Innovation and Farm Performance: The Case of Dutch Agriculture

The agricultural sector in The Netherlands, as elsewhere in Europe, is confronted with three related types of change in its environment. First, markets are changing. Over the years, shortage markets have changed into surplus markets. Prices for basic bulk products fluctuate around, or just above, average production costs. Prices substantially higher than costs can only be obtained on niche markets by offering products with specific extra qualities (in terms of taste, health or production mode). Second, policies are changing. Whereas in the past, the government assumed a role in taking care of the economic fate of farmers, it is now putting more emphasis on the private sector’s own responsibilities. Policies under the Common Agricultural Policy (CAP) are gradually reformed and the market is left to do its work. The farmer is expected to change from an artisan into an entrepreneur. Third, the institutional environment is changing. Until recently, a system of political representation and product and industry boards was in place, to take care of the collective interests of the agricultural community. In the Netherlands, this system has largely broken down as a consequence of the growing differentiation between farmers, and under increasing pressure from within-industry competition.