IENICA REPORT: DENMARK

Executive summary
Industrial Crops and their applications: agriculture/farmers
Industrial Crops and their applications: consumers and government
Industrial Crops and their applications: industry
Economics of agricultural enterprises 1996/1997

Executive Summary

The main crops in Denmark are cereals, rape seed and sugar beet making up for more than 87% of the total plant production (excl. grass).

5 potato starch factories and 4 vegetable oil mills produce products for both food and non food use.

In addition a number of, mainly small, companies import plant based raw materials that are transformed into a large number of non-food products – cosmetics, detergents, paints and varnishes etc.

Currently Denmark has no cereal based non food production, however, the potential is large for e.g. production of plant based packaging materials, films, foams, adhesives, cosmetics etc.

There is a revival of interest for flax and hemp growing. The production, however, is still very small.

In summary Denmark has experienced a growing consumer interest in products from renewable raw-materials, and consumers have shown that they are willing to pay a "green premium" for environmentally friendly products.

However, the production is still modest compared with synthetic products mainly due to higher production costs and thus prices.

The gap in production costs is slowly being reduced for some commodities, and if this could be combined with an internalizing and quantification of environmental and macroeconomic externalities such as product safety, "clean production" biodegradability, job creation, trade balance etc., then products based on renewables might become a very viable alternative to many traditional synthetic products.

In this context, it is important for the decision makers in industry that there is a long term political consistency between the stakeholders – agriculture, producers, users and government. Including long term regulations and rules.

Industrial Crops and their applications

Agriculture/farmers

Like in most EU countries the Danish agricultural plant production is dominated by a few major crops. The three main crops in Denmark: cereals, rape seed, and sugar beet, make up for more than 87 % of the total plant production (exclusive grass). Furthermore for the grain production accounting for 79 % of the total production (exclusive grass), the value-added through processing is limited to a few product-groups like dairy products, meat, poultry, and pork, the price of which is subdued to frequent fluctuations.

Danish agriculture is therefore vulnerable to factors outside the control of Denmark. Low pork prices for instance have a negative effect on the whole agricultural sector including the support industries.

On the other hand the specialisation into a few cultures and product groups of course have made the Danish farmers efficient and competitive. Some concern is however expressed about the future competitiveness, as it is foreseen that e.g. the farmers in the former Eastern-Europe will improve their efficiency and productivity in the coming years. This boost in production will presumably also be within areas, where Danish agriculture today has its strength.

The ideal situation for Danish agriculture might be a more, diversified and thus flexible agriculture allowing for a production closely reflecting the consumption pattern of the EU and major markets outside Europe. It might be so that the apparent contradiction, competitive agri-production versus diversified/balanced sustainable agri-production actually was only apparent; it is thinkable that the introduction of new specialty crops and the stretching out of the plant season via a broad range of crops could improve the production capacity utilisation to a degree that outweighed the benefits of monoculture specialisation.

One might therefore assume that there will be a need for new crops and income possibilities, and this combined with a consumer demand for environmentally friendly products could lead to an increase in Danish non-food production.

Consumers and government

Denmark is presently experiencing a shift in consumption patterns. Consumers are increasingly including intangible aspects in their decisions about which products to buy. The groundwork for this shift was laid in the eightieth when consumers first began to express concerns about the hazards of industrialised production methods by demanding products that were produced with due care for the environment. Furthermore some Danish consumers have proven that they are willing to pay a "green" premium for environmentally friendly products (food and non-food).

Today the demand for organic food has increased considerably, and a state controlled "organic food" label (a red label) was introduced some 10 years ago. A similar label (green) for organically produced non-food products (paints, varnishes, textiles, Christmas trees, insulation materials, cosmetics etc.) will be introduced next year.

Also EU and national regulations will add to the trend towards biobased environmentally friendly products (phosphate free detergents, restrictions on the use of synthetic dyes and aromas, restrictions concerning solid waste disposal, use of synthetic pesticides, organic solvents etc.).

The Danish government has also in other ways shown its interest in promoting agricultural based non-food products. So far two research programmes solely devoted to this area have been launched, plus other national programmes including support of "industrial crop" research.

The government has recently introduced a "green" purchasing policy, which obliges the governmental institutions to buy environmentally friendly products, whenever possible. This will naturally give biobased products a comparative advantage, as such products generally are environmentally friendly. One result of this policy is that all state owned forests are using vegetable oil based chain-saw oils.

An interministerial non-food agency was established in 1994. This agency has the objective to co-ordinate non-food research both within Denmark and with research centres in other countries.

Industry

Danish agriculture is traditionally centred around food production. Moreover Denmark has no major non-food industries. Thus there is no "locomotive" in the form of a multinational companies like Henkel, Eridania Beghin Say, Unilever, ICI or Monsanto that can stimulate the development. The major Danish agricultural raw material consuming companies are all focused on food.

The Danish packaging companies, detergent producers, cosmetic producers, paint and varnish industries, pesticide producers etc. that are potential consumers to biobased raw-materials have little or no experience in the use of biobased raw-materials. In general they are not even raw-material processors. They import semiprocessed materials for formulation into final products.

Immediately this might be considered as a constraint. It could however turn out to become an advantage, as it presumably will be easier to introduce a new paradigm or raw-material base, when there is no basic industry that tend to preserve the traditional raw-material base. There will thus be no need to adapt a current manufacturing process to accept the renewable feed stocks.

Denmark does however have a number of small innovative companies with an interest in non-food production, and they do make valuable contributions to the development of new non-food products. In addition 5 potato starch factories and 4 vegetable oil mills are producing commodities for both food and non food purposes.

The Danish industry has expressed a cautious interest in new non-food productions. Some industries - packaging industries and industries for production of building and insulation materials - have clearly stressed their intention to start up biobased productions, as soon as they are convinced that there is a market for their products.

Economics of Agricultural Enterprises 1996/1997

Ensuring the farmers a larger share of the added value
Farm scale processing
Molecular farming
Pre processing in rural areas, whole crop utilisation, biorefineries
Cash crops
Impact of Agenda 2000

Ensuring the farmers a larger share of the added value

The traditional Danish farmers share of the added value in the agro-industrial sector has diminished during a number of years. During the period 1980-84 the share was 35 ore per DDK sales value, while today it is as low as 26 ore.

The debate concerning introduction of new crops and new uses of traditional crops has mainly been focused on the actual production and the end use, while the possibilities of altering the distribution of the created added value between farmers and industry so far has drawn little attention.

There will always be room for specialised productions catering goods to a very limited market. Such productions can become an important income source for individual farmers with the skill to produce a given specialty crop, but will only have a small impact on the agricultural situation in general.

However even in niche productions the added value is often created by the (pharmaceutical, cosmetic, paint etc.) industry and not by the farmer.

Farm scale processing

In an effort for farmers getting a higher share of the added value a small innovation company, H. C. Biosystemer ApS has established a joint venture with a Danish farmer. On farm is being developed a full-automatic oil press for production of vegetable oils. The oils are used both for food and non-food products. Production started in 1997 with a capacity of 80 -120 kg oilseed pr hour. Biosystems is convinced that they can develop competitive farm-scale units by exploitation of the following advantages:

by modern monitoring and control technology it is possible to operate the plant continuously 7 days a week and 24 hours a day,

the plant is operated by the farmer himself, who naturally is highly motivated. He lives close to the plant and is therefore able to supervise the production round the clock.

The capacity of the production unit at Grønnegård will be doubled in 1998, and a semi automatic bottling machine will be installed (see also page 7).

Another farm (Nykilde) has for the last 8 years produced linseed oil on a very small oil mill. The oil is used for wood protection and paints and sold to local users such as municipalities and local painters. The farmer has 30 ha of land, all of which is used for growing of oil flax.

Quite a few farmers have shown interest in a commercial production of herbal products for nutriceutical and pharmaceutical uses. For example, a farmer on the island of Langeland, Erik Hansen, established in 1997 a plantation of dog roses on 100 ha of land. The mature hib are dried, finely ground and sold as a herbal pharmaceutical. The trade name is "Hyben Vital"

The above described may be a (modest) beginning to a new era, where a number of innovative and inventive farmers create alliances with specialty product industries.

Molecular farming

There is an emerging interest in molecular farming in Denmark. However still primarily amongst scientists and biotech industries. Workshops have been organised to measure the interest and discuss the benefits for Danish agriculture and society. The outcome of these workshops was very positive, and it is now discussed how to proceed.

It is generally agreed that Denmark would be well suited for molecular farming. Our farmers are skilled and well educated, we have a good functioning extension service, and our control system is well organised. Furthermore Danish farmers have access to a number of vital information systems such as "Geographical Information System" (GIS), Global Position System" (GPS), and vision technology. In addition, Danish biotech companies have the necessary expertise and equipment to purify and process plant biomolecules.

In principle the value added is created not only in industry (as is generally the case) but also to some extend already at the primary production level. Therefore one might assume that the farmers could achieve a larger share of the value added, especially if the post harvest treatment, storage and first separation steps take place in the rural area, perhaps even at farm level.

Pre processing in rural areas, whole crop utilisation, biorefineries

In the mid eightieth was in Denmark introduced a new concept for organisation of agricultural production, the biorefinery concept. The objective of a biorefinery is to minimise production costs for plant-derived products through an optimal utilisation of all components in a given crop.

A biorefinery should be located in the centre of a rural area ensuring that transport distances for the normally voluminous crops are minimised. The local refinery produces "made-to measure" intermediates for relevant industries, including food industries. The part to be used for feed will be transported back to the farmers, while the "energy part", i.e. the part that cannot be used for either food, feed and industrial purposes, remains at the biorefinery and is used for production of heat/electricity. The local farmers should be involved in the production in order to receive a share of the added value.

The refinery is thus a link between primary production and industry. It will aim at ensuring a stable supply of homogenous pre-processed raw-materials for individual industrial purposes. Hopefully the introduction of such refineries can thus help to overcome two of the main obstacles for industrial exploitation of plant raw-materials namely the uneven quality of plant-materials and the limited supply-security.

A demonstration biorefinery was established on the island of Bornholm in the beginning of the ninetieth. It was financed by the EU Commission (ECLAIR), the Danish government, farmers and industry. It has been operating for 8 years and is now developing a production system to homogenise and improve the quality of Danish grown wheat for production of bread flour and starch (page 23). Another project deals with development of a process to separate rape seed in all its constituents (page 8). Furthermore is done research on the further processing and derivation of individual components (page 8).

Since the introduction the biorefinery concept has attained much interest from most European countries, USA and developing countries like India, China and the Philippines. So far no commercial production has been initiated.

In a co-operation between South Danish University, Aalborg University, and the local agro-industry in Jutland a new concept for integrated usage of "green" crops such as grass, clover, alfalfa, potatoes for production and feed pellets, starch and different fermentation products has been developed.

A development company: Danish Biomass A/S, owned by South Danish University and the local agro-industries has been established and a pilot plant for fermentation of different residues from the involved agro-industries has been build.

The technology for production of organic acids and amino acid, developed in the co-operation between the universities and the agro-industries, will be transferred to industrial commercialisation by Danish and Dutch companies in the very near future.

All the scientific activities in the above area of biotechnological utilisation of biomass and agricultural residues are being put together in a new scientific centre in Esbjerg named: "Centre for Agro-Industrial Biotechnology".

Cash crops

Of the 4,308,000 ha, which present the total area of Denmark, 62 percent (2,679,000 ha) are cultivated. The cultivated area had its maximum in the 1930’ties with 3,268,000 h or 76 percent of the total land area. To day forests and plantations account 13 percent, wetland 1 percent and cities, roads and uncultivated areas etc. 24 percent of the total land area, respectively.

During the period 1970 to 1998 the agricultural area has decreased with 300,000 ha giving a yearly reduction rate of 0.4 percent. Most of the transformed land area has been used to development of cities and creative objectives.

The EU common agricultural policy was modified in 1992. The prices for cereals, rape, linseed and peas was reduced and hectare subsidies introduced. In 1998 about 144,000 ha. was set aside and 10.000 ha was cultivated with non-food rape.

As a result of the 1992-reform the area cultivated with cereals decreased to 1,404,000 ha in 1994. Since that year the cereal area has increased due to the lower set aside percentage and a reduction in the oilseed area. In 1998 the total cereal area was 1,519,000 ha.

After a fall in the rape seed area in 1997 to 104,000 ha, it has increased to 118,000 ha in 1998. Just before the 1992-reform the rape area was 280,000 ha.

Table 1. Economics (average per ha) for 1996/97.

Source: SJFI 1998

As seen in table 1 the labour income per hour in 1996/97 is highest for grass seeds followed by sugar beet and potatoes. Table 2 shows the farm income in DKK per hours for full-time holdings based on main sectors. Pig holdings show an increasing per hour income. However in 1998 the pig price was drastically reduced causing substantial problems in the sector.

Table 2. Farm income in DKK per hour for full-time holdings based on main sectors

Source: SJFI 1998

Impact of Agenda 2000

Danish Institute of Agricultural and Fisheries Economics assumes (note of 29 may 1998) that the overall income in Danish agriculture will be moderately reduced after the introduction of Agenda 2000.

Cereals will gain a competitive advantage over oilseeds and protein crops.

In 1997 about 159 000 ha of land was set aside of which 75,000 ha was voluntarily set aside. The latter will presumably continue to be laid idle, while 84,000 ha will be taken back into production.

In summary it is foreseen that cereal production will increase while production of oil seed will be significantly reduced and production of protein moderately reduced. Production of potatoes, sugar and fibre crops will only be moderately influenced.

The Danish Forest and Landscape Research Institute has in 1998 analysed the potential development 1995 – 2025 in land use. The analysis is based on political statements given in strategies, action plans and land planning statements (see table 3).

Table 3. Development of land use in Denmark 1995 – 2025.

Source: Groth et al. 1998.

As shown in table 3 the agricultural area grown with non-food crops is forecasted to increase with between 250,000 – 270,000 ha in 2025.