Challenges

A new system to encourage sustainable lease land use



Current Situation

Efficiently managing the land and creating a better balance between agricultural production and nature requires a different approach. In the Dutch land lease system, lease prices are largely determined by the value of agricultural land in the free market. The valuation of lease land is determined by its expected returns. In recent decades, the price of agricultural land has been rising, resulting in The Netherlands having the highest average purchase and lease prices for agricultural land within the EU.

 

High land lease prices intensify the use of land

High leases push tenant farmers to intensify the use of land in order to increase their yields. The current land market and the lease price system reward this strategy, but intensive agriculture is not sustainable in the long run. Cheap food production serves prosperity in the short term, but negatively influences the quality of the living environment and soil health in the longer term.

 

Due to the high prices for land and the capital needed, young farmers are finding it increasingly difficult to take over the business from their parents. For newcomers advocating radically innovative concepts and forms of regenerative agriculture, costs and the lack of long-term access to land are major obstacles. To tackle these issues, LNV is looking for an optimal valuation system for the lease land that would be based on the quality of the land and the measures taken by the farmer to increase soil health and productive capacity in the long run. Such a system, using bonus-malus principles, could create the right incentive for the tenant farmers to consciously manage the soil and the land.

 

What are we looking for?

LNV is looking for a valuation system that brings transparency for the lessor, the tenants, and society, demonstrating how land value is dependent on the methods of its agricultural management. Using a number of indicators (KPIs) for circular agriculture, as defined by the ministry of LNV, we are looking for a bonus-malus pricing system prototype for the lease land. With this challenge, we aim to motivate tenant farmers (and, in time, all farmers) to improve the quality of the soil, its production capacity and regulatory functions (such as water retention capacity, disease resistance, CO2 fixation and functional agrobiodiversity) and increase biodiversity.

 

A good bonus-malus system:

  • offers the tenant sufficient incentive(s) to go the extra mile (not just the ones that law dictates) towards conscious land use;
  • responds to the interests of the tenant farmer to participate in the system (i.e. returns, maintaining productivity, economic value of the land);
  • offers the right balance of usefulness and (social) value of good soil management versus costs;
  • appeals to other potential beneficiaries as well (water companies, banks, government);
  • explores how sustainable agriculture (with a proper interaction between agriculture and nature) can form a new basis for the valuation of agricultural land.

A consultation with LNV selected market partners is part of the challenge.

 

What are we not looking for?

New ways of measuring soil quality and health .

 

What is the impact?

The Circular Vision (De Kringloop Visie) by LNV is focused on the importance of being thoughtful and conscious with the use of raw materials, including soil, biodiversity, clean air, and water. All agricultural soils must be sustainably managed by 2030. This project also greatly contributes to the debate and aids the search for ways to help the transition towards a circular agriculture: in balance with nature.

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