Presentation on economics of circular economy for the Food Valley Network

1. Leading the way in cycles: does circular agriculture
have a revenu model?
Krijn J. Poppe
Food Valley, April 2020

2. The Flow of Materials
grass
Food
Consumption
Manure
SOIL
Food
processing
Animal
production
Chemical
industry /
energy
crops
Plant production
Fruit
and
veg.
Bread
etc.
Cereals
Feed: grass
and soy, cereals
Milk, meat, eggs
Biomass
Co-products
Urine, feces
Nutrients, organic matter
Plant nutrition
Mining
industry
Fossil fuels
Circular
Bioeconomy
Food Systems

3. II Metropoles: Singapore
Service economy
Land is scarce
Import of plant and animal
products
III Grain belts: Ukraine
Large scale extensive arable
commoidty production
Relative low inputs
Export of food and feed
IV Animal-concentrations: ??
Specialised livestock farming
Regional feed production
Export of animal products
Low
Low
High
High
Population density
Animaldensity
I Delta’s: NL
Excellent infrastructure
Land is scarce
Import of food and feed
Export animal products

4.  Policy deal between political parties with very different views
 9 criteria for development
● Closing loops, less biomass waste
● Sustainable stock management (fish)
● Improve position of the farmer
● Contribute to climate challenge
● Improve vitality rural area
● Improve ecosystem (less external effects)
● Animal welfare
● Improve farmer-citizen relationship
● Strengthen export of solutions
Dutch policy on circular agriculture
4
• Soil: ecological, not chemical
• Manure: traditional, no slurry
• Feed: co-products, no human-
edible feed
• Animal welfare: improve

5. Current revenu model of the sector
5
• Export incl. tech.: € 100 bln.
• Of which Dutch made: € 65 bln.
• Net export: € 35 bln.
• Related (incl. other sectors) value added: € 45 bln.
• Gross value added Agri-Business Complex: € 50 bln.
• Of which based on inland grown products: € 33 bln.
• Of which primary production: € 10 bln. (<25% livestock)
• Family farm income: € 3.5 bln.
• External effects: - € 1.6 bln. (conservative)

6. Cochrane’s
Treadmill Suppliers and
(public)
research
innovate to
improve
labour
productivity
First
innovating
farmers
increase
production
Efficiency of
scale: lower
cost price
and market
price
Farmers with
low income
have
problems to
exit:
innovation as
solution
Land is
scarce:
intensification,
environmental
problems
Farmers face
increasing
opportunity
cost of labour

7. Food chain: 2 weak spots – opportunity?
Input industriesFarmerFood processorConsumer Retail
• Public health issues –
obesity, Diabetes-2 etc.
• Climate change asks for
changes in diet
• Strong structural change
• Environmental costs
need to be internalised
• Climate change (GHG)
strengthens this
Is it coincidence that these 2 are the weakest groups?
Are these issues business opportunities / market failure?
Or system failure and lack of transformative capacity?

8. 8
Investment
in product /
service
innovation
DemandPrice
Profit
Investment in
scale and
process
innovation
Production
Capacity
Commodity
model
Value added model
Can more ICT get us
into this model ??

9. Differentiation or diversification as solutions ?
Differentiation
 Differentiate by transparancy, variety
(taste, color, etnic)
 Differentiate by processing (extra
fresh, raw, no additives, traditional)
or sales (farm market, web shop)
 Unique experience
(C) JanWillem van der Schans - WEcR
Diversification
 Other services in additon to food
(child care, recreation, nature,
contract work, energy,
composting, bed & breakfast etc.)
 Economies of scope not scale –
ask for synergies
 Other options: other ownership /
contract models (Herenboeren)

10. Implications for your future
 Current size of the livestock industry will be hard to maintain if you take
circular agriculture and external effects serious. Smaller size improves
national welfare due to less negative external effects.
 (Foreign) consumer is not going to pay for inefficient production or cost
increases due to regional externalities
 Alternative business models could work for individual farms but not for all;
some farms will get large, many will disappear.
 Agricultural export stays and outward foreign direct investment will increase
 NL remains an excellent place for your HQ and Innovation labs:
● Enough knowledgeable farmers in NW Europe for testing inventions
● With incentive to innovate: high labour costs, land prices and access to cheap capital
● Attractive research and fiscal climate, (air) connectivity, metropole (partner-jobs)
● Agglomeration effects (cluster, deep labour markets etc.)
10

11. krijn.poppe@wur.nl
www.wur.nl
Thanks for your
attention