When you talk about the European Union, you are talking about agricultural subsidies. Indeed, the distribution of agricultural billions was an important raison d'être of the European project. In 1970, the equivalent of 3.2 billion euros was allocated to the Common Agricultural Policy (CAP), no less than 93% of the European budget at the time.

The flow of subsidies has only increased since then – 2021 saw 55.7 billion euros go to European agriculture. The European Union has of course expanded considerably and Brussels has set up numerous projects for other sectors in recent decades, but as it still makes up one third of expenditure, the CAP remains by far the largest item in the annual budget.

In Europe, 178 million hectares of land are used for agriculture: 40% of the total land area. In the Netherlands, this percentage is even higher: 60% (2.2 million hectares) of available land is used by farmers. The money flowing from Europe influences the decisions they make.

In 1962, the pursuit of economies of scale led to a policy that stimulated farmers to work more efficiently and produce more. This is reflected in the Dutch landscape: meandering ditches and hedgerows were turned into straight canals and square plots through land consolidation.

So the way Europe distributes those billions is affecting our country. That is why Follow the Money is now looking into these subsidies. What is the goal of the Common Agricultural Policy in 2022? Which rules and conditions will be used to distribute the money? Who gets the most and who comes off the worst? And to what extent does the subsidy do what it is intended to do?

To answer these questions, Follow the Money built a database accessible to the public which contains all of the European subsidies that went to Dutch companies and institutions. These figures are published annually by the Netherlands Enterprise Agency (RVO), which is responsible for paying out European subsidies. However, the RVO will take this information offline after two years, whereas we have collected all the figures since 2014. This gives us an amount of subsidies worth 7.9 billion euros, of which almost one billion (904 hundred million) was paid out in 2021.

We then combined this data with the public data available from the Chamber of Commerce (Kamer van Koophandel or KvK), which enabled us to link 92% of the subsidies to the specific companies they went to. In total, Follow the Money was able to link 7.2 billion euros to a Dutch company or institution.

The largest subsidy pots have hardly any conditions attached

First of all, there is no such thing as the Common Agricultural Policy. This is a collective term for a large number of different schemes: from a subsidy pot that supports young farmers and pays for fruit for schoolchildren to the ‘Honey Scheme’.

The CAP rests on two pillars. The first pillar, which accounts for almost three-quarters of European subsidies to Dutch farmers, is intended to provide farmers with a reasonable income and to support greening measures. The basic payment scheme forms the largest pot within this. Since 2014, a total of 4.4 billion euros has flowed to Dutch farmers through this scheme.

In the past, income support for European farmers was achieved through minimum prices for agricultural products, such as the minimum milk price. The more a farmer produced, the more subsidies he got. This unfortunately led to unsellable milk lakes and butter mountains that were dumped onto poorer countries. The present basic payment scheme was introduced in the 1990s.

Since then, the money received by farmers was no longer linked to their production, but to the size of their farms: the more hectares a farmer owns, the more money he or she receives. The rationale behind this was an increase in scale: when a farmer owns more land, it is more attractive to invest in expensive machinery, so that food can be produced more efficiently. So Europe’s agricultural policy led to it focusing on farms that were as big as possible.

For the others, this subsidy was subject to hardly any conditions: anyone who is registered with the Chamber of Commerce with an agricultural activity is entitled to money from the basic payment scheme.

After the basic payment scheme, the next largest subsidy pot is for ‘Payment for climate and environmentally friendly agricultural practices’. This also forms part of the CAP’s first pillar and is based on the size of a farm.

Anyone who is entitled to these subsidies must meet a number of sustainability conditions. For example, farmers must engage in ‘crop diversification’, use part of their land as an ‘ecological focus area’, and maintain the grassland as much as possible.

However, there are so many exceptions and exemptions to these conditions that in practice almost every Dutch farmer can receive money for ‘climate and environmentally friendly agricultural practices’. Over the past eight years, a total of about 1.4 billion euros has been paid out for this purpose. Since 2014, the European Union has spent a total of 5.8 billion euros to provide Dutch farmers with a reasonable income.

One farmer is a millionaire, the other works for below minimum wage

The income inequality among farmers is high. The Central Bureau of Statistics once calculated that out of every six Dutch millionaires, at least five are farmers. At the same time, a report by the Netherlands Court of Audit showed that 36% of farmers are working below the statutory minimum wage.

There are also large differences in the subsidies that farmers get, as our figures show.

Just to clarify beforehand: in these graphs, we show the average annual income of farmers for whom a subsidy has been included in the dataset for at least four years. This is to avoid outliers – we are concerned with looking at the average over a period of time. The following analysis is therefore based on 75% of the data. The farmers are divided into ten groups of equal size and ranked from the lowest to the highest earning groups (‘percentile’).

This unequal distribution of subsidies is a direct result of the way in which the schemes are structured. By focusing on size, farmers with a lot of land also receive much more money. According to the Netherlands Court of Audit, 37% of the subsidy pot goes to farmers who earn more than twice the average (66,000 euros gross per year).

There are also large differences between sectors. Potato farmers, who usually own a relatively large area of land, will benefit from this. Of the total number of potato farmers, 71% earn more than 33,000 euros gross per year, with no less than three-quarters of their average income consisting of income support. At the other end of the spectrum are the farmers with grazing animals. ‘Only’ one third of their income consists of subsidies, which means that more than half of them earn below the average wage.

In addition to the two large subsidy pots for income support, the first CAP pillar has smaller subsidy pots which the European Union is trying to use to shape the market for agricultural products. The minimum price system is not totally off the table – the European Union still intervenes when it considers market prices for agricultural products to be too low. There are also subsidies for farmers who join forces, since together they might respond better to market demands. Since 2014, the Dutch agricultural sector received an additional 2.1 billion euros through these types of subsidy pots.

The CAP’s second pillar, which accounts for about a quarter of the subsidy money that Dutch farmers get, has a broader goal: ‘rural development’. This is a concept that covers an extraordinary range of objectives. For example, this pillar is supposed to make sure that European agriculture becomes more competitive and climate-proof, that it helps prevent poverty and loneliness among farmers, that it funds knowledge transfer, creates employment, stimulates tourism and provides internet in Europe’s rural areas.

Hundreds of millions to protect wild birds

The largest pot within the second pillar is for ‘agri–environment’ and climate measures. Since 2014, more than 428 million euros has been spent on this in the Netherlands. Most of the money goes to farmers who work together in one of the forty ‘agricultural nature associations’ in the Netherlands. They are responsible for agricultural nature and landscape management (agrarisch natuur- en landschapsbeheer or ANLb).

A large portion of this money goes to the protection of meadow birds. At the end of last year, the Netherlands Court of Audit calculated that more than 400 million euros has been spent on this since the beginning of this century. In 2020, it was more than 33 million. According to the Ministry of Agriculture, about three-quarters of this is funded by European subsidies.

All in all, research shows that the millions in subsidies do not do what they are intended to do. While hundreds of millions were spent to protect meadow birds such as the black-tailed godwit, the number of our national bird’s breeding pairs has halved. Things are even worse for other species. Since 1960, the number of skylarks has plummeted by 95%.

LEADER

A special subsidy pot is the Liaison Entre Actions de Développement de l'Économie Rurale (LEADER): a subsidy programme active for almost twenty years which was set up on the initiative of the European Commission. This money is meant to strengthen the rural economy sustainably, by such means as maintaining facilities or boosting tourism.

The subsidy made available for this is a modest amount: 5% of the money in the second pillar must go to LEADER.

However, this subsidy will be multiplied at least four times when it is paid out. First, every euro coming from LEADER must be matched with a euro from the Netherlands – usually provided by a municipality or province. Secondly, projects applying for a LEADER grant must also meet 50% of the project’s costs with their own money. (This may also consist of subsidies or sponsorship.)

This makes LEADER a lever, which ensures that money flows to the countryside from various government funds.

The largest recipients are not farmers, but farming cooperatives

If we look at who got the most agricultural subsidies in the Netherlands since 2014, it is striking to see that it was not the farmers. There is not a single ‘ordinary’ farmer—by which we mean someone who works the land or takes care of livestock—in the top 50. The largest recipients are all big companies and institutions.

The top 20 is dominated by cooperatives. Some of them benefit from the European Union’s efforts to get farmers to join forces. Take Oxin Growers, the largest recipient of European agricultural subsidies in the Netherlands: a cooperative of more than 130 fruit and vegetable growers.

One of the conditions for getting the subsidy is that the affiliated members must sell all their products through the cooperative. They also coordinate production: one harvests tomatoes in May, the other in June. This is to ensure stability in the market. Since 2014, Oxin Growers received 69 million euros from these subsidy pots, and the money was invested in machines, marketing and brand development, among other things.

In other sectors, you would think of it as the forming of cartels, not the explicit objective of a European subsidy pot

These are businesses which make joint purchases, exchange strategic information and influence the market price. In other sectors, you would think of it as the forming of cartels, not the explicit objective of a European subsidy pot. In the past, competition authorities have imposed fines on agricultural cooperatives for making price agreements.

But in recent years, the highest European court has issued a number of important rulings, including the ruling on chicory, which makes it clear just how much agriculture is still at the heart of the European project – that under certain conditions, the Common Agricultural Policy takes precedence over competition law.

The cooperatives are completely dependent on European subsidies. Because while their turnover is gigantic – the three cooperatives that received the most subsidies since 2014 (Oxin Growers, Growers United and The Greenery) put respectively 748, 486 and 954 million euros worth of fruit and vegetables on the market last year – most of that money goes to the affiliated members.

The cooperative has only a tiny part left over. Last year, for example, Growers United only made a profit of 4 million euros, Oxin Growers only 160,000 euros. The tens of millions that these cooperatives get from the European Union literally make up the difference between profit and loss. The cooperative model has a long history in Dutch agriculture and also receives plenty of legal and financial support from the European Union.

Agricultural subsidy and Quote 500?

Getting almost 53 million euros since 2014, Hoogwegt is number two on the list of largest subsidy recipients. Hoogwegt – owned by the family of the same name – is the world’s largest producer of dairy products. With an estimated capital of 500 million, the family is in 33rd place in the Quote 500, a list of the 500 richest Dutch people compiled by the magazine Quote.

Hoogwegt got the lion’s share of the subsidies in 2016. The milk price then fell below a level set in advance by the European Union. The European Commission responded to this by temporarily withdrawing products from the market – with a decrease in supply should come an increase in price – but these products then had to be stored. This incurred technical and financial costs for the company, and so it received compensation to cover those costs. Hoogwegt got more than 50 million euros for this in 2016.

Billions for farmers with cows

The European Union spends hundreds of millions on nature and landscape management in the Netherlands, but without much success – we are not seeing sufficient improvement with biodiversity and water quality. This has everything to do with where the largest cash flow of all ends up: the subsidy for cows.

Farmers who keep cows get most of the subsidies: no less than 3.4 billion euros since 2014. The part of the agricultural sector that grows grain, vegetables or potatoes is number two: they got 1.6 million, slightly less than half of what the cow farmers received.

The reason why these two sub-sectors got the most subsidies is simple: they own large areas of arable land or pasture, and are therefore large landowners. Because the basic payment scheme and the payment for climate and environmentally friendly farming practices are calculated according to the size of the farm, they are the farmers who receive the most.

The way that subsidies are distributed therefore encourages land ownership. This affects the way farming operations are carried out: farmers who own a lot of land deal with their livestock differently to farmers who do not own great areas of land. For example, in Dutch dairy farming, a sub-sector in which land ownership is common, 84% of farmers use some form of grazing: their cows (sometimes) go outdoors. This helps to tackle the nitrogen crisis: ammonia is created when urine and manure are mixed together, but this happens less when cows are in a field than when they are close together in a barn.

The way European agricultural subsidies are distributed encourages the ownership of large tracts of land, but does little to reduce the amount of livestock

Farmers who own limited land, such as pig and chicken farmers, get much less subsidies. They respond to this by cramming more and more chickens and pigs into their stalls. Over the last seven years, the number of pigs has increased from about 2,400 to 3,400 pigs per pig farm, and the number of chickens from 34,000 to 43,000 chickens per chicken farm. These animals hardly ever go outdoors and in many stalls their urine and excrement is collected together in one place. This results in enormous nitrogen emissions and it is no coincidence that De Peel, the epicentre of the pig industry, is one of the areas in the Netherlands which has the most nitrogen emissions to be reduced.

The way European agricultural subsidies are distributed encourages the ownership of large tracts of land, but does little to reduce the amount of livestock. With almost 105 million chickens, 12 million pigs and 1.6 million cows, the Netherlands has an enormous number of animals which produce a lot of manure on a relatively small area of land, spread over fields and meadows. Manure in itself is a valuable raw material with nutrients that plants grow well from – but not in the quantities produced in the Netherlands.

In fact, so much manure is produced that its nutrients leach into surface water and vulnerable nature reserves. As a result, certain plants grow extremely well, such as algae, nettles and blackberries, but other flower-bearing plants lose out. This in turn has a negative effect on bees, bumblebees, butterflies, beetles, dragonflies and other insects, which in turn also has an impact on the pollination of agricultural crops. Combating the nitrogen and phosphate crisis is also in the best interests of the agricultural sector itself.

Europe distributes subsidies for nature and agriculture management. However, this has only a limited effectiveness in the Netherlands, because the European Union simultaneously distributes subsidies that do not affect the amount of livestock, which then leads to farmers further intensifying livestock farming.

See for yourself where the billions in agricultural subsidies end up

You can also search the database that FragDenStaat put together for this research and see for yourself. Click here and then search by company name, postcode, municipality, and subsidy pot and amount. If you come across something that you think is worth further investigation by our journalists, please let us know!