FNLI: Existence of food producers under strong pressure

FNLI is very concerned about the continuity of Dutch food producers. Exploding energy costs are putting them under increasing pressure. A growing number of producers in various sectors even see their continuity threatened as a result. This affects not only individual companies, but now entire sectors as well. FNLI therefore calls on the government not to delay any longer with appropriate and effective measures to cushion the disastrous effects of high energy prices and to maintain the level playing field in Europe. 

This is necessary not only to dampen food price increases for consumers, but also to allow entrepreneurs in the energy-intensive sectors to compete with companies from neighbouring countries. After all, in the countries around us, the government does intervene with substantial support measures for companies. This prices Dutch products and companies out of the market and threatens their existence.

More and more companies now have to deal with flexible energy contracts, accelerating the rise in energy prices. Recently, ING said it expects energy costs for food producers to rise to an average of 7.5% of total costs this year, up from 1.5% in 2020, and total cost increases for food companies to be between 20% and 30%.
Cees Jan Adema, FNLI managing director: "This endorses what we experience in practice, where we see outliers at companies where energy costs now account for around 30% to 40% of the cost price. At the same time, we see countries around us rapidly ramping up support measures. As a result, Dutch producers are falling behind; similar products from abroad are becoming cheaper. At a time when there is talk of less dependence on foreign countries, the opposite is threatening to happen here. That is not sustainable and undesirable."

Energy prices in the food sector in June this year were 300% higher than in January 2021. Food commodity prices rose 36% over the same period. If this trend continues, companies will start to collapse. Without rising energy costs, doing business is challenging enough with current inflation. When companies go under, it usually also has direct consequences for other local links in the agri-food chain such as farmers and market gardeners. Many producers have borne part of the increased costs, but the limit of what they can absorb themselves has been reached.

Without compensation measures, sustainability among food producers is at risk. To give the energy-intensive sectors perspective and encourage sustainable investments - e.g. in electrification - investment in energy infrastructure is needed as soon as possible. Without accelerated grid expansion, short-term sustainability by those companies is not realistic. Wider use of existing instruments such as the SDE++ scheme can also contribute to this. In addition, the electricity tariff will have to be decoupled from the gas price and set on the basis of actual costs. To keep shelves stocked with Dutch products, keep groceries affordable for consumers and give entrepreneurs some perspective in these extremely uncertain economic times, speed is of the essence to come up with measures that compensate for the excesses. Business cannot be left alone in this extremely difficult task, the FNLI said.

Fnli.nl