The impact of the fipronil crisis on the financial performance of Dutch laying hen farms.

BACKGROUND

Illegal use of fipronil as an insecticide in 2017 has caused substantial damage to Dutch laying hen farms. We assessed how the fipronil crisis has affected the financial performance of affected farms as well as unaffected farms. While affected farms faced culling their flocks and lost revenue, unaffected farms benefitted from temporary high egg prices.

METHODS

A three-step normative modelling approach is taken using financial statements and a partial budget. The estimations are for a 50,000 laying hen farm facing the fipronil crisis for 5 months. First, a baseline is created by generating an income statement of this laying hen farm representing a 'normal year'. Second, incremental costs and revenue as a result of the fipronil crisis are estimated. Third, the baseline income statement is updated with the outcomes of the partial budget. This results in two additional income statements that report the net operating result of this farm being unaffected and affected by the fipronil crisis.

RESULTS

While in a normal year this average-sized farm has a net operating result of around 18,000 euros, profitability was estimated to be - 369,000 euros and + 169,000 euros for the affected and unaffected farm due to the crisis respectively. For affected farms, impacts were especially high as there was no government compensation or insurance.

CONCLUSIONS

As Dutch farms typically operate as independent family farms, there was also no compensation from other chain actors. The affected farms therefore likely have faced financial distress and have had to increase debt or use their financial reserves for household consumption and restarting the business. Outcomes contribute to discussions around liability claims and cost-benefit assessments of measures to improve the chain food safety and rapid alert systems.