The focus on transitions varies enormously per area

GreenTech is shining a spotlight on the transitions happening in the world today. With numerous challenges such as climate change, water scarcity, and the need for more sustainable practices, the current food production systems are being greatly affected. In a series of articles, we will discover the challenges and opportunities of these transitions in the horticulture industry. In this article Rabobank highlights important developments that will influence the global economy.

How will the global economy develop and how does that effect the opportunities for horticultural technology? Menno Middeldorp and Lambert van Horen of RaboResearch, part of Rabobank, point out the most important global developments. And according to them, there are major differences between countries and areas.

Energy and labour

Lambert van Horen says companies all over the world look at sales, but also at costs, which mainly revolve around energy and labour. “The issue is what order of attention these themes have within horticulture and in the field of investments. Sales are mainly on the revenue side, energy, and labour on the cost side. Perhaps you should also mention crop protection as a social theme. In Europe, energy is number one, labour is second and sales are third. But if you look at North America, you see that labour is at the top. And in the Middle East and China, sales are the number one priority. The focus on these themes varies enormously per area and highly depends on local circumstances. That is something to consider when making business decisions.”

Labour is an important theme, Van Horen continues. “Within high-tech horticulture, employees mainly come from abroad. Many Central Americans work in Canada and the US, in the Netherlands you see many people from Eastern Europe, in Australia the employees are recruited from the Philippines and in the Middle East people come from India. But politics worldwide are making it increasingly difficult to bring in people from other countries.” Also, the population is aging, says Middeldorp. “Western countries must deal with this, and it is becoming an issue in other areas of the world too. When countries have increasing prosperity, you always see that the birth rate will decrease. Both these developments offer opportunities for automation and robotisation in the next years, to make the industry less dependent on the availability of employees. There will certainly be a strong demand for labour-saving technology.”

Knowledge-driven technology

According to Van Horen, high-tech horticulture has also become a completely different profession. “It's no longer just about harvesting tomatoes, but also about managing your energy, negotiating with the supermarkets, and thinking about marketing. Growers therefore need more and more support to carry out all these tasks. There are already various parties that offer software, sensors, and other digital tools. They basically support local growers to guarantee their production. This knowledge-driven technology is also becoming an important theme.”

When it comes to urbanisation and disposable income of the middle groups in several countries, the future looks bright for high-tech horticulture, says Middeldorp. “More and more people are moving from the countryside to the cities. It will increase the demand for fresh food grown in greenhouses close to major cities. This certainly offers opportunities for greenhouse horticulture, greenhouse builders and technical companies. And because people have more to spend, the need for high-quality products also increases. Horticulture can also benefit from this.” 

New world order

The political situation in the world, on the other hand, has two faces, Van Horen believes. “You can see a growing need for countries to create more self-sufficiency. That offers opportunities. But political sanctions, as is the case in Russia, entail risks. We are in an era where a new world order is being formed. The balance of power is shifting. This means companies have to choose whether to go to one or to the other, which will certainly mean losing part of their market.”

At the same time, due to the tensions with Russia, Europe has come to realize that its energy position was too vulnerable, Middeldorp adds. “That insight has led to more investments in energy-efficient technologies and accelerated sustainability of the energy market. This development will continue at a rapid pace in the coming years.”

Potential competitor

Middeldorp also sees a risk associated with countries' need for more self-sufficiency. “Yes, this offers opportunities for horticultural companies. Many countries, such as China, are now largely dependent on imports and will want to increase their own production. Due to a lack of sufficient fertile soil, cultivation in greenhouses seems to be the answer. Companies that have the solutions for this in-house can do good business there. But at the same time, you also see that those countries want to adopt that technology, so that they can become a potential competitor in the long term. Therefore, it is important to find the right balance.”

One other development Middeldorp wants to highlight is artificial intelligence. A technique that he believes has broad applicability and will change the structure of the economy. “Things will have to be organized differently for artificial intelligence to function optimally. Only when all production processes worldwide have been adapted, we will notice the full potential of this technology.”

Where many changes are taking place worldwide, it is also important to make entrepreneurs aware of this and to get them on board. Although, according to Middeldorp, changes also mean that there will be dropouts. “Of course, you want to include as many people as possible in these transitions. But that's just how the market economy works, you always have companies that follow the leaders and adopt new technologies and you have companies that don't survive. Transitions always cause a certain differentiation and that is not necessarily a bad development.”

Food supply not at risk

According to Van Horen, it causes consolidation, making the large companies even bigger. “The Netherlands has approximately 5,000 hectares of greenhouse vegetables. That acreage has not changed, but you can see that there are far fewer companies than twenty years ago. The largest pepper grower now produces 10 percent of the entire pepper acreage.” If you look at the energy and labour transitions, you see that some of the technology has an increasing effect on the scale of companies especially with commodity crops, Van Horen adds. “To make an investment in a cogeneration unit, heat storage or a large sorting unit profitable, you simply need a larger acreage. Because the larger the company, the lower the investment per square meter. So, yes companies will close, but others will grow bigger. Therefore, food supply will not be at risk.”

Rabobank wants to guide companies in the transitions that are taking place and let them think about the future, Middeldorp says. “We want to discuss this with entrepreneurs to support them in the right way. As Lambert already said, there are a lot of differences between regions of the world. Each area has its own priority, and each transition can turn out differently in different areas. This makes it important to be aware of what a transition specifically means and entails for you.” According to Van Horen, people often look at developments in the world through their own eyes. “While it is especially important to look at each other more and learn from each other. The views of entrepreneurs in other countries can often be very illuminating and help to successfully complete a certain transition yourself.”