Challenges with Buying Out Livestock Farmers Contributing to the Nitrogen Problem in the Netherlands

‘Farmers in a tight spot due to nitrogen: stopping for 4 out of 10 negotiable’, NOS wrote on its website in September 2019. Six months after the Council of State officially designated nitrogen precipitation as a major environmental problem, many farmers were concerned about their future. At the time of the first large farmers’ demonstrations, the NOS questioned more than six thousand livestock farmers.

The survey made the cabinet optimistic. Carola Schouten, the then minister of agriculture, hoped, just like her successors, to significantly reduce nitrogen emissions by voluntarily buying out livestock farmers. On the basis of the NOS study, there seemed to be sufficient enthusiasm for this.

However, a closer look at the survey results shows that interest in business closures is much lower than the headline above the NOS message suggests. Only 3 percent say a resounding ‘yes’ to the question of whether there is interest in buying out. More than 50 percent say ‘no’ in full and 34 percent answer ‘maybe’, ie: only under certain conditions. The rest did not answer the question.

Wishes

It is precisely in those conditions that the shoe pinches. Officials and provincial administrators report that farmers often have additional requirements. Some farmers are afraid that they will have to pay a large part of the buy-out premium to the tax authorities. They want clarity about that first. Others want to build holiday homes or homes on their plots after they have demolished their stables – but building in the countryside often conflicts with the zoning plan. Still others want to continue as arable farmers and have the guarantee in advance that this is allowed.

Many of these additional wishes are at odds with nature conservation. The peak loaders must be removed in order to create buffer zones around nature areas. Holiday parks and traditional arable farming lead to extra recreational pressure and nitrogen emissions. On the other hand, the government is currently unable to provide sound revenue models for nature-inclusive farmers, also because chain parties such as Rabobank, supermarkets and dairy companies do not cooperate.

Buy-out arrangements

The buy-out schemes (Lbv and Lbv-plus), which Nitrogen Minister Van der Wal will open at the end of this month, are intended for nearly 11,000 livestock farmers who cause the most nitrogen damage in nature areas. When they are bought out, they are reimbursed 100 to 120 percent of their company value and sometimes a compensation for demolition costs. The cabinet expects a lot from the Lbv-plus peak tax scheme in particular. This must guarantee half of the nitrogen reduction target for (currently) the target year 2030.

Not all 11,000 livestock farmers need to participate in order to achieve the intended reduction targets. It may also be much less, provided that some of the largest peak loaders raise their hands. A large peak loader may deposit three to five times as much nitrogen on a Natura 2000 area as number 11,000. It is much more efficient to buy out the top 10 than thirty or fifty farmers dangling at the bottom.

But the largest peak loaders are often livestock farms that have invested heavily in scaling up and innovative housing systems. They are economically strongest in a market that revolves around the lowest cost price per unit of product. The willingness to quit is probably low among this group. A recent one also points to this NRC-reconnaissance among 28 peak loaders. Only three show any interest in buying out. The rest see enough perspective to just keep farming.

Reasons to quit

Brussels prohibits livestock farmers bought out with state aid from starting a new livestock farm elsewhere in Europe. This ‘occupational ban’ is unacceptable to many farmers. This will also reduce enthusiasm. Last year, the Netherlands Environmental Assessment Agency listed the results of previous purchase schemes. They almost always fail. Usually quite a few farmers initially show interest, but only a fraction ultimately signs a buy-out agreement.

There are several reasons for this high drop-out rate. The threshold for entering into a conversation without obligation is of course low. Buying out is especially attractive for older farmers without a successor. There are enough in themselves, but with voluntary schemes livestock farmers try to get the most out of it. Negotiations can therefore take a long time; many farmers are adopting a wait-and-see attitude.

Most young farmers do not want to stop. They prefer to opt for technical innovation or relocation of their company. But in practice these technical innovations often fail to deliver the nitrogen gains they promise on paper, which means that permits are lost in the administrative courts.

Future

When relocating, the question arises where all those livestock farms should go. Nowhere in the Netherlands are thousands of hectares of agricultural land lying fallow where livestock do not cause damage to nature. Zeeland, Flevoland and North Groningen are the most obvious destinations, but land must be released there. And for that too, enough farmers must first let themselves be bought out.

The cabinet is also unlucky that milk, meat and egg prices have risen enormously in the past year. At the time of the NOS survey, livestock farms were on average much less profitable. Some of the respondents probably had a gloomy view of the future at the time and were therefore receptive to a buyout. That is different now: livestock farmers have had a top year. Rabobank also predicts high prices for the rest of 2023.

The cabinet threatens to use ‘compulsory instruments’ if too few livestock farmers allow themselves to be bought out. Van der Wal wants to work out standardization and pricing measures before the summer, but three of the four coalition parties seem hesitant to actually use that big stick. The provinces, which issue nature permits to farmers and have to withdraw them after buying out, feel even less in favor of coercive measures. With farmers’ party BBB at the helm, provincial councils can frustrate government policy considerably, for example by fully focusing regionally on innovation instead of buy-out.