We want to carry out our core activities as well as possible. Furthermore, we encounter dilemmas that influence our choices or our way of working. Unexpected developments or events also ensure that the practical reality proves to be more less clear-cut than expected. We are aware of this and try to learn from it. A few of the key dilemmas and events from 2021 are described below.
OUR DILEMMAS IN 2021
The pressure to innovate versus the intractable reality.
The Netherlands has been in a so-called ‘nitrogen crisis’ since 2019. In May of that year, the Council of State ruled that government policy to reduce nitrogen deposition in nature conservation areas was not sufficient. Since then, the Dutch government has been busy making new policy to reduce nitrogen deposition. This concerns both nitrogen oxides (NOx) that are primarily emitted by traffic and industry and ammonia (NH3) that is mainly produced by agriculture. Neither the elaboration of this government policy, nor the proven effectiveness thereof, is clear to farmers. This is creating uncertainty. Will it be necessary to invest in new stall systems that prevent nitrogen emissions or will the farm be purchased or relocated perhaps? The agricultural sector therefore finds itself in a kind of Catch-22 situation. It is difficult to make clear investment choices, because the rules and the impact of policy for the individual entrepreneur are unclear. We feel the pressure to drive innovation, but simultaneously realise that the reality is more intractable than ever.
The desire to reduce the climate impact versus the dependencies in the value chain.
The climate targets we are faced with as a company require considerable steps and investments. Two of the ways we are achieving this is by streamlining the energy supplies to our production companies or by reducing methane in calf husbandry. Although our ambitions in this regard are big, we notice how dependent we are on others if we are to significantly improve our performance. Looking at the value chain of the VanDrie Group, the indirect emissions of CO2 will have to be included in policy in due course. Indirect emissions are caused by business activities of other organisations. This concerns emissions from sources that are not owned by the VanDrie Group and over which we are usually not able to exert any direct influence. The VanDrie Group collaborates with many organisations and entrepreneurs, such as veal farmers, suppliers or customers, which are included within the scope of indirect emissions. We are mapping out the barriers and will also share this with policymakers. At the same times, we want to work together with our cooperations partners to jointly tackle the climate targets.
WHAT WE HAVE LEARNED IN 2021
The cost price under pressure
In 2021, the costs of transportation, energy and raw materials increased considerably. For example, the price of whey powder in the indexes was around 75 euros in December 2020. This went up to 120 euros per 100 kilos in 2021. At the end of March 2022, the index price was already more than 146 euros. At the same time, the availability of raw materials decreased significantly. In the last months of 2021, inflation in Europe rose considerably. The prices rose to a historic record high in December 2021 since the introduction of the Euro in 2000. This means that the cost price in the entire production chain of the VanDrie Group were placed under considerable pressure. There was already an expectation in 2021 that this would not simply be over in 2022. Unfortunately, we are now seeing that this is the case. Inflation has risen further in 2022 and this has taught us that long-term agreements with suppliers will continue to be of major importance in the future in order to reduce the cost price and maintain profitability.
2021 was an intense year for the VanDrie Group’s meat processing companies in the Netherlands. Three companies had to close for a short time due to an outbreak of COVID-19 among the workforce. As a result of that, public-private collaboration took on a new dimension; lots of different government agencies examined and assessed the policy we were pursuing. We have experienced how important open communication and collaboration can therefore be. This enabled us to tackle problem areas promptly and to achieve external support for the chosen course, thereby guaranteeing safe working conditions.