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Rabobank: Energy transition in horticulture not finished

The Dutch horticulture sector is experiencing robust financial development, according to researchers at Rabobank. However, there are concerns too. In the greenhouse horticulture sector, they are particularly concerned about the sector's energy transition. Businesses cite grid congestion (an insufficient available capacity on the electricity grid) as the most pressing issue. In open field cultivation, transitioning to cultivation with minimal or no use of chemical crop protection is the biggest challenge, as revealed in a sector update.

No update is complete without a barometer reading. The Rabo Horticulture Barometer still rates the financial development of the sector as more than satisfactory.

Researchers state that the pricing of most products is sufficient for profitable operations. When it comes to tomatoes, the pricing for specialties is slightly less favorable than for standard cluster tomatoes. For cucumbers, the economic results of the first cultivation are somewhat less than last year. According to the bank researchers, the financial results in food horticulture often closely correlate with energy management. Increases in the costs of energy, labor, and fertilizers are now leveling off.

In the public debate on energy, water, crop protection, and labor, the interconnectedness of the horticulture complex as a whole hardly discussed, the bank's researchers note. Lambert van Hooren and Arne Bac argue: "To be able to test their innovations in practice, the presence of primary production is crucial for developers of new varieties and technologies. Moreover, primary production is vital for the trade companies in vegetables, fruits, or flowers and plants. They combine the products of Dutch growers with imports from foreign colleagues, primarily for consumers in the European Union and the United Kingdom. This creates a complete assortment for supermarkets, specialized trade, or food service."

Ornamental horticulture is dependent on purchasing power development
Overall, the ornamental horticulture shows a positive development. Moreover, there was a good turnover for Mother's Day. Purchasing power development seems to have a slightly more significant impact on ornamental sales than it does for fruits and vegetables. A cautious consumer may sometimes postpone the purchase of a bouquet of flowers or a houseplant. Additionally, it is often more challenging to secure good energy deals within this subsector. Many ornamental horticulture businesses under glass are smaller, do not always have combined heat and power installations, and are truly dependent on lighting for the quality of their production.

The price formation of ornamental horticulture products varies. Prices for chrysanthemums and tulips have been good, while those of green houseplants and gerberas could improve. Yet, Phalaenopsis shows a healthy development again. The significant reduction in the area of Phalaenopsis by about 30% has played an important role in this.

The VGB ( a Dutch association of wholesalers in horticultural products), and Floridata reported positive news about the export of cut flowers and potted plants. In the first quarter, exports increased by 4% compared to 2023. In April, the increase was even more significant.

The export value to the United Kingdom showed a substantial increase (unlike France). The British pound was about 3% stronger against the euro in the first quarter of this year relative to the first quarter of 2023. Additionally, British garden centers have particularly increased their purchases of pot and garden plants in anticipation of the upcoming border inspections from May 1 this year. These inspections are expected to increase costs or prices by about 0.5 – 1.0%. Finally, an export increase of 4% roughly matches inflation, so the real return has not changed.

The British trade organization HTA reports a 22% increase in turnover for affiliated garden centers in the first months of this year. Also, British consumer confidence has risen by 15 points: from -36 in March 2023 to -21 in March 2024 (on a scale of -100 to +100).

The energy transition in horticulture is not finished
Greenhouse horticulture is aiming for climate-neutral cultivation by 2040. Stakeholders indicate this is possible if certain prerequisites are met. Now, the greenhouse horticulture is being adjusted to accelerate the increase in CO2-emissions-levy-payments. Also, geothermal projects are experiencing delays due to lengthy procedures and updated regulations. For this reason, Rabobank conducted a survey among greenhouse growers to assess the state of the energy transition.

This survey reveals that in the past three years, greenhouse horticulture businesses have primarily invested in (additional) screening installations, LED lighting, geothermal connections, and solar panels. Nearly half of the businesses report achieving or expecting to achieve more than 20% energy savings with these measures. Reasons for not investing in energy-saving measures vary greatly. Some businesses have favorable energy contracts, some can achieve sufficient savings with cultivation measures, or some are waiting for opportunities to connect to regional, area-specific initiatives.

Investments are also expected in the next three years, often including dehumidification as part of the investment in (additional) screens and the introduction of The New Cultivation methods. Other investments that growers are interested in include heat pumps, electric batteries, and electric boilers. Especially with an investment in a heat pump, an electric battery seems indispensable, providing more buffering capacity for cost-effective use of the heat pump.

In the longer term, there is an interest in investments that are currently being researched. Sometimes these are investments with a long procedure time, such as those for wind turbines. The reasons for entrepreneurs to focus on saving energy vary, including cost savings, subsidy policies, customer demands, or regulations. However, there are also obstacles. Grid congestion is the main reason for not investing.

"When we combine the results of this survey with recent reports on the challenges in developing geothermal energy, we see that the goal of making Dutch greenhouse horticulture climate-neutral by 2040 still requires efforts from the sector and all stakeholders involved," the researchers write. "This is not an easy task."

The bank will soon publish a 'Greenhouse Horticulture Energy Transition Menu' listing over fifty energy-saving options.

Source: Rabobank (in Dutch)

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