level in 1975, 100%and 250% higher in
1980,and 134% and 266% higher in 1985.Total grain 1(not including rice because there
is no rice grown in the Netherlands) production per hectare in the Netherlands was
9,650kg,the highest of the EU,which wasnearly onetime higher thanthe average level
of EU15countries in 1993.
Highproductivity asthefoundation of Dutchagriculture,that isthe basisofthe gen-
eral picture of Dutch agriculture.

Table2.71 Comparison ofDutch agriculturalproductivity with European countries

Country 1975 1980 1985

labour land labour land labour land

produc- produc- produc- produc- produc- produc-
tivity tivity tivity tivity tivity tivity

The average of ten countries = 100

Germany 118 126 107 119 105 109

France 122 87 114 93 126 94
Italy 76 140 98 171 93 171
Netherlands 215 281 199 305 234 366
Belgium 174 177 168 189 175 183
United Kingdom 108 44 130 57 128 56
Ireland 58 40 53 42 62 46
Denmark 142 91 135 102 223 130
Greece 57 151 60 180 56 172
Spain 75 59 67 55

Source: Terluin(1990).

1
Grain only includes cereals inthe Netherlands, unlike in China.

39
3. LONG-TERMTREND

Dutch agriculture hasa brilliant present, asdemonstrated in the last Chapter. But
what about its past? How did Dutch agriculture come to present from its past step by
step?What isthe longtermtrend of Dutchagricultural development? Looking backthese
historicalaspectsarehelpfulto understandthemysteryof Dutchagricultural development
andto holdthe future of Dutch agricultural development. Taking the history as mirror,
the upsand downs can be understood correctly' 1 .
Whenthe long-term trend isanalysed,an important (and difficult) issueistheclassi-
fication of developmental stages. Because different classifications of the same research
object often leadto different conclusions,classification isoften argued. Inthis report, on
the basisof development features,the courseof Dutchagricultural development is classi-
fied into four stages:
pre-moderntimes, before 1880;
first modernization phase, 1880-1950;
second modernization phase, 1950-1980;
sustainable growth, after 1980.

3.1 Pre-modern times: before 1880

The Netherlands derives its name from 'the Republic of the United Netherlands',
whichwasestablished inthe 16thCentury. Inthattime,William of Orange ledthe United
Provinces in a revolt against their Spanish rulers. After the so-called '80 Year War', the
country gainedformal independence in 1648.After independence, the Netherlands star-
ted itseconomic construction and social development immediately. Inthe 17th Century
the Netherlandswasthe leading maritime nation inthe world.Thisperiod was knownas
the 'Golden Century' or 'Golden Age' in Dutch history.
Agriculture, being afundamental sector of Dutch economy, began its development
asthe Dutch economyflourished. But ingeneral Dutch agriculture was inthe traditional
state itwasin before 1880,eventhough many achievementswere gained during this pe-
riod.
Geographically, agriculture developedfrom coastal areasand concerned dairyfarm-
ing.Thisisbecauselarge partsof the Netherlands, asdescribed in last Chapter, lie below
sealevel.Muchfarmland,particularly inthe seadistricts,wasmarshyand usuallytoo wet
for arable farming. Bydraining the land with the help of windmills, it could be usedas
pastureand hayfields,though it was unsuitable for arablefarming.Therefore a relative
specialization in dairy farming took placefirst inthese coastal areas.Dairy produce was
soldto consumers inthe Netherlands and beyond.
Higher daily wages per male labourer, higher rents per hectare of farmland, and
higher yieldspercowarethe eloquent proof that Dutchagricultural development started
from dairy farming inthe coastal areas.Thiscan beseen intable 3.1. Not only were the
figures higher than those in inland provinces, they were also higher than the national
average level.Wagesand rents, asthe price of productive factor, aredetermined by the
supplyanddemandoffactors.Thismeansthatthe higher pricesof labourer and farmland
were deducedbythe higher demand of agricultural productiontothesefactors inthesea

This isoneofthethreefamous expressions inancient China.Thosethree

expressions are: taking copper (in ancient China, the mirror was made by
copper) asmirror, one can bedressedsuitably; taking other people as mirror,
rights andwrongscanbeknown;taking history asmirror, highs and lows can
be understood correctly.

40
districts. Higher yields per cow are aclear indication of the higher level of agricultural
development inthe coastal areasthan elsewhere.

Table3.1 Agricultural wages and rents and yield per cow in the Netherlands at about 1810

Coastal provinces Inland provinces Netherlands

(1) (2) (3) (4) (5) (6) (7) (8)

Daily wages per male

agricultural labourer 0.76 0.82 0.80 0.88 0.86 0.60 0.54 0.48 0.65
(NL/)
Rents per hectare (NL/) 25 22 31 30 31 9 14 19 23

Milk yield per cow (hi) - 2.2 2.4 2.2 2.4 1.0 1.0 - 1.9

(1) Groningen, (2) Friesland, (3) North Holland, (4) South Holland, (5) Zealand, (6) Drente, (7)
Overijssel, (8) Gelderland
Source:van Zanden (1994).

Thespecialization indairy farming inthe coastalareashad both internal and exter-

nalconsequences.Itforced the farmers inthe coastal areasto buyfoodstuffs like bread,
insteadof growingtheir own cereals.Thefarmers also beganto buytheir tools from the
emergingfarm implements industry, insteadof makingtheir own.Thisinturn stimulated
the gradual commercialization of agriculture.So,this commercialization wasthe first ex-
ternal effect of the specialization of dairy farming inthe coastal areas.This helped form
and develop the domestic market and accompanying trade.
Becausethe coastal areasstopped growing cereals,an insufflent supplyfrom thein-
landareasobligedfarmers incoastal areasto import them from other countries and pay
for them with export revenues, butter and cheese being among the most important ex-
port produce.
Another remarkable development duringthis periodwasthe emergence of market
gardening and itsconcentration nearthe cities.Beginning inthe 17th century, all sectors
startedtoflourish,especiallytrade.Relatedindustriessuchasshipbuilding alsodeveloped.
Thepopulation alsogrew rapidly,mostly inthe largetowns.ThetradecentreAmsterdam,
for instance, already had about 100,000 inhabitants around 1600, and this figure soon
increasedto 200,000.The urbanization led to an increased demand for vegetables and
fruit, resulting in the emergence of horticulture, including flowers and bulbs, near the
cities.At the end of the 17th century, horticultural produce wasalready part of famous
Dutch exports.
However, someproblems were encountered during this period. Foremost was the
heavytax burden,imposed bythefederal government inthe coastal areas,which had to
finance one war after another in the struggle with England and France to be able to
maintain Dutchtrade activities.Butthe government did not do anything in return andas
a result, farmers hadto choose:either specialize in intensive production for the market
to paytaxes or retreatfrom agriculture altogether. Thefirst choice resulted in amore in-
tensiveform of agriculture,whereasthe secondoption reduced agricultural investments.
Thesecondimportant problem appeared inthe inland areas.Intheseprovincesagri-
cultural development wasfar behind.Beforethe 18thcentury, self-sufficient family farms
werethe main structure behind agricultural development inthese areas.Cereal produc-
tion prevailedandcattlewaskeptonlyfor manureandpower,with hardly any exportable
surplus.Unfavourable naturalconditionssuchaspoorsoilquality andan underdeveloped
infrastructure -few roads and canals-were important reasonsfor the lagging develop-
ment in inland areas.Themost important reason,however, was institutional:the feudal
system and the common grounds system. Undoubtedly the feudal system isharmful to
agricultural development. Thecommon groundssystem,asystem in which most pastures

41
were shared by all t h e inhabitants of a village, proved t o be a hindrance f o r individuals
w h o wanted t o innovate, because everybody had t o agree on any change. A l t h o u g h from
1800 onwards some efforts were made t o abolish this system,solving this problem by leg-
islation t o o k three-quarters of t h e 19th century. A barter economy was also a restricting
factor in t h e inland districts (Huizinga, 1986).
Generally speaking, Dutch agriculture developed w i t h a gentle u p w a r d tendency
before 1880, asshown in table 3.2. Gross production, labour input, agricultural land, pro-
ductivity, all increased at different rates. For example, agricultural gross production in-
creased 67.3% in 1880 against 1810, labour productivity grew 7%, land productivity rose
near 50%, milk yield per cow increased 3 2 % .

Table3.2 Long term development of Dutch agriculture, 1810-1880(in constant prices)

1810 1850 1880

Gross production (mill.guilders) 205 257 343

Labour input (1,000 man years) 308 420 482
Agricultural land (1,000 ha) 1,796 1,906 2,015
Production per
manyear in guilder 665 611 711
hectare in guilder 114 135 170
Yield per hectare (hi)
wheat 13 19.3 22.7
rye 15 18.0 17.2
barley 27 32.8 39.1
oats 25 32.4 35.3
potatoes 170 120 125
Yield per cow (milk in hi) 1.9 2.3 2.5

Source:van Zanden, 1994.

Table3.3 Thenumber of mouths fed by 100people working in agriculture in four countries

Country 1500/20 1600 1700 1800

EnglandAA/ales 132 143 182 248

Belgium 173 160 192 233
Netherlands 177 219*) 277
France 138 145 158 170

*) 1670.
Source:van Zanden, 1994.

Compared w i t h surrounding countries, Dutch agriculture had reached a higher stage

of development inthis period. Astable 3.3 shows, Dutch agricultural labour productivity,
was between 12t o 6 3 % higher t h a n three of t h e surrounding countries in 1800.

3.2 First m o d e r n i z a t i o n phase: 1880-1950

Roughly speaking, Dutch industrial revolution started in t h e first half of t h e 19th

century. This industrial revolution pumped t h e Netherlands into t h e so-called 'modern

42
economic growth'\ Atthe beginning ofthesecondhalf ofthe 19thCentury,Dutchindus-
trial development accelerated. Industrial development created not only a new demand
for agricultural products which provided new opportunities for agriculture, but alsoim-
provedthe infrastructure suchascanals,railway network, portsandtradeways which are
neededfor agricultural development. Inthe period 1851-1860the length of new canals
opened inthe Netherlands reached232km,a139km increaseintenyears;144kmof new
canalswere opened in between 1871 and 1880,which was an increase of 66 km sincea
decadeearlier.Thelengthofthesurfacedroadnetwork was8,542km by 1864;nineyears
laterthisfigure wasat 12,024km.Thelength ofthe railway network was335km in1860,
and4.5times longer in 1880(Griffiths, 1982).
Theincreasingdemandandimproved infrastructure providedfavourable conditions
for agricultural development. Against this background, Dutch agricultural development
started itscourse of modernization after 1880.
Themainfeaturesof Dutchagricultural development during this period arethe in-
troduction to agriculture of modern factors. Onthe production side,among others, we
have artificial fertilizer and new crop varieties. New institution systems are also intro-
duced,relatedto cooperations,finance,farmers' organizations, and education, research
and extension, related to the production relation, into agriculture 2.Thesefactors were
not onlythe basicforcesto drive Dutchagriculture towards modernization but they have
also becomethe basisfor the present agricultural system inthe Netherlands.
TheDutchgovernment playedakeyrolefrom the startofthis modernization phase.
Facing the agricultural crisis which arose from the imports of cheap grain from North
Americafrom about 1880to about 1900dueto considerable improvements intransporta-
tion,the Dutch government did not closethe border to protect Dutch agriculture asthe
German government did,buttook aseriesof measures, including the introduction of in-
stitutional factors andthe introduction of modern input factors mentioned above,to im-
prove agriculture andagricultural competitiveness.

3.2.1 Introduction of modern input factors

Inthe modernization processof Dutchagriculture,the gradual replacement oftradi-

tional input factors played an important role.

Diffusion of the useof artificial fertilizers

Artificial (chemical)fertilizer wasthefirst modern productive factor introduced into

Dutch agriculture. Dueto the advent of artificial fertilizers, far-reaching changes took
placeinthefertilization of agricultural landafter 1880.Becauseofthislink,manychanges
occurredinagricultureasawhole.Theintroduction of artificialfertilizer brokethe imped-
imentfrom the shortage of manure already existing in several areasand had a consider-
able impact on agricultural production.Itcreatedanewfrontier for not only agricultural
growth but alsothe chemical fertilizer industry.
Becauseartificial fertilizer representedthe new production force,there was a rapid
diffusion of the useof chemicalfertilizers in Dutch agriculture.Within ashort period, the
Netherlands becamethe largestconsumer of artificialfertilizer per hectareof arable land.
Fromthe artificial fertilizer imports 3 ,the rapid increase inthis usagecan beseen.Within
25yearsonly,the imports of Dutch artificial fertilizers increasedto morethan 105times

1
Theterm 'modern economic growth' was introduced bythe American
economistSimonKuznetsto describethecombination ofeconomicgrowth and
structural change in the Western world in the 19th and 20th centuries. His
work hasmadethe term ahousehold term in economic literature.
Accordingto KarlMarx,the productiveforceandproduction relation are
two basicfactorsto move economic and social development forward.
Priorto 1914,therewerefew artificial fertilizer firms.Nearlyall artificial
fertilizerswere imported.Sothe imports of artificial fertilizers provide a good
indication of their increased usage.
43
the levelof 1885/1889,nearly doubling everyfive yearsand with anaverage growth rate
of about 20%per year.Table 3.4showsthe percentage of land userswho used artificial
fertilizer around 1888. Insome areas,this percentage reached 66among large farms. It
is also clear that everywhere the larger farms pioneered the use of artificial fertilizer.
Though largefarmsgenerallytendto leadtheway inagricultural innovation,inthat time
even crofters and labourers beganto useartificial fertilizers.
Accordingtothe investigation ofthe StateCommission,thefirstcentresto useartifi-
cial fertilizers were, first of all, eastern Zeeuws-Vlaanderen and the peat colonies in
Drenthe and Groningen.Both regionswere important centresfor diffusion of the use of
artificialfertilizers. InDrenthe andOverijssel,thefarmers inthe peatcolonieswereinstru-
mental indiffusing the useof artificial fertilizers.Their example induced the farmers on
the sandy soil to start using them aswell. The new polders in North Holland were the
third area. The sea clay region in the southwestern Netherlands also consumed large
quantities of artificial fertilizers.

Table3.4 Numberoflanduserswhousedartificialfertilizersasapercentageofthetotalnumber
of landusersbyfarmsize, circa 1888, intheNetherlands

(1) (2) (3)

Labourers 0.3 4.5 16.7

Smallfarmers 2.6 18.6 42.9
Largefarmers 6.4 48.8 65.9

Total 2.0 17.9 38.4

(1)In16municipalitieswhere between0and 10%ofthe landusersusedartificialfertilizers.

(2)In10municipalitieswhere between 10and25%ofthe landusersusedartificialfertilizers.
(3)In6municipalitieswhere morethan25%ofthe landusersusedartificialfertilizers.
Source: vanZanden,1994.

By1936/38,the useof artificialfertilizers hadreachedahigh level.Theuseof fertiliz-

ersperacrewasasfollows: N 15kg,P20517kg,and K2019kg (Foreign Agricultural Ser-
vice, MLNV, 1959).
Two main factors caused the rapid diffusion of the use of artificial fertilizer after
1880. First, the supply of manure for intensive agriculture, as it had developed before
1880, was aserious bottleneck in many agricultural areas.Second,the growing output
andtrade of artificial fertilizers madethe relative priceof artificial fertilizers decline rap-
idly after 1880.The riseof the cooperative movement andthe expansion of agricultural
education after 1900also playedan important role inthe diffusion of the useof chemical
fertilizers.

Factoryprocessing of dairy products

Thefactory processingof dairy productswasanother innovation inDutch agriculture

after 1880.Theeconomies of scale inherent inthe production processand in marketing
the productswereanimportant aspectof dairy production.Butpriorto 1880,factory pro-
cessingof dairy products was rare;the problems involved with the production of butter
and cheese,especiallythe poorer quality onthe small farms,was not an urgent one.
Thesharp riseofthe margarine industry inthe 1870s,with itsconcentration on ex-
portsto England,hit Dutch butter exports,which consequently declined.FarmersinFries-
land, who were highly dependent on the marketing of butter, were the first to suffer
from thisblow. Tomaintaintheir position inthe butter market,they established the first
cooperative butter factory in 1886;this was lessriskyfor adairy farmer than producing
butter in a privately-owned factory. Friesland became the centre of factory-made
dairy

44
products after the late 1880s.Following the example of Friesland,this innovation spread
rather quickly to other provinces.
The innovation in butter production played a key role in agricultural development.
The increase in production and exports of butter and cheese, both quantitatively and
qualitatively,wasaccompanied byadramatic decreaseinproduction costs.Consequently,
all butter-producing farmers could benefit,especiallythe smallfarmers with less working
capital. It also created economies of scale in dairy processing and this was another step
towards further agricultural specialization.

New crop varieties

Inthe centuries before 1880,technical development in Dutch agriculture -suchas

new crop varieties, new systemof rotation, and equipment -wasthe result of trial and
error. Itwasmore or lessaccidental,uncoordinated experiments carried out by individual
farmers.The innovations spread from field to field when the farmers inthe immediate
vicinity sawthe innovator's successand consequently appropriated the innovation.The
diffusion of innovations wastherefore generally relatively slow.
After 1880,with helpfrom the government, anew system of innovation arose.The
construction of experimental agricultural fields started after 1890;so-called 'wandellera-
ren' -literally 'walking teachers',agricultural consultantswho walked through the fields-
experimented with new techniques and new crops, enabling farmersto seethe advan-
tagesofthe innovations.After 1900,the number of experimental fields increased rapidly.
This new system created many new techniques such asnew crop and livestock varieties,
and new planting systems,from which manyfarmers benefited.

3.2.2 Institutional factors

Modernizing agriculture not only requires new input factors -the hardware - but
alsosoftware: knowledge and information.Without software, like any computer system,
modern hardware in itself isinsufficient. Institutional systemsintroduced into Dutch agri-
culture provided the foundation for agricultural modernization.This isstill the case.
Thefirstfactor introduced intoagriculturewasthefarmers'andfarmworker organi-
zation.Although the Dutchagricultural organizations began inthe first half of the 19th
century 1,ittook until 1884before the first national umbrella organization wasformed,
the Netherlands Agricultural Committee. Once again it appeared to bevery difficult to
cometo someform of centralization. Later, in 1896,aRomanCatholic union was formed
out of the Netherlands Agricultural Committee, the Nederlandse Boerenbond (Dutch
Farmers Union). In 1918 a protestant farmers union was founded. The organization of
agricultural workerswasset up in 1900.Then,the first agricultural employees' organiza-
tion wasformed, Nederlandse naam (Netherlands Agricultural Labourers' Union). Now
farmers andfarmworkers hadtheir own national associationto presenttheir interests to
the national government.
Thesecond institutional factor wasthe introduction of the cooperative from 1880
onward. Inthe second half of the 1880sthe first agricultural cooperative was established
in the Netherlands 2 .The first dairy cooperative wasfound in 1886,which wasthe first
cooperative for agricultural products;the first cooperative vegetable auction wasestab-
lishedin1887.Afterthat numerouscooperativeswereestablishedeverywhere.Upto 1949
there were already 3,150 cooperatives; the market shares of agricultural cooperatives
were, respectively, 50% incredit, 6 1 % in buying infertilizer, 86% in cheese production,

'In 1805 the government established the Advisory Committees for

Agriculture. Later so-calledfree organizations were founded inthe provinces,
first inGroningen andZeeland in 1837.In 1850all provinceshadtheir regional
organizations. Thiswas areasonfor the government to disband the Advisory
Committees for Agriculture the following year.
Although the first agricultural purchasing cooperative was established
in 1877,the cooperatives for agricultural products were not formed till 1886.

45
85% in butter production, 84% in milk deliveries, 83% in industrial potatoes processed,
98% in salesof marketed vegetables andfruit, 75% in sale of intake of wool, and 60%
insaleof marketed flowers (NCR,1993).Cooperativescan beseenasinstruments of 'self-
help'.Throughthe cooperatives,thefarm andthe market came into contact for the pur-
chaseof artificialfertilizer,feed,seeds,andagricultural machinery,forthesaleandmanu-
facture of products, and for providing credit. The advantages of cooperatives are clear.
Firstof all,the cooperatives allowedfarmersto profit from the economies of scale in the
large-scale purchaseof inputs aswell asinthe saleand manufacture of products;the co-
operativesalsoallowedfarmersto buyand usemachinerywhich could not beused profit-
ablybyasinglefarmer. Secondly,the cooperativeswere helpful inregaining andexpand-
ing the farmers' position inthe markets,for example by increasing the pricesthey ob-
tained for their products aswell aschecking buyers' andsuppliers' monopolistic profits.
Cooperatives improvethe competitive power of farmers andstrengthen their position on
the markets.
Thethird institutionalfactor isthe cooperative agricultural financial system.Because
ofthe rapidimprovement intransportation possibilitiesbyseaand land inthesecond half
of the 19th century, Europe became accessibleto productsfrom far-flung agricultural ar-
eas. The massive flow of agricultural products to Europe caused an enormous drop in
pricesinthe Netherlands. Between 1870and 1895 grain pricesfell to lessthan half their
previous level.Becausemanyarablefarms hadconverted into livestock farms,dairy prices
andbeef pricesalsodropped after 1885.Theagricultural crisisbrought about agreat scar-
cityof moneyamongthefarmers,which ledto socialabusessuchaspaying in instalments,
loansat usuriousratesof interest andfinancial dependence of the individual farmers on
itinerant traders and on shopkeepers.To protect farmers against extortionate rates and
to promote agricultural development, in 1888agovernment-appointed study committee,
which of course had a broader function than simply supplying credit, emphasized the
needfor asound agricultural credit system.However,thiswould haveto besetup by the
interestedfarmersthemselves.It recommended the establishment of credit cooperatives
on the model of the Raffeisenbanks in Germany, which took place in 1896. Two years
later,two centralfarmers'credit bankswerefounded,the Cooperative Central Raiffeissen
Bank in Utrecht (non-catholic, the members of which were mainlythe local banks from
all over the country apart from the south), and the Cooperative Central Farmers' Credit
Bank in Eindhoven (catholic, the members of which were mainly the local banks in the
south,the east andthe west of the country). Right from the foundation of the farmers'
credit bank,the cooperative agricultural financial systemhasplayedavery important role
in agricultural development in the Netherlands. As mentioned earlier, up to 1949, the
share of farmers' banks in agricultural credit reached 50%.
Thefourth institutional factor isagricultural education, research andthe extension
system. During the agricultural crisis that arose asa result of foreign competition, the
Dutchgovernment chose notto closethe borders but to strengthen itsagriculture byset-
ting up asystemof education,researchandadvice.Inthiswaythe farmerswere provided
with the instrumentsto find solutionsto their economicthemselves. Known asthe 'three
pillars'of agriculture,education,researchandextension haveremainedthe basisof Dutch
agriculture.

3.3 Second modernization phase: 1950 -1980

After World War II,the economy asawhole in the Netherlands recovered quickly
andagriculture experienced aboost.Agricultural development involved astrong growth
of production and exports, also productivity, asillustrated intables 3.5 -3.8.
Theaverageannual growth rateof grossagricultural production between 1950and
1980wasabove4%,the highestgrowth rateoccurring inhorticulture, morethan 5%.The
ratefor livestock farming washigher than4.5%.Theaverage annual growth rate of agri-
cultural exports was morethan 6%.
The most remarkable growth appeared in agricultural productivity. Fromtable 3.8
wecanseethatthegrowth rateof agricultural productivity peryearwasabove3%,inthe

46
period 1960-1970 itwasashigh as3.7% annually;the contributive shareof TFP inagricul-

47
Table3.5 Agricultural growth in the Netherlands in 1950-80

Period Gross Intermediate Net production Net national

production input in agriculture income

average annual growth in %

1950-60 4.6 6.8 3.3 4.0
1960-70 3.8 4.8 2.7 5.3
1970-80 4.6 4.7 4.2 2.8

Source:CBS/LEI-DLO.

Table3.6 Growth of grossproduction per subsectorof agriculture in the Netherlands in 1950-80

Period Arable Livestock Horticulture

farming farming

average annual growth in %

1950-60 4.4 4.9 3.9
1960-70 1.5 3.8 5.3
1970-80 2.3 4.6 5.8

Source:CBS/LEI-DLO.

Table3.7 Growth of agricultural exports in the Netherlands in 1950-80

Period Exports growth per year in %

1950-60 7.1
1960-70 5.8
1970-80 5.1

Source:CBS/LEI-DLO.

Table3.8 Growth of agricultural productivity in the Netherlands in 1950-80

Period TFPgrowth per year in % Contributive share of TFPin

agricultural growth in %

1950-60 2.16 59.8

1960-70 3.70 97.6
1970-80 3.28 74.7

Source: Rutten, 1992.

t u r a l g r o w t h 1, also called t h e relative contribution of TFP in agricultural g r o w t h , was

above 60%, in 1960-70 it was so high w i t h 98%. That means t h a t on average more t h a n
60% of Dutch agricultural g r o w t h during t h e period 1950-1980 came f r o m an increased
productivity, or improved agricultural efficiency. The high efficiency ist h e major source
of Dutch agricultural g r o w t h .

1
The contributive share of TFP in agricultural g r o w t h is defined as t h e
ratio of TFP g r o w t h rate t o total agricultural production g r o w t h rate (Feng,
1989,1992). It iscalculated by dividing the TFPg r o w t h rate by the g r o w t h rate
of total agricultural production.

48
 Structuralchanges,asexpressedbymechanization,scaleenlargement, specialization
and intensiveness, arethe core of Dutch agricultural development during the period of
1950-80 isthe structural changes,which were showed in.

3.3.1 Mechanization

Agricultural mechanization isone of the most remarkable changesthat took place

inthe Netherlands between 1950and 1980.
InDutch practice,duringthis period,optimization of output or addedvalue per per-
soninagriculture wasrequiredto achievethe samelevelof purchasing power asoutside
agriculture. Mechanization servedto increase output per person.The price relationship
between labour and capital also ledto mechanization.
After the war, especiallysince 1950,the rebuilding activitiesandthe growing indus-
trialization provided goodjob opportunities for the agricultural workers who wanted to
leavethe sector.At the sametimethe discrepancy between income perperson inagricul-
ture and in industry drew many people awayfrom agriculture. So,the absolute decrease
of agricultural workforce inthe Netherlands started immediately after theWW IIand de-
veloped inavery rapidway (table 3.9).The average annual decrease rate of agricultural
labour was about 3% during the period 1950-1980. Inthe first two decades after 1950,
more hired labour left than farm family labour.

Table3.9 Changetrendof agriculturalworkforceintheNetherlandsin 1950-80

Period Farmfamily labour Hired labour Total

annualchangein%

1950-60 -2.2 -2.8 -2.3

1960-70 -3.2 -5.5 -3.6
1970-80 -2.0 -1.2 -1.9

Source: CBS/LEI-DLO.

Theshortage of agricultural workforce resulted inthe useof more machinery. Asa

result, in the 1950sand 1960s mechanization in agriculture developed very fast in the
Netherlands, ascan beseen intable 3.10.

7ab/e3.10 Increase ofagriculturalmachineryintheNetherlandsin 1950-80

Period Tractors Milk Combine Potato Sowing and

machines harvesters harvesters planting
machines

annual change in %

1950-60 12.9 26.0 9.7 16.3 3.7

1960-70 6.7 8.3 9.5 0.6 -
1970-79 2.0 -3.4 -2.4 -1.6 0.6 *)
1950-79 7.3 10.1 5.7 5.0 1.7

*)1960-79.
Source: CBS/LEI-DLO.

49
3.3.2 Scale enlargement

Scaleenlargement, especially the scaleenlargement per agricultural labour, isthe

most important structural change in Dutch agricultural development after 1950.Thereis
acloserelation between scaleenlargement and mechanization:without mechanization,
scaleenlargement on the farm isimpossible.
Mechanization alone is not sufficient, though. The enlargement of one farm will
usually be at the expense of other farms. If other farms do not abandon their holdings
and maketheir landavailable,enlargement of the independent farms isonly possible to
a limited extent dueto the land-bound production.Thismeansthat related institutional
system isnecessaryfor scaleenlargement in agriculture.
The locusof scaleenlargement of Dutchfarms inthe period 1950-1980 isshown in
tables 3.11-13.Theshare of holdings larger than 30 hawas morethan 16% in 1980,11
percentage pointshigherthan in 1950;the shareof holdingssmallerthan 10ha declined
32percentage points in 1980against 1950.Asfor cultivated landarea,the shareof farms
with lessthan 30hawas39% in 1980,17 percentage points morethan in 1950;the share
of farms with lessthan 10 ha was 9%, much lessthan in 1950.On average,the size of
main holdingswasnearly 19ha in 1980,7.6 ha higher than in 1950. If horticultural hold
ingsare included \ the averagesizeof holdingswas 13.9ha in 1980,8.2 ha more than in
1950,which is 1.5 times more.
Concerning the sizeof livestock farming,the increase isalsosubstantial.The share
offarmswith morethan 30milk cowswas69%in 1980,3.6timeshigherthan in 1950;the
share of milk cows on farms with more than 30milk cowsintotal milk cowswasmore

Table3.11 Scale enlargementaccording toarea intheNetherlandsin 1950-80 *)

Size 1950 1960 1970 1980

holdings area holdings area holdings area holdings area

<10ha 61.7 28.9 52.4 25.8 36.5 14.4 29.8 9.1

10-20 ha 24.8 31.2 31.9 34.9 39.8 36.2 34.9 27.1
20-30 ha 8.0 17.3 9.4 17.7 14.4 22.1 19.1 24.7
30-50 ha 4.5 14.9 5.2 15.2 7.4 17.8 12.3 24.5
>50ha 1.0 7.7 1.1 6.4 1.9 9.5 3.9 14.6

Average num ber

of hectares per 11.11 12.7 15.6 18.7

*) Notincluding horticulture holdings.

Source: CBS/LEI-DLO.

Table3.12 Averagesize of farmsaccording toarea intheNetherlandsin 1950-80 *)

Farmsizein hectare

1950 5.7
1960 7.5
1970 11.6
1980 13.9

*)All holdings,including part-timefarms.

'Generallyspeaking,horticultural holdings aresmaller, asshown in table

2.5,becausethey are intensive. Horticulture hasdeveloped considerably since
1950. So, if horticultural holdings are included, average farm sizes will be
smaller.

50
Source:CBS/LEI-DLO.

51
Table3.13 Development of the number of animals per farm and per kind in the Netherlands in
1960-80

1960 1970 1980

Milk cows
number of farms with >30 milk cows
as% of the total number of farms with milk cows 15 32 69
% of milk cows on farms >30 milk cows intotal milk cows 31 51 80

Breeding sows
number of farms with >50 breeding sows
as% of the total farmswith breeding sows 0 6 34
% of breeding sowson farms >50 breeding sows in
total breeding sows 0 25 77

Fattening pigs >20 kg

number of farms with >200fatting pigs
as% of the total farmswith >200fatting pigs 1 12 29
% of fatting pigs >20 kg on farms >200fatting pigs
intotal fatting pigs >20 kg 5 50 75

Layers
number of farmswith >5000 layers
as% of the total farms with >5000 layers 0 2 24
% of layerson farms >5000 layers intotal layers 0 41 89

Source:CBS/LEI-DLO.

than 80% in 1980, 50 percentage points higher t h a n in 1950. In f a t t e n i n g pig farms, t h e

share of farms w i t h more t h a n 200 fattening pigs more than 20 kg in the total number of
f a t t e n i n g pigs heavier t h a n 20 kg increased 28 percentage points in 1980 against 1950;
in 1980this figure reached 75%, 15times of t h a t in 1950. This means t h a t three-fourths
of all fattening pigs heavier than 20 kg were already concentrated in t h e farms w i t h 200
fattening pigs heavier t h a n 20 kg in 1980. 76% of breeding sows and 8 9 % of hens were
centralized respectively on t h e breeding sow farms w i t h more than 50 breeding sows and
on the hen farms w i t h more t h a n 5,000 layers in 1980.

3.3.3 Specialization

Another structural change of Dutch agriculture after 1950 isspecialization. In theory,

specialization benefits scale of production and deepening of knowledge and information
in agriculture. Dutch agricultural specialization t o o k place in geography and farms, i.e.
regional specialization and f a r m specialization.
As discussed in section 3.1,t h e dairy f a r m i n g began t o concentrate in t h e coastal
areas before 1880.A l t h o u g h the trend of agricultural specialization on regions hascontin-
ued since t h e beginning of this century, this t r e n d accelerated during t h e period 1950-
1980. Up t o 1980,the three main belts of agricultural production, asshown in paragraph
2.2.3, were already shaped completely.
The specialization has also taken place in farms. Farm specialization ist h e basis of
regional specialization. Taking t h e ratio of mixed farms in t o t a l farms as an indicator t o
reflect the farm specialization, the picture of farm specialization during 1950-1980 i s t h a t
the ratio of mixed farms intotal farms was less5% in 1980, nearly a half decreased against
1965.That meanst h a t more t h a n 9 5 % of total farms consisted of specialized farms at t h e
end of t h e 1970s.

52
3.3.4 Intensiveness

Intensiveness isanother maintrend of Dutch agricultural development during the

period 1950-1980.Makingfull useof limited land resources,the meaning of agricultural
intensiveness isto produce asmany products aspossible in a shorter period with more
inputs of capital,technology, variable inputsand modern management on aspecific land
area. Inanutshell, intensive agriculture isone of high output with high input.
The sharp increase of the use of capital in the agricultural production process isa
better indication of agricultural intensiveness.Total value of capital used in agriculture
increasedfrom 16billionguilders in 1957to 90billion guilders in 1983(Strijker, 1986),an
annual growth rateof 7%.Accordingto FAO,the amount of fixed capital per hectare in
1980 was 1,953 U.S.dollars inthe Netherlands, the highest in the world and 12.3times
that of the U.S.
Maybethe best illustration of intensiveness isthe enormous increase in agricultural
productivity. Whenthe level of 1950 isset at 100,labour productivity is318 in 1970 and
559in 1980.Labour productivity increased more than 4.5times in 1980against 1950,an
annual growth rate of 6%. Land productivity in 1980 amounted to 1,785 U.S.dollars \
46% higher than Japan, 132% higher than Germany 2 , and nearly 15times higher than
the U.S.

3.4 Sustainable growth: after 1980

Dutchagricultural development entered anew stageafter 1980,i.e.the sustainable

growth stage,which isaimed at improving the relationship between agriculture and the
environment.
Before 1980,ingeneral,Dutch agricultural development aimed at the highest pro-
duction and export possible. Little attention was placed on environmental issues. After
1980,environmental issuesbecame more important.
Theuseof chemicalsandfuel, andthe disposal of manurefrom agricultural produc-
tion, contributesto the pollution of riversandcanals,the air,soil,andgroundwater. How-
ever, agricultural production alsofunctions asamanager of most of the green areas.In
adensely populated country,this isincreasingly important for recreational purposes, and
for maintaining green zones between the urban agglomerations. So,agriculture isvery
important for abalanced environment.
The main environmental problems asa result of agricultural development in the
Netherlands camefrom manure. Strong specialization and intensification of production
systems,especially intensive livestock production, which predominantly focussed on an
increase in productivity, had anegative effect onthe natural environment. The rapid in-
creaseof livestock production also increasedthe manure production tremendously, thus
serious environmental problems have resulted.
A great deal of superfluous manure resulted in at leastfour categories of environ-
mental problems: eutrophication of surfacewater dueto nitrogen and especially phos-
phate emissions,nitrate pollution of groundwater, acidification dueto the volatilization
of ammonia originating from manure,and,finally, accumulation of heavy metals in soils
and food. Since 1980 only 30 to 35% of the phosphate that farmers currently apply is
taken up by the crops. The remainder is largely absorbed by the soil. Already 30% of
Dutchsoils issatured with phosphate.Approximately 75% of the total amount of nitro-
gen which is presently applied in the agricultural sector is accounted for assurplus,as
thesemineralsarenot incorporated inthe productssupplied bylivestock andarablecrops.
Nitrate concentrations in groundwater continue to rise, resulting in some cases, in the
closingdown of wells.More closingdownsareexpected.Ammonia from manure contrib-
utesfor morethan 30%to the total aciddeposition. Manure alsocontains heavy metals,
such as cadmium, copper, mercury, lead and zinc. The application of manure to land

2ln 1975 USdollar.

West Germany.

53
substantially contributes to the accumulation of heavy metals in soilsand food.
Increasingenvironmental problems inagriculture urgedthe policymakersto develop
instrumentsto reduceandcontrolthe pollution causedbythe intensivefarming practices.
TheDutchgovernment hastaken several measuresaimedatthe protection of the natural
environment andthe sustainable growth of agriculture since 1980.These measures have
driven Dutchagricultural development into the sustainable-growth phase in which agri-
culture provides not only better food but also abetter environment.

54
4. MAIN FEATURE OF DUTCH AGRICULTURAL
DEVELOPMENT

Thesuccessof Dutchagricultural development hasbeenshown inpreviouschapters,

but anexplanation for thissuccessstill needsto begiven.What factors made Dutch agri-
cultural development sosuccessful?Although Dutch agriculture benefited agood deal
from itsfavourable natural background (seeChapter 2),it appearsthe factors behind the
successful Dutchagricultural development are not the natural but the institutional ones.
Behindthe prosperity of Dutch agriculture isasetof institutional systems, including land
ownershipandtenuresystem,freetradesystem,financialsystem,marketing system, coop-
erative system,organizational system,education and researchand extension system,and
government policy system. These eight systems compose the principal experiences of
Dutch agricultural development.

4.1 Land ownership and tenure system

Landownership andtenure systemrefersto theway people own landandhow they

rent it to others to use if they choose not to cultivate it themselves. In agriculture land
ownership andtenure system ismuch more important because of the close relationship
between agriculture and land. Landisnot onlythe location of agriculture but alsoabasic
and important production factor of agriculture. Because land isthe basisof agriculture,
landownership andtenure system isthe basisof institutional systemswhich are needed
for agricultural development.
Landownership andtenure system hasmany impacts on agricultural development.
Ofthem the most important one isthe impact on agricultural productivity. An individual
proprietor who owns his land knows that increased effort or skill that leadsto a rise in
output of landwill also improve hisincome.This result does not necessarilyfollow if the
land isowned bysomeone else.Ifatenant's rent contract isonly for ayear or two, arise
in output may result inthe landlord threatening to evict the tenant sothat all or much
of the increase in production can becaptured through arise inthe rent. Inthis case,the
tenant doesnot havethe incentiveto improveproductive conditions and increase output,
there must not bethe increaseof agricultural productivity which isthe lifeblood of agri-
cultural prosperity. Itisobviousthatfrom anincentiveandmanagement point of view the
ideal land ownership and tenure systemfor agricultural development isthat the landis
owned byfarmers orthe tenant can rent landfor aspecificduration from the landlord.

4.1.1 Typesof land ownership andtenure system

Thefamilyfarm isthe cornerstone of agricultural production.Theagricultural sector

isdominated by private enterprises, i.e.the family farm.This isthe main characteristic of
all institutional systems in Dutch agriculture.
Ingeneral,there isanefficient systemof land ownership andtenure inthe Nether-
lands.Thefamily-owned farm features this system.About 70% of land usedfor agricul-
ture at present isowned by farmers themselves,viz.the owner-occupied land; another
30%offarmland isrentedfromthe landlordand partlyfromthe State,namelythe rented
land.
Tables4.1-4.5showthetype of landownership andtenure systemand itschange in
the Netherlands at various stages.Thesefigures show that:
(a) the owned landtype dominatesthe agricultural land ownership andtenuresystem,
butthe position of owner-occupied landwent down before 1950andwent up after
1950,theshareof owned land increased 25percentage points in 1995against 1950.
Thismeansthat the changing trend of farmland ownership andtenure system has

55
 been marched towards the owned land type since 1950. The government policy
aimedat controlling farmland price soasto stimulate farmersto buy land resulted
inthistrend;
(b) theshareoffully owned holdings isdiminishing asthesizeof holdings increases.The
percentage of farms with 5and lessthan 5ha of land, where the farmers are full
owners, is25% of all farms; but the percentage of farms with more than 50 ha of
land,where the land isfully owned byfarmers, isonly 1.5% intotal farms;
(c) the share of fully owned land area rosefirst andthen declined asthe farm sizein-
creased;
(d) more than half of rented land comesfrom the private owners. Butthe position of
the government asa leaser isincreasing,from 21.7% in 1977to 24.8% in 1987.On
the other hand,the position of farmerswho leaseland isdecreasing,from 22.7% in
1977to 13.6% in 1987,which isalmost ten percentage points inten years;
(e) about one-tenth of total rented land,with adownward trend,comesfrom farmers'
parents at present.Thisshows usthe farmers' parents are not the major source of
rented farmland.

Table4.1 Theposition of owner-occupied and rented land in the Netherlands

Year Agricultural land area in ha % in total agricultural

land area

owned rented total owned rented

1921 1,035,223 966,019 2,001,242 51.7 48.3

1930 1,095,928 835,706 1,931,634 51.0 49.0
1940 1,080,954 1,243,238 2,324,192 46.6 53.4
1950 1,029,152 1,305,967 2,335,119 44.1 55.9
1955 1,084,191 1,223,813 2,308,004 47.0 53.0
1970 1,112,124 1,030,473 2,142,597 51.9 48.1
1979 1,205,513 827,971 2,033,484 59.3 40.7
1985 1,275,630 743,394 2,019,023 63.2 36.8
1990 1,342,409 663,199 2,005,608 66.9 33.1
1995 1,361,653 603,094 1,964,747 69.3 30.7

Source:CBS/LEI-DLO.

Table4.2 Thetype of land tenure systemaccording to holdings in the Netherlands

Full Part owned holdi ngs Full

owned rented
holdings 80-99% 50-79% 20-49% <20% total holdings

in%
1970 38.1 8.8 14.1 10.4 6.0 39.3 22.6
1975 42.5 8.8 14.3 10.3 5.7 39.1 18.4
1985 47.1 10.6 15.1 9.9 5.2 40.8 12.1
1995 52.8 11.5 13.7 8.9 4.2 38.3 8.9

Specification 1995
Hectare per holding
0.01 to 5 25.2 0.6 1.8 1.3 0.4 4.1 2.8
5to 15 14.1 2.5 3.9 2.6 1.1 10.1 2.3
15to 30 8.0 4.1 4.1 2.4 1.3 11.9 2.0
30to 50 3.9 2.9 2.6 1.6 1.0 8.1 1.3
>50 1.5 1.5 1.4 1.0 0.5 4.4 0.5

Source:CBS/LEI-DLO.

56
Table4.3 Thetype of land tenure systemaccording to land area in the Netherlands

Full Part owned land area Full

owned rented
land area 80-99% 50-79% 20-49% <20% total land area

in%
1970 27.9 10.5 14.9 11.6 8.2 45.2 26.9
1975 29.9 11.3 16.2 12.1 8.3 47.9 22.2
1985 31.9 15.5 18.5 12.9 7.7 54.6 13.5
1995 34.3 19.5 18.9 12.2 6.3 56.9 8.8

Specification 1995
Hectare per holding

0.01 to 5 2.9 0.1 0.3 0.2 0.1 0.7 0.4

5to 15 7.0 1.4 2.1 1.4 0.6 5.5 1.2
15to 30 9.7 5.2 8.7 2.9 1.6 18.4 2.5
30to 50 8.3 6.1 5.6 3.5 2.1 17.3 2.8
>50 6.4 6.7 5.9 4.1 2.0 20.7 2.0

Source:CBS/LEI-DLO.

Table4.4 Thetype of rented land systemin the Netherlands

Rentedfromthe owners living in Netherlands Rented

from the
private persons public organization total owners
living
farmers others government others abroad

in%
1977 22.7 38.7 21.7 13.3 96.4 3.6
1983 18.2 40.4 23.9 14.1 96.6 3.4
1987 13.6 42.8 24.8 15.4 96.6 3.4

Source:CBS/LEI-DLO.

Table4.5 Thetype of rented land systemin the Netherlands

Rented from parents Rented from others

in%
1970 18.0 82.0
1977 15.3 84.7
1983 13.0 87.0
1987 13.0 87.0
1993 11.3 88.7

Source:CBS/LEI-DLO.

4.1.2 Strong points

That most of t h e farmland is o w n e d by farmers themselves, isan important aspect

of t h e land ownership and tenure system. As mentioned earlier, there are no problems
w i t h t h e owner-occupied land system because t h e farmers w h o use their o w n land for
agriculture k n o w h o w t o do so efficiently.

57
 With referenceto the rented landsystem,there arestrict policy and law instruments
to protectthe interestsof tenant farmers and landlords.The Netherlands isone of the six
EUcountrieswhich dispose of administrative procedures destined to control the conclu-
sion and modifications of the leaseagreement \ There islegislation which provides strict
interventions inthe relation between landlord andtenant inthe Netherlands.Thislegisla-
tion ensures an efficient land use and maintains a reasonable relation between tenant
and landlord.
The key points of Dutch rented farmland system areasthe follows:
the Land Board isinchargeof leaseagreements.All tenancy agreementsaresubject
to the approval of the authority. The authority assessesthe merits of contracts on
the basisof rent levels,land distribution andquality, and location inregardto farm-
house andfarm buildings;
aspecial division of the law courts,Tenure Chambers,settles all legal disputes;
theterm of tenancy ineachcontract must beat least 12yearsfor farms and at least
6years inthe caseof single plots of land;
theterm of tenancywill automatically beextended bysix-year periods unless either
party gives notice to quit within a specified period before the termination of the
tenancy term;
thetenant maywithin aperiod of one month after receipt of suchnotice apply to
the appropriate Tenure Chamber for an extension of the term of tenancy;
the Minister of Agriculture, Nature Management and Fisheries can set maximum
rents for various classes and qualities of land and of farmhouses and buildings to
control and maintain reasonable rent levels.When approving tenancy contracts,the
Land Boards usethe fixed maximum levels asaguide in defining the proper maxi-
mum permissible rent in aparticular case;
incaseswhere atenant iscompelled to quit land for non-agricultural purposes he
mayclaimcompensationfor lossessustained.Compensation maybeclaimednot only
incasesof dispossessionof landbut alsoifatenancycontract onaccount ofthenon-
agricultural purpose of the land isrefusedextension or isannulled.When assessing
the compensation due consideration isgivento the possibility of tenancy extension
asembodied inthe original contract;
provisions havebeen made bywhich atenant in caseof illness,disablement or age
(65 years) maytransfer histenancy to hiswife, one of hischildren or step-children
oradopted child or co-tenant. Insuchcases,however, the Tenure Chamber may re-
fuse a request for transfer if the proposed succeeding tenant isconsidered unable
to provide sufficient guarantee for reasonable management ofthe leased property;
the death of the tenant does not cancel the contract automatically; certain heirs
havethe rightto continuethe lease.TheLandChamber cancancelcontract,or itcan
order the continuation of the leasewith all or several heirs;
the landlord cannot suefor the rent, and neither party can cancelthe agreement,
aslong asthe leaseagreement hasnot been notified to the authority;
incaseof neglect of leasedproperty theTenure Chamber will at the request of the
landlord assesshisneglect andfix aterm within which any directions asdefined by
theTenure Chamber must becarried out. Failureto carry out any suchgiven direc-
tion may result in annulment of the agreement;
rents may bereviewed after everythree-year period.An application for areview of
the rent must besubmitted to the Land Board before the end of athree-year ten-
ancyterm.It isof coursepossiblefor the partiesconcernedto revisethe rent by mu-
tual agreement, but inthat casealsothe approval of the Land Board isrequired;
thetenant hasthe right of preemption when the leased land issold. If the landlord
doesnot respect the right of preemption, he isobliged bythe LandTenure Law to
pay damagesto the tenant.

1
The other five countries are Denmark, Germany, France, Ireland, and
Spain.

58
4.2 Free trade system

Theadvantagesoffreetrade betweencountrieshavebeen recordedbyclassicaleco-

nomictheory. Everycountry, byengaging inproduction according itscomparative advan-
tage and then exchanging products with other countries freely, canmake bestand full
use of its resources and obtain the highest welfare. In other words, every country may
benefit from free trade.
Thoughfor manyreasonsthere isstill nofullfreetrade intheworld,the Netherlands
isone of the principal actors upholding and striving for freetrade inthe world.
Agricultural trade isavery important pillar of Dutch national economy, asdemon-
stratedinparagraph2.2.6.Dutcheconomybenefitsfrom agriculture,agricultural develop-
ment benefits from trade, agricultural trade benefits from the free trade system. Free
trade isacornerstone of Dutch agriculture.
The Dutch Government hasdevoted itself to free trade and hastaken trade asthe
basicnational policy inthe courseof agricultural development. Early inthe 17th century,
i.e.the Dutch 'GoldenAge',thankslargelytothe extensivetrading network setup bythe
Dutch EastIndia Company (V.O.C.),the Republic acquired great prosperity \ TheV.O.C.,
which was established in 1602to coordinate trade with South-East Asia,wasfor a long
time the largest commercial enterprise inthe world. It was active in shipping and trade
on every coast of the Indian Ocean. In the course of the 20th century, especially after
WorldWar II,the Netherlands became increasingly activeincreating international organi-
zationsto promote freetrade. It isa Founding Member of the EC,OECD,UN,NATO and
various other international organizations. In 1958 it established,together with Belgium
and Luxemburg,the first custom union inthe world:the Benelux, with completely free
movement of labour, capital and services.The Maastricht Treaty on closer economic and
political integration,transforming the ECinto the European Union (EU),wasdrafted by
the Dutch government in December 1991,when the Dutch held the rotating Presidency
of theEC.
The main points of Dutchfree trade system are asfollows:
completelyfreetrade of agricultural products insidethe Netherlands (notrade barri-
ersamongthe provinces).Thestationof collectingfees,which isaimedto restrictthe
free movement of products among regions in some countries, cannot befound in
the Netherlands.There isasingle market. It isobvious that the domestic free trade
isthe basisof the freetrade with other countries;
completely free movement of production factors insidethe Netherlands;
free goodstradewith thesurrounding countries,thankstothe EC, and later,theEU;
all trade activities conform with the requirements for agood trade order. Regula-
tions aremade notjust bythe government and parliament. Mostly, they are made
by individuals involved in the production, trade and consumption of agricultural
products.There isaconstant interaction between producers,traders,and consumers
to comply with the rules;
inafreetrade system,also in amarket economy system,the role of government is
to provide agood framework for the producers,traders and consumers.

4.3 Cooperative system

Without anydoubt the agricultural cooperative hasplayed akeyrole in Dutch agri-

cultural development. Intheory, the structure of the markets determines the necessity.
The relation among farmers isdefined as'full competition'.There are many farmers, in
general with smallfarms,with anopen production processandfree accessto agriculture.
This meansthat the influence of the individual farmer onthe total supply or demand is
negligible. Onthe opposite sideof the market,the situation generally ismore or lessmo-
nopolistic. Fullcompetition ononesideofthe market and more or lessmonopolistic com-

'Before 1795, the Netherlands was called the Republic of the United
Netherlands.

59
petition onthe other side,createsaneedfor agricultural cooperatives.Themorethe mar-
ket diverts from 'full' competition,the greater the impulse to build up a countervailing
power.
Dutch cooperatives exist throughout the agricultural sector and trade field. They
have increased inoperational scale,merged graduallyto achieve attractive economies of
scale,and havecrossednational boundaries sincetheir introduction into agriculture. The
Dutchcooperative system issummarized inthe following paragraph.

4.3.1 Agricultural cooperatives

Inthe Netherlands,the 'cooperative' isreservedfor averyspecificform of economic

collaboration, basedon private enterprise and voluntary organization.Thedefinition of
an agricultural cooperative is(NCR,1993):
'An economic organization in which farmers collaborate permanently and put to-
gether parts of their economicactivity (ingeneral the market function), atjoint risk
andonjoint account in order to make the economicactivity concernedas profitable
aspossible,while maintaining the self-supporting nature of the other functions of
the agricultural enterprise'.

farmer A-»buying seed-• production of grain -»fatting pigs-»selling pigs

farmer B =•buying seed-• production of grain =» fatting pigs-* selling pigs

Figure 4.1 Individual farmer proces

farmer A =»buying seed •* production of grain -»fatting pigs-»

cooperative joint selling

enterprise or processing
(agreement) pigs
ft
farmer B —buying seed •* production of grain -»fatting pigs =»

Figure 4.2 Cooperative activity

Figures4.1and4.2showsthe processesinvolved insellingpigs,for example,or other

final products suchassugarbeet, milk,flowers orvegetables, individually or in collabora-
tion with others, respectively.
Bothfiguresshowfour activities orfunctions within the farmer. Thefarmer assuch
does not carry out any market activity and the processesflow into each other until the
farmer hasto sell hisfinal product on the market. For an individual farmer, all activities
arecarriedout byhimself. Incooperative case,two separatefarmersA and Bhave agreed
to collaboratefor the purpose of commercialization on the basisof agreement madeal-
readybythemselves,includingthe possibilityof processingfor abettervalorization of the
final product.
Theprinciples of agricultural cooperatives may besummarized from the above fig-
uresand definition asfollows:
they arethe collaboration of private enterprises;
they arethe collaboration of independent entrepreneurship. Eachfarmer remains
himself responsible for all production decisions and the production process on his
own farm.This meansthat the agricultural cooperatives arethe collaboration be-
tween independent farms. Inother words,the agricultural cooperative system isa
form of 'external' economic organization;

60
 they arestrictly based on the agreement made by farmers;
they arefounded on avoluntary basis.Theyare managed andcontrolled inademo-
cratic way by members;
theyarefully independent ofthegovernment;there isnogovernment intervention;
the cooperatives incur costs and make profits which are for joint account of the
members.Byusing an internal keyof distribution,thesecostsand proceeds must be
distributed among the members. The standard to be used in this respect shall be
derived from the market structure and its straight or complete competition. This
meansanobjective key of distribution basedonthe quantity andthe quality of the
economic activity each member undertakes with his cooperative;
collectingthe economic activities of farmers means 'pooling'. Inthe pooling system
everyfarmer doesnot necessarily receivethe sameprice.Thepricediffers depending
onthe delivered products. Fromtheir inception manyagricultural cooperatives have
fixedthe price paid bythe quality of the produce.This isseenand accepted by the
farmers asan objectivesystem;
internal rights and duties must be shared among the members of the cooperative
organization. This concerns the financing, the sharing of risks,the liability of the
voting system;
concerningthevotingsystem,dailypracticehasshownthat,withinamaximum limit,
the majority vote is increasingly gaining ground in the Netherlands. The growing
differencesbetweenthevariousfarmersstimulatethisdevelopment.Thismeansthat
the 'one-man-one-vote' principle adoptedfrom the Rochdale-pioneers must not be
looked on asan 'axiom' for an economic organization like acooperative;
economically speaking agricultural cooperatives depend directly on the production
processof their member farmers.This production processdirectsthe cooperatives'
primaryobjectiveandfunction.Inotherwords,the cooperative isthe 'prolongation'
of its members;
closemembership. It meansthat if afarmer isamember of cooperative, he mustsell
all hisproductsthrough the cooperative. It isnot allowed that part of his products
issoldto retailers by himself directly for amember farmer;
multimembership. It meansthat onefarmer may bethe membersof morethan one
cooperative organization.

4.3.2 Methods of agricultural cooperatives

Themethod usedbyagricultural cooperatives isone of horizontal and vertical inte-

gration or differentiation. The cooperative that farmers bring together andjointly sell
their products isakind of horizontal integration, a kind of aproducers' society.
If additional activities can betaken over in relation with the further market func-
tions, likefor example the processing,wholesale and export activities, in other words, if
cooperatives collectthe products (horizontal integration) andtake over the downstream
commercialfunctionsfollowingtheactualproduction processatmemberfarmer level,the
cooperative isakind of vertical integration.
The 'radiation effect' of the cooperative isvery important becausethe cooperative
has impact on the price levelsof allfarm products. Noenterprise cantakethe liberty to
disregardthe achieved price levels (i.e.achieved inter alia bythe action of the coopera-
tive) becauseotherwise it risks being pushed out of the market.

4.3.3 Defence of the cooperative interests

Localandregionalcooperativesareeither organized inso-called 'commercial'central

cooperatives or in 'non-commercial' central organizations, societies or federations. The
cooperative interests are mainly defended bytheir central representative organization.
Almostallthe Dutchagricultural cooperativesareorganized inthe National Cooper-
ative Councilfor agriculture and horticulture (NCR),asfigure 4.3explained. NCR,asana-
tional umbrella organization,wasestablished in 1934asthe result of ajoint action of the
agricultural cooperatives to defendthe cooperatives atthe national levelagainstthe at

61
 National Cooperative Council

/ Î
? T \

2 central 1 central 5 central 1 central 8 central 9 central 8 extra-

organ, farmers' coop.for credit coop. marketing ordinary
of coop, union supply coop. and pro- members
auctions and pro- Rabobank cessing
cessing coop.

Figure4.3 NCRasanumbrella organization

tacks of the non-cooperative enterprises,which denied the right to set up cooperatives

and boycotted them.
The main aimsof the NCRcan bedescribed asfollows:
to further the cooperative enterprise and other corresponding economic forms of
collaboration between farmers;
to representthe interestsofthe members,especiallyasarepresentative coordinating
body of the agricultural cooperatives, at national and international level.

The NCRendeavours to fulfil these aims by:

studying problems of economic, legal, fiscal or organizational nature, especially
where these problems effect the principles of cooperation, either directly or indi-
rectly;
supplying information on principlesof cooperation,bothwithin the agriculturalsec-
tor and to others such asthe Dutch Government, the Parliament and the press,
schoolsand foreigners;
publishing a quarterly magazine, called 'Cooperative Magazine', brochures and
other printed matter about the cooperatives;
giving lectures about the history,theory and practice of the cooperatives;
consultingthe Dutch and European Governmentswith respectto cooperative prob-
lemsand legislation.

Inpractice,the Secretariat of NCRdealswith alarge scopeof activities. It isasmall

office with astrong input of expertsfrom the member organizations on the varioussub-
jects to be dealt with. They work in committees or working parties. On one hand, the
committees advise and guide the Board of the NCR in its positions. Onthe other hand,
somecommittees act asacontract placefor cooperative employees in aspecific area.

4.4 Financing system

Thecapital isthe bloodhood of agriculture,especially modern agriculture. It isabso-

lutelyimpossibletotransfer agriculturefromatraditional oneto modem onewithoutsuf-
ficient capital.How and where to get capital remains an important issuesin agricultural
development. It isobvious that farmers cannot be financed fully by their own means.
There must besomechannelsoutsidefarmsto finance agriculture.An effective financing
system iscrucial for agricultural development.
Total invested capital for Dutch agriculture asawhole hasgrown sharply over the
past few decades.At NLG 182billion,the 1994value of assetswas almost 3.5 times the

62
1974figure, NLG52.5 billion (Rabobank, 1995) \ Total capital hasgrown by an average
of 3.7% annually since 1984.Generally speaking,the picture of agricultural capital struc-
ture nowadays isasfollows:of total invested capital,59%comesfrom farmers' own capi-
tal, 23%from borrowed capital,and 18%from landlords' capital.This meansthat nearly
aquarter of total invested capital iscontributed byfinancial institutions. Fromtable 4.6
it can beseenthat the share of borrowed capital intotal invested capital (not including
landlords' capital) hasbeen growing.Thistrend reflectsthe dependency of Dutchagricul-
ture on borrowed capital. Inother words, the financial resources beyond farmers isbe-
coming increasingly important.
Theeffectivefinancingsystemof agriculturewill bedescribed inthe nextparagraph.

Table4.6 Capitalstructure ofagricultureintheNetherlands *)

1974 1980 1988 1992 1994

in%

Own funds 79 77 75 73 72
Borrowed capital 21 23 25 27 28

*) Notincludinglandlords'capital;asat 1 January.
Source: CBS/LEI-DLO.

4.4.1 Financing sources

Ingeneral,there arefour major sources of finance of Dutch agriculture.

Familyasasource of finance

Family loans occur rather frequently, especially when farms are passedon from fa-
ther to son.Ifthe successorcannot getthis kind of loanfrom hisfather, credit institutions
needto beapproached. However,for mostyoungfarmers it will be impossible to gener-
ateenough income (after consumption andtaxes)for payingthe interest and redeeming
the loansifthefarmsarepassedonagainstmarket prices,becauseof substantial increases
incapital requirementsto financethe farm assets.In 1991for example,one needed 1.65
million guilders on average to finance afarm against market prices.Atake-over against
this market price isimpossible.Interms of continuity of family farms,the parties involved
(successor,parentsandother children) haveto lookfor other optionsfor valuingthe take-
over.
Ingeneral,the take-over price of afarm ismuch lower than the market value.For
most assetstaken over, an appraisal will take place which comes down to the market
value of those assetsat that moment. For land and quotas 2,there are special fiscal ar-
rangements. Inthe caseof atake-over within the family the successor only hasto paya
priceequivalentto thevalue of leasedland,viz.about 60%of thevalue of free land.This
meansthat the take-over price isonly about 60% of the market price.Thesuccessor (be-
ing afamily member) cantake overthe quota for free.Onlywhen the successor paysless
than the above-mentioned prices (after all parties gave their blessing to the proposal)
does he have to paytaxes over the gift which iscounted asthe fiscally accepted prices
minus paid pricesfor the assetstaken over).

1
The increase is not just the result of investment, as it is prompted by
price rises
risesfor
forvarious
variousassets.
a Land price riseshave been particularly high.
Quotasare usedto limit the production inthe EU.Farmers naveto pay
for getting the quota.

63
 Therearetwo take-over types inthe Netherlands:the directtake-over andthe grad-
ualtake-over,whichmostlytakesplaceintheform of apartnership.With referenceto the
first way,the years before the take-over the sonor daughter usually works on the farm
of his parents asapaid labourer. (When the farm iseconomically too small for two full-
time workers,the soncanwork outsidethefarm.) For liquidity reasons,alarge part of his
wages remainswithin the farm (asacredit note on the balance sheet) andfor which the
successor receivesinterest. Inthisway hebuildsup hisown capital.In many ways parents
andsuccessorwork toward thefinaltake-over andthey investto guarantee future conti-
nuity. Inreferenceto the secondway,beforethe take-over the parents andthe successor
enter into a partnership with profits partially accumulated on the successor's account.
Besidessharingthe profits,the successor canalso participate inthe capital gains.A part-
nership will also give the prospective successor more juridical certainty concerning the
take-over.Theshareof the successor inthe capital gainsdependson:thewaythe parents
bring inthe assetsinthe partnership (against market value or against fiscal value, each
with itsdifferent fiscalconsequences) andthe arrangement made inthe partnership con-
tract;the development in pricesof the assetsandthe contents of the contract the succes-
sorhasthe possibilityto accumulate more capital of hisown.Consequently, hewill have
to finance asmaller part of the take-over with borrowed capital.

Financial institutions

Inthis group,there are a large number of more or lessspecialized institutions for

different agricultural capital requirements.Theseinstitutions,which arecommercial lend-
ers, lend money to farmers on business terms. The farmers have to pay interest on the
loan, while security isusually required to cover the amount lent.
Commercial lenders can be divided into three groups:
1. agricultural credit institutions and merchant banks.Within this category Rabobank
occupiesbyfarthe most important position inthe agricultural sector.About 90% of
total loans of agricultural sector isprovided by Rabobank;
2. finance companies.These mainly give loansfor the financing of movable property
suchaslaying batteries,specialized machines,pig equipment and soon.They doso
mainly inthe form of leasing or hire purchase. Frequently, however, the purchase
of movable assetscanbefinancedthrough an ordinary bank. Compared with bank
financing, the rate of interest for leasing and hire purchase isconsiderably higher.
Financing through afinance company would be considered if the purchase hasa
limitedeconomic life.Purchaseofthisnaturewouldgeneratesufficientturnover and
profitto guarantee that interest and capital can be repaid over the relatively short
time usually allowed for the completion of suchtransactions;
3. mortgage banks,saving banks,insurancecompanies,private persons.Sourcesinthis
category only grant mortgage loans on real estate.These institutions do not nor-
mallyallow overdrafts on current accounts.Thefinancing possibilities arevery often
limited to afirst mortgage.

Landlords

Landlords' capital is atypical characteristic of Dutch agriculture. It represents the

valueof landand buildings heldon lease,and consequently doesnot standfor borrowed
capital required by farmers to finance their operations. Owing to the increase of land
price,the landlords' capital share intotal capital provision hasbeen pushed up. But the
continuous decrease of leasehold land had an adverse effect onthe landlords' capital.
Thetenant farmer hasthe considerable advantagethat the rent hepaysisgenerally
much lower thanthe interest and repayment capitalwhen borrowing to financethe pur-
chaseof the land.So,the landlords' capital also play an important role in Dutch agricul-
tural financing.

64
Government

The Dutch government hasan important role inthis field providing finance for the
agricultural sector inavariety of ways.Onlythe role of landlord isreviewed here; others
will be mentioned in paragraph 4.8.
Centraland localgovernment often actsaslandlord,sometimesgranting long leases
inthe Netherlands. Itdoessoby meansof the Public LandsServiceandthe SBL\ In addi-
tion, it ispossibleto deploythe servicesof the Land Bankto arrange atransfer of owner-
ship, purchase of a previously rented farm or expansion of a business.When the Land
Bank provides assistancethe land islet on along lease.Theannual ground rent is2.5%
of the purchase price of the land, and the amount of the rent may be revised every six
years.Applications to the Land Bank must satisfy anumber of criteria.

4.4.2 Financing methods

The financing methods mentioned here arejust the methods used in commercial
financial institutions. Sucha method isa combination of security, the amount involved
andtheterm of the loan.Thevariousforms of finance areshown intable4.7.Inpractice,
which method offinancing isuseddependsto agreat degree onthe specific businesscir-
cumstances.

Mortgage Finance

Mortgage finance isthe method most used in Dutch agriculture because it is the
mostfavourableforthefarmland.Astothe amount borrowedandthe minimum redemp-
tion:
normal mortgage financing isnot likelyto exceedamaximum of 70% of the valua-
tion;
however, a 'topping up' mortgage ispossible, but together with the normal mort-
gagefinancing must not exceed 90% of the valuation.The grant of a 'topping up'
mortgage ispartly dependent on the profitability andsolvency of the business;
depending onthe nature of the securities,the minimum redemption payments re-
quired may not come into effect for five years and after that period will be from
1.5%perannumfor mortgages on landto 5% peryearfor wooden buildings.Inthe
caseof 'topping-up' mortgages the redemption percentage isat least 5% and fre-
quently higher.
When mortgages are granted on leasehold property or the right of building, the
amount of the loan depends to a very large extent on the provisions of the contract.
Loansgranted varyfrom 25%of the valuation where aright of demolition isincluded in
the contract to 50-70%when the contract contains afirm right to compensation.

SeasonalCropCredits

Seasonalcropcreditsare intended to meet atemporary needfor operating capital.

Thisform of financing ismainly intended for arable farms inwhich expenditure and in-
comefluctuate markedly with the seasonsandwhen there isoften alargecredit require-
ment until harvest time. Temporary credit can be granted on the basisof the proceeds
expected from the cropping programme.The loan must be repaid after the saleof the
produce.
Thesecuritiesusuallyrequiredfor aharvest loanarethetransfer of ownership of the
crop and an assignment of debts.Also on the mixed arable-pig farm crop credits can be
a useful finance source.

1
StichtingBeheer Landbouwgronden (Foundationfor the Administration
of Agricultural Land).

65
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66
Interest Accumulation Arrangement for YoungFarmers

The aim of this kind of arrangement isto lighten the financing charges on young
farmers in particular, bytaking over existing firms or businesses.
Inland-tied businesses,no redemption or interest payments are made onthe mort-
gage loanfor the firstfive years.During the first five years 5,4,3,2and 1% interest, re-
spectively isadded to the principal of the loan. After the first five years liabilities areas
follows:(a)the previously agreed redemption payments on the principal; (b)the interest
onthe principal plusaccrued interest; (c)the accrued interestto be redeemed in 10years.
Inenterprises nottiedto land,that part of the loanfor whichthe Agricultural Loan
Guarantee Fund(ALGF)hasprovided aguarantee can be paid back in accordance with a
graduated redemption system.Beforethis arrangement isadopted investigation shows
whether this method of redemption issuitable for the particular enterprise,which must
becapable of meeting the much higher charges after the fifth year.

Livestock Financing

There are a number of credit arrangements designed specificallyfor the financing

of livestock. They can be divided into what isknown asfree arrangements and tied ar-
rangements.
Under afree arrangement the proprietor iscompletely free inthe choice of both
customer and supplier, while atied arrangement is based on a partial surety from the
supplier and/or customer. The latter imposes on the proprietor the obligation to buy his
stockfrom aparticular supplier andto sellto aspecifiedcustomer.Thisobligation isinde-
pendent of any other concerning price guarantees, etcetera.When aproprietor wishes
to change hissupplier and/or customer,the situation can be reviewedto determine how
thefinancing canbeadapted,possiblyto afree arrangement. Loansgranted under free
arrangements are generally somewhat lower than those given under tied contracts.

4.4.3 Major agricultural financial institute: Rabobank

As mentioned above, about 90% of bank lending to the agricultural sector comes
from the Rabobank Group,withthe remainder, about 10%, being provided bythe com-
mercial banks.To makethe agricultural financial system understood well the Rabobank
must be introduced independently.
Generallyspeaking,Rabobank isoneofthe largest banksinthe Netherlandsatpres-
ent. Measured bytotal assets,it isthe second largest bank. Measured by market share, it
isthe largest onthe domestic market. Internationally, it isone of the 40 largest banks in
theworld.Thestrengthof Rabobank'sposition isreflectedinthefollowing marketshares.
Rabobankawardsapproximately 90% of allbankcredit grantedtothe agricultural sector.
Some40%of smalland medium-sized companies bank with Rabobank, against approxi-
mately 15%ofthe largecompanies.Rabobank handles35%ofthe privatesavingsmarket
and25%of the residential mortgage market. A third of all payment transactions isper-
formed by Rabobank.

Thenature and objective of the Rabobank

Asdiscussed inChapter 3,Rabobank was established on the basisof farmers' credit

cooperation.The main objective isgranting credit to members/entrepreneurs atthe most
favourable rate andconditions possible.Thismeansthat Rabobank provides loansto the
membersand suppliesother bank services,both atthe mostfavourable conditions possi-
ble, and also in economically difficult times.
Thegoalof anycooperative isto provide optimal serviceto itsmembers.Foracredit
cooperative like Rabobank, this means offering optimal financial service.The Rabobank
membersareall businessclientsthat receive business loans. Members do not haveto pay
a contribution fee but becomeamember automaticallywhenthey receive loansforcon-

67
ducting their business. Private clients do not become members automatically, but may
request membership.

Thestructure of the Rabobank

Therearetwo typesof Rabobanks:

a. the localRabobanks.Eachlocal Rabobank isan independent, autonomous unit with
itsown responsibilitiescarried byitsown Boards.Eachhasitsown geographical area
within the confines of which it performs itsoperations on behalf of itsclients in the
area.ThelocalRabobanksareallmembersofthecentral Rabobank andthrough the
central bank they are connected with each other;
b. Rabobank Nederland,i.e.Central Rabobank 1.It isaseparatecooperative institution
which has its object to promote the interests of the local Rabobanks. All local
Rabobanks are members of Rabobank Nederland.

The Rabobanksarealsoassociates invarious other (affiliated) institutions, of which

the most important isRabohypotheekbank N.V. (Rabo Mortgage Bank).

Thelocal Rabobanks

The local Rabobanks areorganized in acooperative way based uponthe principles

of Raiffeissen.These principles are:
a. member liability. Inthe pastthe membersassumedunlimited liabilityfor any deficits
that would remain when the cooperative would haveto be liquidated.The unlim-
ited liability worked asaguaranteeto clientsthat their deposits and savings would
atanytime bepaid back.Withthisguarantee localclientsarepreparedto stall their
money atthe credit cooperative. Presently (since 1980) liability at the Rabobank or-
ganization islimited to NLG5,000per member, asthe increased reserves are now-
dayssufficient asasafeguardfor the debts.This liability takesthe place of acapital
contribution bythe members.Together withthe reserveswhichthe bankshave built
up over the yearsfrom retained profits, members' liability enhancesthe solidity of
their own credit institution.Members' liability servesasan extra stimulus to the Ra-
bobanks to persue a cautious banking policy. As a result, the cooperative banks
have, since their inception, never experienced the need to have recourse to their
members' liability;
b. cross-guarantee system.Thismakesthe local Rabobanksandthe central bank liable
for each other's commitments. In line with this cross-guarantee system,all partici-
pants of the Rabobank organization areentitled to financial support where funds
are inadequate to meet all liabilities. Premiumsarenot levied,but anyamount paid
eventuallywould beapportioned amongthe participants.Throughthecrossguaran-
tee system it ispossible,alsofor the smaller local Rabobanks orthose which are not
assolvent asthe others,to profit from the perfectfinancial stance of the Rabobank
Group inthe financial markets;
c. restricted area. Each local Rabobank isactive in arestricted area,serving the local
community, maintaining good personal contacts and being active in local associa-
tions (suchassports, music, etcetera);
d. prudential management. Creditswill only be granted to creditworthy members;
e. reservation of profits. Profits are not distributed among members but have to be
addedto reserves.The profits are dedicated to improving the financial baseto en-
largethe borrowing capacity (and assuchthe lending capacity) and to reduce the

1
ln 1972,twocentralcooperative umbrella banks,viz.Cooperative Central
Raiffeissen Bank and Cooperative Central Farmers' Credit Bank, merged into
one central bank, i.e. Cooperative Central Raiffeissen-Farmers' Credit Bank
(Raiffeissen-Boerenleenbank, shortly Rabobank). Following the example of
their central banks, local Raiffeissen and farmers' credit banks merged and
increasingly startedto callthemselves Rabobanks.

68
 liability and risks of the members. This provision aims at enabling the cooperative
banks to constitute their own capital, needed both to shoulder any losses and to
expandtheir service capabilities for the benefit of the local community.
Each local Rabobank isan association of persons on a cooperative basis,with the
objectiveto servethe financial benefits of itsmembers.The local Rabobanks grant loans
to businessandprivateclients,mainlyfor businessinvestmentsand housingfinance (mort-
gage).Tofinancethese loans,they attract savings and deposits from clients inthe local
community.
Upto certainfinancial limitsthe local Rabobanks arecompletely free in conducting
their business.For larger amountsthey need approval ofthe central bank,becauseof the
possible risks involved. Each local bank hasto look after its own financial position,such
asthe solvency, liquidity and profitability.
Theadvantagefor membersofthe localbank isnot onlythattheygetcheapfinanc-
ing, but alsothat they have considerable influence onthe bank's policy.

Thecentral Rabobank

All local Rabobanks are members of and havesharesinthe central Rabobank. The
balance sheet total of each respective local bank determines the number of shares.
Thecentral Rabobank, Rabobank Nederland, isthus adaughter company of all the
local Rabobanks. Vividly, it isnot the mother of the 510 local member banks \ but the
daughter of 510 mothers.
The central Rabobank hastwo different kinds of tasks:those that result from the
relationshipwiththe localmember banks,and moreconventional bankingtasks.Thecen-
tral Rabobank isinvolved in policy makingfor the whole organization (strategy, market-
ing, sponsoring, public relations), advising and assisting local banks in cost-reduction
plans,economic andfinancial developments, product development, etcetera another im-
portant task isthe liquidity management. The central Rabobank helps the local Rabo-
banks with surplus funds channel these surplus funds to local Rabobanks with deficits.
Furthermore,thecentral Rabobank supervisesthe local Rabobank'ssolvencyand liquidity.
The Dutch central bank hasformally delegated this task of supervision of the member
banksto the central Rabobank.
Asa banking institution,the central Rabobank servesthe larger companies which
areoften too big and needtoo specialistadviceto bemet byalocal member bank. Other
banking activitiescarried out by Rabobank Nederland arethe foreign banking activities
and money- and capital market transactions.The difference between central Rabobank
and local Rabobanks isthatthe central bank issuesstocks,whereasthe local banksdo not.

Themanagement of the Rabobank

Thescientific management isoneof the important features of Rabobank. It isbased

upon the down-up model,not up-down model.
The management model of local Rabobanks consists of four parts, as shown in
figure 4.4.TheGeneral Meeting hasthe highest formal authority within the local Rabo-
banks. Normally the members come together once ayear in the General Meeting. The
membersof the Boardof Directors andthe Supervisory Board are elected bythe General
meeting. It isthe General Meeting that hasto approve of the overall policy,the annual
accounts andthe allocation of profitsto activities of local or general interest.
The Boardof Directors generally comprisesthreeto five members.The number isso
small to improve the decisiveness of policy making and to ensure discretion around the
treatment of credit applications.
TheBoardof Directorsdefinesgeneral overallpolicyonliquidity,solvency,profitabil-
ity;ensuresthecompliancetotheArticlesof Association and isaccountabletothe General
Meeting andthe Supervisory Board.

'Now there are 510 local Rabobanks. The central Rabobank consists of
510local banks.

69
 The Management conductsthe daily banking activities, suchasgranting loans and
attracting deposits.It implements the policy decisions of the Board of Directors, looks af-
ter the liquidity, solvency and profitability of the bank.

General Meeting

V i
Boardof ^ Supervisroy
Directors ^K Board

11
Management

Figure 4.4 Themanagement of local Rabobank

General Meeting
local Rabobank

> r
Supervisory Board Management
Boardof Directors

Regional and
Central DelegateAssembly

General Meeting
Rabobank Nederland

1
Supervisory Board ExecutiveBoard
Boardof Directors

Figure 4.5 Themanagement of central Rabobank

TheSupervisory Board comprises at leastthree members. It not only supervises but

alsoadvisesthe Boardof Directors andthe Management. It hasto approve some impor-
tant decisions, such as on the budget, appointment of managers, closing/opening of
branches.
The management of the central Rabobank, asshown infigure 4.5, looksvery much
likethe management of localRabobanks.Therearean Executive Boardwhich isin charge
of daily financial and economic management; aBoard of Directors in charge of general

70
policy,cooperative nature,relationship between central bank and local banksand among
local banks;aSupervisory Board,consisting of membersof affiliated banks and participa-
tions, incharge of supervision,advice and approval of some important decisions;aGen-
eral Meeting with about 3,000 delegates of local member banks.
There isanextra,which isthe Regional and Central DelegateAssembly, inthe man-
agement structure of central bank.The reasonfor itsexistence isthat it isvirtually impos-
sibleto discussmajor issueswith the member banks at the General Meeting,since there
areabout 3,000delegates atthat meeting asmentioned above.Thereforethetotal num-
ber of member banks isdivided into about 22 'circles',eachcomprising 10-30 local mem-
ber banks.These22 'circles' of local member banks each meet twice ayear in a regional
delegate assembly. Major issuesarediscussedthere,the resultsof which are passedon to
the central bank. Eachregional assembly will sendthree delegates to acentral delegate
assembly, which meetsfour times ayear. Incentral delegate assembly also delegates of
thecentralbank participate.Theobjectiveofthe regionalandcentral delegate assemblies
isto improvethe communication between central bank and local banks,which at a gen-
eral meeting ofthreethousand personswould not bepossible.Inthe meetings of assem-
blythe issuesarediscussedandthe mindsare made readyfor changes.Consultation pro-
cessestake place,which usually leadsto unanimity or at least large majority acceptance.
Throughthis organizational structure of decision-makingthere isagood communication
possiblebetweenthe many independent andautonomous partsof the Rabobank organi-
zation.

4.5 Marketing system

Marketing playsanimportant roleinagriculturaldevelopment. Itnotonlydealswith

the issues how to sell the agricultural products effectively in the domestic and abroad
markets,but also bridges consumers and producers.Through this bridgethe changes of
consumers' preference,which arethe guideofthe adjustment of food production,canbe
transmittedto producers.Marketing isan interactive processbetween producersandcon-
sumers.

4.5.1 The major points of marketing system

There isalready agood agricultural marketing system inthe Netherlands. Its major
strong points can besummarized asfollows.

Consumer orientation

Strong market-consumer orientation isthe basic feature of the Dutch agricultural

marketing system.Thesocalledmarket-consumer orientation meansthat agricultural and
food production isonlythe tool to meet consumer's needfor food;the need of market-
consumer isthe ultimate aim of agricultural and food production; it isthe market that
determinesthestructureof agricultural andfood production;product development, pack-
ing,branding andoffering servicesinagricultural andfood production havealwaystosee
consumers as 'king'.
In order to keepthe strong market-consumer orientation, some market-consumer
orientated institutions were established in the Netherlands. Of them the Commodity
Boards and Industrial Boards must be mentioned.
The Netherlands isthe only country inthe world that hasCommodity Boards(Pro-
duktschappen) and Industrial Boards(Bedrijfsschappen).Those institutions provide anin-
stitutional network for avertical and horizontal marketing integration and inthat way
representthe interestsof all participants (producers, processorsandtraders) inthe prod-
uctchain.Thecooperation andcommunication within different industries aswell assuc-
cessful penetration of foreign markets can beexplained bythe existence of the Boards.
TheCommodity Boardsweresetup in 1950s,when agricultural production structure
typically existed of agreat many small farms and processing companies. They are com-

71
posed of representatives of the producers, processing industry, and traders concerned
with the commodities coming within the orbits of these Boards. EachCommodity Board
consistsof two or more groups of enterprises performing different economic functions in
respectof aparticular product or group of allied products.So,Commodity Boardsarever-
tical organizationsthat were created on behalf of specificsectors.They includethe entire
production chain for each product: production, processing,wholesale and retail trade.
Theyfunction inthe control of the markets and may issueregulations under government
supervision which are binding for all groups of people dealing with the products con-
cerned. Thirteen Commodity Boards have been already established in the Netherlands,
theyarerespectivelyfor 'Livestockandmeat', 'Poultry andeggs','Potatoes','Seedsof field
cropsand seedpotatoes', 'Vegetablesandfruit', 'Fishery produce', 'Cereals,oil seeds and
pulses', 'Ornamental horticultural produce', 'Horticultural seeds','Dairyproduce', 'Marga-
rine,fatsandoils','Feedingstuffs', 'Beeranddistilledspirits'.Commodity Boardsare inde-
pendent intheformulation ofthesector policy,suchasthe structure ofthe sector, quality
of product, marketing and promotion, technical and market research, animal welfare,
educationandtraining,environment, innovation,public relations and information, work-
ingconditions,andadvicefor the government. Bythese meansorganized industry isable
to dealwith manyaffairsitself,andthishasresultedinthe reduction of government inter-
vention inthe economic sphere.Commodity Boardsdo not engage in buying and selling
but are engaged in market research, promotion and technical research for the generic
product.Thetotal promotional budget of Commodity Boards surpasses 150million guil-
ders.
The Industry Boardsare composed of enterprises performing equal or related eco-
nomicfunctions.Theyarehorizontal organizations, representing the interests of onesec-
tor,wholesale andretail dealersof agricultural productsfor example.InIndustrial Boards,
the Industrial Boardfor Agriculture (Landbouwschap) \ nearly all agricultural producers
being organized in it, has been empowered, under the supervision of the government,
to prescribe rulesand regulations applicable to everyone engaged inthe agricultural in-
dustry, not only ontechnical and economic matters, but also inthe social field.
Therearemanyother privateinstitutions involved inmarketing promotion especially
export promotion.At presentvariousagribusinessfirms, including cooperatives, have be-
come national or even international companies in the Netherlands.They run their own
individual marketing programs.
Ingeneral,the Dutch Government isnot involved directly inagricultural marketing.
It dosepromote agricultural products in international exhibition etcetera.Itdevotes itself
to creating agood policy environment for agricultural marketing. There isone depart-
ment inMLNVthat isactive in agricultural export promotion. Itsmain activities are:orga-
nization of trade meetings, arrangement of joint participation to exhibitions and trade
fairs,supervision of missionsand assistance byagricultural attaches.

Conducting through the product chain

Conductingthroughthe product chain isanother feature of Dutchagricultural mar-

keting system.Ingeneral,eachfarm product hasitsown chain,which isfrom the pre-pro-
duction(supplyandservice),to the production (agricultural production process),andthen
to the post-production (treatment and processing,trade and distribution). Marketing ac-
tivities areconducted around the product chian.
A product chaincanbedescribed as'a moreor lessindependent cluster of vertically
integrated economic activities related to the production, processing and trading of an
agricultural product or agroup of agricultural products including separate activities in-
volved in the delivery of the necessary goods and serviceswhereby all firms and institu-
tions maintain asignificant relationto eachothers' (Post,1989).Themaingoalof the pro-
ductchain istwofold.Ononeside,to coordinate andoptimizetheflow of products in the
threestagesinthe chain (production,processing,trade).Onthe other side,to offer prod-

1
Landbouwschapwill befinished atthe end of 1997.Itsfunctions will be
transfered to other organizations.

72
ucts t o consumers of t h e required quality and in t h e right place.
There are three main types of product chain: (a) undifferentiated. Producers and
firms or enterprises in every stage of t h e product chain have roughly t h e same economic
power inthe market, (b) processing-production oriented.A dominant role isplayed by the
processing firms. They have a monopoly position in t h a t stage of the product chain. In this
case, t h e entrance of new firms is rather difficult. Firms in other stages of t h e product
chain have only a limited economic power compared w i t h the processing industry, (c) de-
mand dominated. The market power isconcentrated on the demand side. Inthis case, t h e
product chain is dominated by traders and consumers.
Table 4.8 shows t h e marketing activities conducted t h r o u g h t h e product chain in
seed potato industry. Horizontal and vertical integrations around t h e p o t a t o can be seen
clearly.

Auction as an important tool

Being introduced in 1887, auctions have gradually become t h e dominating market-

ing institution in Dutch agricultural sector, especially in horticulture. Growers sell most of
their flowers, vegetables and fruits by auctions. The rapid development of t h e auction
system isdue t o the fact t h a t t h e growers realizes t h e importance of a strong marketing
organization.
The auctions have expanded activities f r o m price discovery and product assembly
into other marketing activities, such as m i n i m u m pricing schemes, p r o m o t i o n , logistics,
and product policy,t h e auctions cooperate in master organizations which coordinate ac-
tivities, like national minimum priceschemes and promotional activities. Some retail chains
are critical of the auction system, since daily purchasing t h r o u g h auctions does not f i t t o
retail sales planning. The auctions have developed additional selling operations, such as
brokerage operations in pot plants and auctioneering for delivery at afuture time period.

Table4.8 A model of the integrative functions of marketing inseedpotato industry in the Neth-
erlands

Type of integration

Horizontal Vertical

P 1. Powerful specialist Bedrijfschap 1. Strong institutionalized vertical

R (the Landbouwschap) for seed
D producers
U 2. Non-fragmented and powerful
C farmers union representation
E 3. Strong commercial integration
R of producers in producer
S cooperatives
Channel
partici- M 1.Powerful self-regulatory
pants E Bedrijfschap for traders
R 2. Enhanced cooperation between
C traders (and alsostrong policital
H representation) though VECO
A andNCR
N 3.Traders' Bedrijfschap sharescon-
T trol of the Produktschap with the
S Landbouwschap. This provides
traders with another horizontal
forum in managing surplus buying
through STOPA,and generic pro-
motions and market development
through NIVAP
integration through the Produkt-
schap (the Pootaardappel Con-
tract Commissie)
2. Marketing cooperatives,
epitomizing the ideals of vertical
Integration, control 60% of all
seed potato exports
3. Companies operating on the
cooperative principles of vertical
integration,controlafurther35%
of all seed potato exports
4. Non-cooperative, private seed
potato traders are increasingly
utilizing vertical integration by
enteringintoaproper contractual
economy with producers

73
74
Basedon the cooperatives

Cooperatives arevery important in Dutch agricultural development as mentioned

insection4.3.they playavital roleinagricultural marketing.Mostofthe marketingactivi-
tiesarecarried out bycooperatives inthe Netherlands.Three cooperative companies ac-
countfor morethan 80% of milk supply,two cooperative auctions dominate the flower
market,cooperative auctionsalsodominatethevegetable market,onecooperativedomi-
natesthe potato processing for industrial purposes. Maybe nowhere inthe Dutch agro-
economy isthe cooperative role more strongly expressedthan inthe potato marketing.
Cooperativescurrently control40%of allwarepotatotransactionsand 100%ofthestarch
potato industry,aswell asthevastmajority of seedexports.Totally,95%of allseedpota-
toesaremarketed bycooperatives or 'cooperative-type' organizations.So,based strongly
upon the cooperatives isthe important feature of Dutch agricultural marketing system.

4.5.2 Auction inthe marketing system

Asdiscussedabove auctions play an important role in agricultural marketing,espe-

cially inflower and vegetables marketing. About 95% of the glasshouse vegetables are
sold through the auctions. Auction, featuring the Dutch agricultural marketing, is the
important part of Dutch agricultural marketing system.
Thefirstauction,vegetableandfruit auction,wasestablishedduringthe lastdecade
of the 19th century inthe Netherlands. From that time onward the auction system has
shown averyvigorous development. Theauction isastrong marketingtool. It isunthink-
ablefor flower andvegetables marketing without auctions at present.
Theauction isatypical free market,the products are either graded and packed by
the farmers or at grading and packing stations. Eachauction market society hasits own
stockof containers,which areavailableto producersand buyerson payment of adeposit,
plusrentfor use.Assoonasproducearrivesatthe auction market, it isexaminedon qual-
ity accordingto fixed standards.Subsequently it isauctioned by meansof an electric auc-
tion clock.After theauctionthe productscomeintothe distribution hall andare delivered
bythe distribution staff to the right buyers.
Themost importanttool inthe auction isthe auction clock. It isthe heart of the auc-
tion. This ishow it works. Opposite this clock are the seats of the buyers. Between the
clock installation andthe seatssome room isleft for exhibiting the produce, or samples,
which enables buyersto examine it.When the produce isbrought infront of the clock,
the auctioneer announcesthe nameof the producer andany remarks(quantity and qual-
ity) made by the auction inspector, and then the auction proceeds.The pointer on the
clock isput into motion indicatingfiguresonthe dial. Itmovesfromthe highestfigure on
the clock downwards. As soon as it indicates the price a buyer is prepared to pay, he
pressesanelectric button infront of him at hisdesk,and at the sametime also indicates
the quantity hewantsto buy,the pointer stopsat once.Instantaneously a number corre-
spondingwith that of the seatof the buyer, isilluminated inthe centre of the dial or on
aseparatenumber-board,allother buttons beingautomatically disconnected.Thefollow-
ing round givesanother chanceto buyerswho weretoo late.All salesare automatically
registered bythe computer.

4.6 Organizational system

One of the main features of agriculture isthat the agricultural production iscon-
ducted, in most of cases,by individual family farms.This isvery different from the other
industries. For example, the industry can not be modernized on the basisof individual
family enterprises, but the agriculturecan.
One problem resultedfrom thisfeature ishowto look after the interests, economic
interestandsocial interest, of individual farmers.Becauseineconomic point of view indi-
vidual farmers are inthe state of perfect competition inthe market, this meansthat any-
oneofthe individual farmersdoesnot havethe ability to influencethe market. But there

75
isadifferent picture outside the individual farmers, monopoly existsto some extent on
the oppositesideof the market. Insocial point of view, individual farmers are separated
eachother, it isnot easyto maketheir voice beheard.Howto reflecttheir social position
isa problem.
Although the interestsof individual farmerscanberepresented bythe government
this isnotfar enough.Becausethe government represents notonlyfarmers but also other
socialclasses.Dutch experience hasprovedthat the farmers' organization isthe best way
to look after the interests of individual farmers.

4.6.1 Thestructure of farmers' organizations

Farmers'organizations inthe Netherlands include inthisreportfarmers'unions,farm

workers' unions,technical agricultural organizations, and umbrella organizations.

Farmers' Union

There are a great number of regional farmers' unions, which are the basis of the
centralfarmers' union inthe Netherlands.Aswe discussed insection 3.3,farmers' organi-
zation inthe Netherlands started at the regional level.These regional organizations are
an important economic and political factor. The regional organizations were united na-
tionally into three central farmers unions based on the ideological currents.Theywere:
The NetherlandsCatholic Farmers'andGrowers' Union (KNBTB),with about 55,000mem-
bers;The Royal NetherlandsAgricultural Committee (KNLC),with about 47,000 members;
The Netherlands Protestant Farmers' and Growers' Union (NCBTB), with about 21,000
members.Thefarmers' unions,regional levelandcentral level,work veryclosely together.
In1995thosethreecentralfarmers' unionsunited againinto onesinglecentralfarm-
ers' union:The Dutch Federation of Agricultural and Horticultural Organizations (LTO-
Nederland).LTOnow doesnot only representthosethreefarmers' organizations. Itrepre-
sentsat national and international levelthe collective interests of seven regional organi-
zations and professional organizations.Together it looksafter the interests of more than
100,000entrepreneurs in agriculture who aremember of these regional and professional
organizations.
LTOalsohasseveralcommittees/working partiesfor the different types of farming,
for example dairy farming, arable farming, pig farming, vegetables producers in glass-
houseetcetera.Besidesthese committees for specifictypes of production there arecom-
mitteesfor different subjects/questions like 'land use'(planification), 'international affairs'
(EU,WTO),'socialaffairs' (salaries,labour conditions).The position of women inthe farm
sector isdiscussed in aspecialworking party.
Logically,farmersarenot the direct member of LTO.Theyaremember of oneof the
regional organizations. Regionalorganizations aredirect member of LTO.Sothe regional
organizations receivefinancial contributions of thefarmers.The level of contribution de-
pends upon the farm size.
Mainly,the aimsof the farmers' unions are:
represent and promotethe economic andsocial interestsof entrepreneurs and their
families in agricultural sector, at regional, national and international level;
play anactive part inthe improvement of the regional, national and international
market position of agriculture;
promote the integration of all areas inmarket-aimed production chainsand arede-
dicatedto creatingafullyvaluable position inthesefor entrepreneurs inthe primary
sector;
work towards innovation with aview to durable and competitive agriculture and
improvement inthe quality of country live;
aim at interaction andcooperation with social organizations outside agriculture on
alevel of itsown answerability towards itsown members;
promote the position of agriculture amongthe society asintegrated and valuable.

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FarmEmployees' Unions

Farm workers have their own jointed forces.At national level there are also three
farm employees' unions:General Netherlands Agricultural Workers' Union,The Nether-
landsCatholicAgriculturalWorkers' Union,TheNetherlands ProtestantAgricultural Work-
ers' Union.Since 1970the two latter unions have been absorbed into larger employees'
organizations. Farm employees' unions arethe organizations to represent the interests
of those who are employed byfarmers.

Technicalagricultural organizations

Theentrepreneurial spiritof Dutchfarmers,stimulated bygovernment subsidies,has

provided alarge number of supplementary organizations, especially inthe area of infor-
mationfacilities. Manythese establishments areset up bythe farmers' unions.The varied
collection of service establishments can be brought together under the name 'technical
agricultural organizations'.Thetechnical agricultural organizations areoften directed, to
a largeextent, bythefarmers.Theseorganizationsfrequently work together with educa-
tion, research and extension establishments.
Thewillingness of groupsof farmersto work together on production improvement,
cost reduction and production increase hasalso ledto agreat blossoming of the so-called
studyclubs.Inastudyclub,agroup of farmers try to find possibilities of improving busi-
nessmanagement and planning bysharing experiences and comparing businessresults.
Inthe horticulture, growers have set up asociety.The Dutch Association of Study Clubs
for Horticulture (NTS),which coordinatesthe manystudy clubs.NTSlooks after the inter-
ests of growers with respect to research and is,astheir representative, the permanent
consultation partner with research establishments and horticultural auctions.

Umbrella organizations

Asdiscussedabove,there werethree central farmers' organizations andthree farm

workers' organizations before 1995.Howto coordinate these organizations, particularly
farmers' organizations andfarmworkers' organizations becomesaproblem, because the
employers' andthe employees organizations do not confront each other liketwo non-
communicating blocs,but onthe contrary haveachieved alarge measureof cooperation.
Underthiscircumstance,the formation under public law ofthe Industrial Boardfor Agri-
culture bearswitness to this coordination and cooperation.
Sinceitsestablished in 1954,the Landbouwschap hasevolved into the official body
for cooperation between agricultural employers and employees in which expertise is
pooled.Committees have been formed for all aspectsof agriculture. It also possessesre-
gional councilswhich areconcerned particularly with the promotion of agricultural inter-
estsin relationto land useand physical planning. It also playsan important role in inter-
national relations. Finally it actsasa permanent consultative body for MLNV.
The mergence of three central farmers unions andthe sharp decrease of farm em-
ployeesmakethe specific occordinative umbrella organization not sonecessary.SoLand-
bouwschapwill beclosedatthe endofthisyear. Butthisdoesnot meanthat itsfunctions
disappear too. Itsfunctions will be movedto other related organizations.

4.6.2 The main points of farmers' organization system

The main strong points of Dutchfarmers organization system may be expressedas

follows:
farmers'organizations areindispensable inagricultural development.Without them
the interestsof farmers can not be looked after well, and farmers can not beorga-
nized well;
farmers organizations are not onlythe economic organizations but alsothe political
player in political and social affairs. This political force isnecessary to balance the
different social interest groups and maintain the social stability;

77
 farmers organizations arefully independent. They arefarmers own organizations.
Theymaycontactwith other organizations,alsogovernment bodies.Buttheydo not
belong to the government;
farmers organizations arefully autonomous.They are organized,run and managed
only byfarmersthemselves.Their internal affairs arenot disturbed byexternal pow-
ers;
farmers organizations arefully freeto enter. Farmers havethe full right to choose
whether they areorganized intothe farmers organizations or not. Farmers are not
obliged to becomethe member of farmers' organizations;
farmers organizations havethe full rightto expresstheir wishes.All legal measures,
including demonstration, can be usedto show their requirements and opinions;
farmers organizations are managed on the basisof democracy. Thechairman and
the members of the Board of LTOare elected by its members,the chairmen of re-
gional organizationsareelectedbytheir own members;the chairmen of committees
areelected byfarmerswiththat specifictype of farming.This meansthat the farm-
ersare inapositionto influencethe courseof events at the farmers' organizations;
farmers organizations (Landbouwschap) havethe powerto make regulations, in the
technical,social,economic,environmental andadministrative spheres,under thesu-
pervisionof government.Theregulations haveto beobserved inthesector (oraseg-
ment of it).Thisisanelement of the autonomy granted bythe Government-a mea-
sureof independent. Compliancewith those regulations isreforced bythe Govern-
ment.Theexisting regulations relateto veterinary health, research at experimental
farmsand gardens,and quality improvement in awide range of products. In addi-
tion, information,training and education of farm employees islaid down in a regu-
lation;
farmers' organizations areclosely involved inthe consultations on collective labour
agreements.Tendifferent agreement are already concerned:for arable andgrass-
landfarming,(glasshouse) horticulture, bulbiculture,arboriculture, poultry produc-
tion, agricultural crafts (contractors),farm management services,land development
services,willow and reed cultivation andfinally peat cutting;
farmers organizations act asaconsultative bodies for the Government and Parlia-
ment. The problems and wishes of agricultural world are discussedat the monthly
meetingsbetweenthe Minister of MLNVandadelegationfrom thefarmers'organi-
zations (Landbouwschap). Theflow of information from farmers' organizations is
directed at Government and Parliament,atthe officials involving agricultural policy,
atthe farmers,andfurthermore at all personswho play arole inthe decision-mak-
ing processconcerning agricultural affairs;
representation of interests by all means of measures and exercise of influence on
Government policy at international, national, regional and local level which relate
to agriculture and rural development for the benefit of agricultural holdings form
the heart of the farmers' organizations work;
the Government does not intervene in the affairs of farmers' organizations. But
there are all kinds of communication and regular contacts and close cooperations
between Government and farmers' organizations, and between Parliament and
farmers' organizations.

4.7 Education, research and extension system

TheNetherlands hasastrong agricultural education,researchand extensionsystem.

We havementioned manytimesthatthissystem isthe keypillar supporting Dutchagricul-
tural development.

4.7.1 Education system

Dutchfarmerscanspeak English.Dutchfarmers arecompetitive.Allthose arebene-

fitsfrom the education.

78
 Some strong points exist in Dutch agricultural education system:

Variouslevels

Dutch agricultural education isvocational education. It consists of four levels.

(A) Lower education

Every child in the Netherlands receives a primary education. Because education is
compulsory to 16 years, almost everyone follows secondary education after primary
school.Lower agricultural education isaform of secondary education.It isageneral edu-
cationorientatedtowards aprofession.Pupilshaveto follow 4yearsof studyatthe lower
agricultural school,beginning after finishingthe 6thyear inageneral primaryschool.The
first two years are obligatory.
Lower agricultural education ismeantfor everyyoungfarmer. It providesanagricul-
tural basis.Butthe lower agricultural school isnot anendstation of the pupils,but rather
a preparation for an intermediate or higher agricultural vocational training. Pupils can
move onto further training schemeswithin and outside agricultural education after fin-
ishing it.

(B) Intermediate education

Intermediate agricultural educationtakestwo,three orfour years.Students choose
aspecialization in intermediate agricultural school.The intermediate agricultural educa-
tion trainsstudentsfor avariety of jobs in sectorswhich areconnected with agriculture.
Many of the students are preparing themselvesto be an independent farmer.

(C) Higher education

There are five colleges of higher agricultural education in the Netherlands where
training isgiven for higher executive functions in business, institutes and in agricultural
organizations.Thesubjectscover all aspectsof agriculture. Higher agricultural education
takes4.5yearsto gainthe qualification 'ingenieur' (ing.)which isequivalentto aBachelor
degree in other countries. It requires a prior education to senior secondary level (with
physicsandchemistry) or an intermediate agricultural education. Mostof the agricultural
advisors inthe Netherlands have studied at one of the higher agricultural colleges.
After the higher agricultural education,there are anumber of possibilities for fur-
ther education,such asone-year agricultural teachers' training course, higher manage-
menttraining,one-year commercial economic course,entrence to Agricultural University
andto the Faculty of Veterinary Medicine of Utrecht State University.

(D) University education

Thisisadegree-granting education.Agricultural training at university level isgiven
at the Agricultural University of Wageningen (AUW).A university course leading to the
qualification 'ingenieur' (Ir),on average,takes 5.5yearsand isequivalent to aMaster de-
gree in other countries.
Forthestudentswhowishto specialisefurther within acertaindiscipline,there isthe
possibilityof extendingthetraining bytheso-calledsecondphase.Second-phasestudents
work and study for 4years asAssistants-in-Training towards the qualification of Doctor
of Agricultural and Environmental Sciences.

Flexible forms

Besidesthe regular agricultural education mentioned above,there are many other

flexible forms which provide agricultural knowledge to farmers and others who arein-
volved inthe affairs connected with agriculture. Forexample,agricultural evening class
isoneoftheseflexibleforms. Eveningclassesarefor the greater part specialized courses
in several agricultural subjects.

79
 Practicaltraining schoolsalsogivespecialisttraining andrefresher courses.Inagricul-
tural practical schools,teachers,advisors,farmers, industry businessmen and researchers
meet to exchange information.
Agricultural coursesespecially refresher coursesarealsogiven byagricultural experi-
mental stations and agricultural extension organizations.

Looked after by MLNV

Agricultural education is part of MLNV in the Netherlands. This isan exceptional

situation inthe Netherlands.Almostallother (vocational) education isentirelytherespon-
sibility of the Ministry of Education andSciences.
Undoubtedly, agricultural education looked after bythe government body of agri-
culture ishelpfulto maintain the close relationship between education information and
advice, research andthe businesscommunity inthe agricultural sector.

Supported by the Government

Agricultural education receivesagreat deal of support, especially financial support,

fromtheGovernment. Lower andintermediate agricultural education undertaken byAg-
ricultural Education Centers,agricultural colleges and university, are all financed by the
Government. Lower and intermediate agricultural education undertaken by private
schoolsarealso heavily subsidized bythe Government. Eventhough the eveningclasses,
which are private, are nearly fully subsidized bythe Government.

Involved by farmers' unions

Farmers' unions involve inthe agricultural education.Theytake careof the financial

aspectsof private agricultural schools,though theseschoolsareheavily subsidized by the
Government.

More attention paid to practice

Agricultural education in the Netherlands pays more attention to practice soasto

train the students' ability to solve problems independently. In lower agricultural educa-
tion,thework ineachschool isclosely relatedto agricultural conditions inthe neighbour-
hood. Nearly allstudents in intermediate agricultural education and alsostudentsat agri-
cultural colleges of higher education andthe Agricultural University receive, aspart of
their course, practical training at a practical training school. At the practical training
schools,students aretaught to deal with real issues.

4.7.2 Researchsystem

Agricultural research inthe Netherlands takes place at many organizations. Butas

shown intable4.9,the institutesof Agricultural ResearchDepartment (DLO)arethe main
part in agricultural research.Their research budget account for nearly 50%of the total
budgetfor agricultural research.Thismeansthat nearly ahalf of agricultural researchare
carried out bythe DLO institutes inthe Netherlands.
Ingeneral, Dutch agricultural research system iscomposed byfour parts:

Experimental stations and Regional Research Centers

Experimental stations and Regional Research Centers (ROCs)carry out the practical
research.So-calledpractical researchisthe researchthat isclosestto farmers.Thisfeatures
the Dutch agricultural researchsystem.ROCsare(clusters of) experimental farmers.They
are independent foundations with their own personnel. The experimental stations are
foundations,the personnel of which are employed bythe Government. Both groups are
half financed bythe Government and half bythe farmers. In general,the experimental

80
stationsandthe ROCsaredirectedtowards aspecific branchof the industry.Theyconcen-
trate on synthesizingthe available knowledge within and around agricultural research.
Thisknowledge iscollected andtranslated for useat farm level.There iscoordinated re-
search programming for each branch of the industry which isachieved in consultation
withthe businesscommunity,theextensionserviceandthe Government. Farmers,asusers
of the results and co-financiers, are intensely involved with this.

Table4.9 Agriculturalresearch organizationsandtheirshareinthetotal budgetforagricultural

research intheNetherlands *)

Budget inmil.NLG Sharein%

DLOinstitutes 315**) 45
ExperimentalstationsandROCs 70 10
Universities 175 25
Other researchorganizations 140 20
Total 700 100

*)Thebeginning of 1990s;**) About 70%fromthe Government.

Source:MLNV.

Agricultural research institutes

Agricultural researchinstitutes include DLOinstitutesand non-DLO institutes.Strate-

gicandapplied researchand part ofthe basicresearcharecarried out at these institutes.
DLO,asaspecial agency in agricultural research,ispart of MLNV.The DLOinstitutesen-
gage inthe applied researchwhich produces background knowledge which,by means of
practical research,can beconverted intotechniques which farmers can usedirectly. They
alsopasson basicknowledgetothe largerfirmsinthe agricultural sectorwhich undertake
their own research.The DLOinstitutes are divided accordingto area of discipline, not to
industrial branches.DLOispartlyfinanced bythe Government. Businesscommunity gives
contract research projects.Inthefuture, DLOwill haveamore independent position and
will have to earn a larger proportion of its own budget by means of contract research.
NowadaystheGovernmentaidhaschangedfrom abasicsubsidytofinancial contributions
to definite research programs.
Non-DLO institutes includethe institutes,suchasthe institutesfor Applied Scientific
Research (TNO),The National Institute of Public Health and Environmental Hygiene fi-
nancedbythe Ministry of Housing,Town andCountry Planning and Environmental Man-
agement,the institute affiliated bycattle feedstuffs industry, and afew private research
establishments includingthe Sugar BeetResearchInstitute,the Netherlands Fertilizer Insti-
tute, andthe Netherlands Institute for Dairy Research,which do not belong to DLO but
also undertake applied and basic researchfor the agricultural sector. In addition, many
private and cooperative firms carry out their own research in someareas.

Universities

Universitiesareanimportant part of agricultural research.Fromtable4.7wecansee

the researchbudget of universities isthe second most only after DLO.About one fourth
of agricultural researcharecarried out at universities.The most important establishment
in this category isthe Agricultural University in Wageningen. AUW mainly undertakes
basicresearch,alsosomeapplied research.About 70%ofthe researchofAUW isfinanced
by MLNV.

81
TheNational Council for Agricultural Research

The National Council for Agricultural Research (NRLO) used to be a coordinative

agency.InNRLO,researchestablishments,socialorganizations andthe Government con-
sider requestsfor future research. NRLOdevelops reconnaissance studies inthe field of
science and technology and makes an inventory of research needs. For this, NRLO had
programming committees for each branch of the agricultural industry. Everyfour years,
NRLO presented its long-term outlook for agricultural research.This long-term outlook
was,for MLNV,an important starting pointfor its research policy.At present, NRLOisan
advisorycouncilfor MLNV.Itdoesforesightstudiesondevelopments of Dutch agricultural
andfood sector,andtriesto develop different strategiesfor scienceandtechnology pol-
icy.

4.7.3 Extension system

Theextension isveryactiveinDutchagricultural development.Awide rangeof advi-

sorsand experts in government services,farmers' organizations, independent extension
bureaus,cooperatives andother supplyandprocessing businessesareengaged inagricul-
tural extension field inthe Netherlands.

Extensionservicefrom the government services

TheAgricultural ExtensionService(DLV)isthe largest agricultural extension organi-

zation inthe Netherlands.Ithasenvolvedfrom itsformerfunction asthegovernment ser-
vice into an more independent organization of agricultural extension service.At the na-
tional level,DLVisdirected byanAgricultural Advisory Committee made up byrepresen-
tativesof government andfarmers' organizations.At the regional level,eachDLVteam
issupported byaguidancecommittee which ismade up by membersof technical agricul-
tural organizations, representatives of farmers' organizations and arepresentative of the
trade union for the food industry andfunctions asasounding board for the team.
DLV gives advice on the production, technology and economy of the agricultural
business. Itsservice hasmore than 60 regional teams spread over 26offices throughout
the country. Theteams are divided over 15agricultural sectors. Eachteam consists of a
team leader and agricultural experts.Theagricultural experts visit farmers on their hold-
ings,write articlesforthetrade press,putfolders and brochurestogether, organise group
gatherings, guide farmers' study clubs,address meetings, organise demonstrations and
makeacontribution to agricultural courses.Advice isgiven not only onthe daily running
of aholding but alsoon long-term businessdevelopments. Butthe agricultural experts do
not make decisionsfor farmers.

Extensionservicefrom the farmers' organizations

Farmers' organizations are strongly involved in agricultural extension service.The

Social-economic Advisory Service (SEV) isan extension service agency in the social-eco-
nomicfieldwith morethan 200advisorswho are employed bythe regional fermers' un-
ionsandthe trade unions inthe agricultural sector and inthe feedstuffs industry.
Theservicesfrom SEVsupportfarm families and employees in decisions concerning
businessandfamily.TheSEVadvisorsgivecounselling about questions relatedto business
succession,adaptations and closure,family finances, insurances,town and country plan-
ning,environment, landand leasemattersand legalaffairs.TheSEVadvisors giveexten-
sionservicesbymeansof individual advice,organisingwritten advice,material and group
extensionwork, addressing meetingsandgiving education on economic andsocialtopics.
Wherethere aresocial-economic problems,the SEVadvisorswill alwaystakethe personal
circumstancesof the entrepreneur and hisfamily into account. Inthe caseof atake-over,
the position of thefamily successoraswell asof the parentswill bediscussed,not only in
financial but also insocialterms.

82
 Besides giving advice in the social-economic field, the farmers' organizations also
providetechnical-economic extensionservicesinhorticultureviathe FoundationsforCulti-
vation Guidance.Thosefoundations give intensive guidance on cultivation to growers. In
addition,farmers' organizations often employ legal and other specialistswhom farmers
and advisors canapproach for help.

Extensionservicefrom the supply and processingbusiness

Supplyand processing businesses are also involved inagricultural extension service

inthe Netherlands.They usually employ their own advisors.Their extension services are
oftencoupledwiththesaleof meansof production.Theiradvisorsoperate independently
and the advice the give istreated asa separate activity from selling. In dairy farming,
farmers receive specifications via the dairy cooperatives or special inspection services on
the composition of milk from each cow and advice on checking for diseases.

Extension servicefrom the private extension bureaus

Innature,the advisorsof supply and processing businessesare private extensionser-

vice. Besides them, the commercial extension bureaus are important private extension
service.Duringthe last 15years,the private extension service hasincreased agreat deal
in the Netherlands. The commercial extension bureaus, particularly in the horticultural
industry, havetaken over asignificant part of the traditional advisory market.

4.8 Government policy system

Government playsan important role inthe agricultural development although the

Netherlands isatypical free market economy system.Thefunctions of the Government
arealmosteverywhere inthe agricultural sector.Thepolicy isthetool of Government pro-
moting agricultural development. Policysystemcomposesan important part of Dutch ex-
periences of agricultural development.

4.8.1 The aspectsof the Government function

Thefunctions ofthe Government are involved inalmost all aspectsof Dutchagricul-

tural development.
Agricultural education,researchandextension isthefieldthattheGovernment plays
even morefunctions.Asdemonstrated insection4.7,it isthe Government that set up the
establishments of agricultural education,research and extension,financed the activities
of agricultural education,researchandextension,promoted the developments of agricul-
tural education,researchandextension.Allthese have madethe education,research and
extension asthe pillar of agricultural development. Dutch agricultural development is
unthinkable without the education,researchand extension. It isunthinkable for agricul-
tural education, research and extension without the Government support.
Infinancingfield,the Government alsoplaysanimportant role.It isthe Government
that promoted the establishment of Rabobank,which isthe majorfinancer of agricultural
sector asdiscussed in section 4.4.The Government not only exerts influence on agricul-
tural financing by meansof monetary policy,supervision of banks' businessactivities,and
structure policy, but also provides important financial service for agricultural sector by
means of Agricultural Loan Guarantee Fund (ALGF), Agricultural Development and
Reorganization Fund (ADRF),and Land Planning (LP).
TheALGFwas initiated in 1951with the objective to promote the development of
agricultural sector,and in particular the expansion of productivity in agricultural firms. It
actsasaninstitutional guarantor,therefore,anddoesnot lend money itself.It guarantees
interest payments and repayments onthe money loansgranted by banksto farmers. Any
entrepreneur operating anagricultural enterprise inthe Netherlandsandfailingto obtain
sufficient security may apply for guarantee for: (a)take-over of aholding or founding a

83
new enterprise,(b) modernization or expansion,and (c)refinancing but onlywhere ade-
quate proof ispresentedofthecompany'sprospectsof improving itsprofitability.Applica-
tionsfor guaranteewill beevaluated basedoncriteria including:(a)entrepreneurship and
professional expertise, (b) past financial policy, company size and production circum-
stances,(c)company profitability, and(d)ownfunds.Thecrucialcondition isthatthe bud-
get mustdemonstrate that sufficient savingswill result andthat liquidity trends aresuch
that fluctuations in income will not endanger the company's continuity. The standard
normally appliedfor guarantee obligations isthat the Fund assumeobligations equal to
fivetimes itstotal guarantee capital.Thetotal guarantee fund reached 189 million NLG
at the end of 1994,7.6times of that in 1952.
TheADRFwasestablished in 1963withthe objectiveof promoting the development
andreorganization of agriculture.Thismeantthat onthe one handsupporting enterprise
widing-up and making provisionsfor persons leaving agriculture and,onthe other hand,
stimulating improvement of the operational structures of the remaining enterprises by
meansof subsidies.Overthe years,many reorganization and development schemes have
been introduced. Most of them have now fitted into EUstructural policy or are an elabo-
ration of that policy.
Land Planning Act which came into force on 1985 states that land planning isin-
tended to improve the use of the countryside in accordance with its functions as laid
down in the context of physical planning. It can encompass measures and facilities for
agriculture andforestry, natureandthe landscape,the infrastructure,open air recreation,
cultural history. There are four types of land use measures in the Land Planning Act:
reorganization, reallocation,useadaptation,and reallocation by agreement. Thecost of
landplanning measuresareborne bythe Government andthe owners involved.Theaver-
age share of the total costs of 'reorganization' and 'reallocation' borne by the State is
60%.Theremaining40%ispaidbythe ownersandbythethird partiessuchasmunicipali-
ties and district water boards.
Inmarketingfield,althoughtheGovernment doesnot involve inthe concrete affairs
of agricultural marketing it promotes agricultural trade with other countries via various
measures asmentioned in section4.5.
Incooperative field,the Government lain down cooperative regulations and lawso
asto provide institutional framework for cooperatives and the parties involving in the
cooperatives.
Inthe price policyfield,the Government assiststhe agricultural industry not only by
providing research, advisory and educational facilities and measures for structural im-
provements in farming, but also by an active agricultural price policy.This price policy is
designed on the one hand to stimulate more production, higher quality and healthier
environment and,onthe other hand,to safeguard agricultural producersto some extent
against risksresultingfrom wide pricefluctuations. Inthe early 1930safterthe greatcrisis,
the Government operated the pricesupport policy, i.e.the fixed annually minimum guar-
anteed pricesfor anumber of important productswhich guarantees were relatedto the
costpricesof the individual products covered.Thecost price calculations were based on
the costsof production onfarmswhichwerejustifiablefrom asocialandeconomicaspect.
Theterm 'socially and economically justifiablefarms' meansthat the sizeand pattern of
production andefficiency ofthefarm management of thesamplefarmersfrom which the
data for cost pricing are collected are subject to special requirements. In addition to all
paid expenses,the cost of family labour, the interest on invested capital and a renume-
rationfor farm management are included inthe calculated cost price.This renumeration
is related to the salary scales of farm managers in the state farms in the polders of the
LakeYsseldistrict.Thecostpricescalculated by LEI formed the basisfor discussions about
the levelof the price guarantees betweenthe Minister of MLNV andthe Industrial Board
for Agriculture. Not onlythe calculated costpricesbut also other factors weretaken into
consideration when deciding on the agricultural price policy.Of importance wasthe de-
velopment of marketing possibilities. From 1968,when the Common Agricultural Policy
(CAP)was introduced,onward Dutch Government hasimplemented the CAPand played
an important role in promoting the improvement and rationalization of theCAP.

84
 Inthe environmental field,the Government isactive inthe environmental construc-
tion soasto maintain the sustainable development.

4.8.2 Somestrong points of the Government policy system

Thestrong pointsof DutchGovernment policysystemcanbesummedup asthe fol-

lowing aspects.
the basic purpose of agricultural policy isto maintain the production to meet the
certain demand, to improve the productivity, to raise the competitive capacity of
agricultural sector in the world market, to keep the balance between agricultural
production andenvironment,to promotethecooperationamongallpartieswho are
involved in agricultural sector;
the principal means used by the Government are economic method and juristic
method.Thismeansthatthe Government does not directly intervene the affairs of
agricultural sector.TheGovernmentfunctionsthroughtheeconomic levers.Allactiv-
itiesof the Government are baseduponthe laws;
the basic principle of the Government to manage agricultural development isthat
the Government absolutely dosenot engage inthe business.TheGovernment isthe
coach not the player;
the Government always maintains good communications with farmers' organiza-
tions,cooperatives,andother partiesthat areplaying moreor lessinthe agricultural
sector;
the Government hasto adjustthe policies according to the changestaken place in
theagricultural sector andthe domestic and international marketssoasto makethe
policescomplyasmuch aspossiblewiththe consumer demand at home andabroad.

4.8.3 The policy priorities for the coming years

Forthecomingyearsthe Dutchagricultural policywillfocusonprovidingtheagricul-

tural sectorwith anew perspectivefor the future and protecting the interests of nature
and landscape.
To realizethese aimsthe Government hasopted for apolicy which (a) offers more
incentivesto promote innovation inthesector,(b) sticksto the objectives for nature and
landscape butstressespeople'sown responsibility inthe management ofthe natural heri-
tage, and (c) promotes cooperation between research,education and extension bodies
and encourages efforts inthe areasof R&Dand innovation.

85
 SIGNIFICANCE OFDUTCH AGRICULTURAL
DEVELOPMENT EXPERIENCE FOR DEVELOPMENT
ECONOMICS

Development Economics deals with the issues how developing countries develop
from lessdeveloped economyto developed economy.Agricultural development isone of
the main issues in Development Economics. Backward agriculture isthe basicfeature of
developing countries.Transforming backward agriculture to advanced one isthe funda-
mental base on which developing countries modernize their economy. As analysed in
above Chapters, the Netherlands has had a successful agricultural development, it has
createdvaluable experience in itscourse of agricultural development. Undoubtedly, it is
very necessaryfor developing countriesto absorb Dutch experience of agricultural devel-
opment. To make Dutch experience benefit others asmore aspossible, it isof necessity
to introduce a new concept about Dutch experience of agricultural development into
Development Economics.

5.1 Concept about Dutch already in Development Economics

Thereisalreadyoneconceptabout Dutch inDevelopment Economics:DutchDisease.

Butthis concept more or lesshasanegative meaning.
Forvirtually allofthe period of postWorldWar IIuntilthe middleof 1970sthe Neth-
erlandsenjoyed remarkable prosperity inalmostall respects.Inflation rarelyexceeded 3%
peryear,GDPgrowth rarelydropped below 5% peryear,and unemployment fluctuated
around 1% of the total labour force. Much of this prosperity, aswe have described in
above Chapters, was due to the fact that the traditional export sector, i.e. agricultural
sector, was highly competitive with the rest of the world. Agricultural sector earned a
large part of the revenue by means of export. However, in the early 1960s substantial
reservesof natural gaswere found inthe Netherlands.Gasexport became an important
export goodsduring thefollowing years.By 1975gasexports had increasedto about one
tenth of total exports,andthe Netherlands enjoyed atrade surplus of about 4% of GNP.
Gasexports had made adouble effect. Onthe one hand, it sharply increased the trade
surplusandthe Government revenue.TheGovernment usedthe taxeson gasto fund its
drastically increasedspending, particularly welfare spending.Onthe other hand,the in-
flow of foreign exchange from gasexports buoyed up the exchange rate, asthe Dutch
guilder appreciated by about 30% relative to its major trading partners from 1973
through 1978.Theappreciated guilder madeanotable impact on traditional export sec-
tor, viz.agricultural sector.Traditional exporters were facedwith adouble blow: on one
side,domesticcostsincreased;onthe other side,guilder earningsfrom eachdollar's worth
of exportsdecreased.Thecompetitiveness of agricultural exports intheworld marketwas
brought down.Asaresult unemployment rosesharply asthe relatively labour-intensive
export sector stagnated,GDPgrowth also dropped from the annual rate of 5% in 1960s
to 1-2% bythe endof 1970s.It isobviousthatthe gas 'bonanza' gave mixed blessings to
the Netherlands.
Theabove experience of the Netherlands was already summarized asaconcept in
Development Economics,i.e. Dutch Disease.Thisconcept meansthe impact on traditional
export sector andthe affliction of national economyfrom the enormous exports of natu-
ral resources (natural gas,oil) (Gillis, 1983).
After the Netherlands somedeveloping countries suchasNigeria,Mexico,and Indo-
nesia havesuffered the Dutch Disease.

86
5.2 Cananother concept about Dutch besummarized in Development Econom-
icsfrom Dutch agricultural development experience

Canwe summarize another concept about Dutch in Development Economics from

the Dutchexperience of agricultural development shown inthe aboveChapters?Thean-
swer is'yes'.Becausethe experience of Dutchagricultural development isof universal sig-
nificance. Inamethis new concept asDutch Model in agricultural development.

5.3 The content of Dutch Model

Iamtrying to definethe content of Dutch Model inagricultural development asthe

following points.
smallfamily farms in primary production,with large scale,internationally oriented
and competitive operations in other part of the agricultural column. Very often
these large scaleoperations arecooperatives or have acooperative function,
agood institutional framework, including landtenure system,tradesystem,cooper-
ativesystem,financing system,marketing system,farmers'organization system,edu-
cation- research-extension system, and policy system. These systems form a solid
ground on which all parties involved in agricultural sector can play freely and ac-
tively;
outward-looking development.Agricultural resourcesareallocated accordingto the
market demand at domestic and abroad.Agricultural production isengaged inac-
cording to the comparative advantages.
efficiency priority.Agricultural production takesthe efficiency askey. Highcompeti-
tivecapacity isplaceduponthe basisof high productivity. High productivity isplaced
upon the basisof technical progress.
knowledge and information generation and diffusion in agricultural sector,
central guidance by government.

87
6. ENLIGHTENMENT OFDUTCH EXPERIENCEOF
AGRICULTURAL DEVELOPMENTTO CHINA

China isthe largestdeveloping country intheworld now. Itsagriculture, ingeneral,

isstill intraditional state.Howto modernize China isabig questionfacing everyChinese,
alsointeresting the restof the world. Undoubtedly, the modernization of China can not
bebuilt upon atraditional agriculture.The modernization of China can not do without
agricultural modernization.So,itseemsto beveryclearthat moreattention must be paid
totheagricultural development inthe courseof Chinesemodernization.Thereisno mod-
ernization of Chinese whole economy without agricultural modernization. Developing
agriculture isan indispensable partof modernizing China.Needlessto say,the experience
of Dutch agricultural development isvery useful to China.

6.1 Sino agriculture compared with Dutch

China has made many achievements in agricultural development. Especially since

1980 many changes havetaken place in agricultural sector and rural area. In nowadays
Chineseagriculture iswell-known with itsonly 7% of the world's farmland feeding suc-
cessfully22%of the world's population.This isabig contribution of Chinese agriculture
to the world.
But if compared with Dutch agriculture, Chinese agriculture isstill very backward.
Inlandarea point ofview,China ismorethan 230timesofthe Netherlands;in population
point of view,China isabout 80timesof the Netherlands; inagricultural working popula-
tion point of view, China ismorethan 1,300 times of the Netherlands. However, in gross
value of agricultural production point of view, China isonly 5times of the Netherlands;
in agricultural exports point of view, China iseven lessthan the Netherlands. From the
above numbersthe backwardness of Chineseagriculture andthe gap between Sino agri-
culture and Dutch agriculture can beseen clearly.
Obviously,thegap between Sinoagriculture and Dutchagriculture isdueto the gap
of efficiency between two countries. Theagricultural productivity of China ismuch and
much lower thanthat of the Netherlands.China usesmorethan 1,300times of the Neth-
erlandsagricultural labour forcesto produce only 5timesof the Netherlands agricultural
products.From 1950through 1988,thecontribution of productivity growthto agricultural
growth in the Netherlands was 83%. But from 1952 through 1990 the contribution of
productivity growth to agricultural growth in China was only 15% (Feng, 1995). This
showsthattheagricultural growth inthe Netherlandscomesmainlyfromthe productivity
increase, productivity increase accounts for about six sevenths of Dutch agricultural
growth;onthe contrary, productivity growth accountsfor only one seventh of Sino agri-
culturalgrowth.So,the improvement of efficiency isthe keyof Chineseagricultural devel-
opment. There is no development of Chinese agriculture without the productivity im-
provement.

6.2 Main obstacles of Sino agricultural development

Many Chinese people hold the opinion that the main obstacle of Sino agricultural
development isthe morepopulationwith lessland.However, ifcomparedwith Dutch,this
opinion isnot right. Becausethe population density of the Netherlands isabout 3times
ofthatof China,andyetthe Netherlands hasaverystrongagricultural sector.Theexperi-
enceof Dutch agricultural development hasproved that the natural factors are not the
main obstacle to hamper agricultural development.

88
 Inmyopinion,the main obstaclesto hamper Sino agricultural development do not
come from the natural part, but the institutional part. It isthe lack of effective institu-
tional systemsthat hampersthe development of Chinese agriculture. If aset of effective
institutional systemswill not be built up in the near future, Chinese agriculture will not
run out of the backwardness.

6.3 What China can learn from the Dutch experience

Upto herethe question hasalready become very clear. What China can learn and
needto learnfrom the experience of Dutch agricultural development isnot how to build
windmill, how to grow tulip, and how to makewoodenshoe, but how to construct aset
of effective institutional systems. It isthe a set of effective institutional systems that is
neededfor Chinato learnfrom the experience of Dutch agricultural development. China
mustbuild upthe effective landownership andtenuresystem,freetradesystem,coopera-
tivesystem,financingsystem,marketing system,farmers' organization system,education-
research-extension system,and government policysystemto bear itsagricultural develop-
ment.
Owingto the limitation of time andspace,the question how to build up concretely
the institutional systems inChinawill not be discussed inthis report which has answered
all the questions related to itstitle. In fact, the answer to how to establish institutional
systems in China hasbeen already included inthe fourth Chapter.

89
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VITA

Haifa Feng (Feng Haifa in Chinese), born in Shanxi province of China in 1957.
ServedasSecretaryofthe localgovernment from 1975to 1977after finishing Higher
Elementary School in China.
Studied at Agricultural Economics Department of Southwest Agricultural University
(Chongqing) inChina,oneofthe sevenkeyagricultural universities belongingto the Chi-
neseCentral Government, from 1978to 1982.
ServedasLecturer of Agricultural Economics Department of ShanxiAgricultural Uni-
versity which former body, Ming Xian College,wasfounded by Americans inthe 1930s,
in China,from 1982to 1984.
Studied for Master and Ph.D at Agricultural Economics Department of Northwest
Agricultural University (XiAn),oneofthesevenkeyagricultural universities inChina,from
1984to 1990,
Master of Economics in 1987, Ph.D in 1990.
Served asAssociate Professor in Northwest Agricultural University in China from
1990.
Servedasdeputy Director of Rural Economy Research Institute of NorthwestAgricul-
tural University from 1991.
Served asPost-Doctor Researcher in Shenyang Agricultural University (Shenyang),
one of the seven key agricultural universities in China,from 1993to 1994.
Served asProfessor in Shenyang Agricultural University from 1994.
Served asProfessor from September 1994,ashead of General Economics Research
Department from April 1995,asassistant Director from October 1995 inthe Institute of
Agricultural Institute, ChineseAcademy of Agricultural Sciences(Beijing).
Entitledasthe Personobtaining ChinesePh.DDegreewith outstanding contribution
by Northwest Agricultural University in 1990.
Entitled asthe specialistwith outstanding contribution by Ministry of Agriculture of
China in 1995.
Selected asPh.DTutor of the Postgraduate School of ChineseAcademy of Agricul-
tural Sciences in 1996.
Visiting Japanwith academic exchanges in 1994.
Visiting Scholar inAgricultural Economics Research Institute inthe Netherlands from
1996to 1997.

95