Quota system at Dutch flower auction remains in place for now

Author: Ron van der Ploeg

AALSMEER, Netherlands: Auction prices for cut flowers, potted plants and bedding plants remain under severe pressure. However, the overall rate of unsold products is significantly lower than in week 12 when the market went into a freefall. The auction temporary ‘quota system’, implemented last week, sees supply volumes at the clock drop by approximately 70 per cent, helping to achieve a better balance between supply and demand. Meanwhile, growers unable to auction off most of their flowers and plants have sometimes no other solution than to compost their products in situ.

In a radio interview with BNR last week, auction boss Steven van Schilfgaarde says that the auction supply restrictions continue to be in place and it is working. He adds that they are in  essence, part of the market mechanism. “Obeying measures to keep the world’s population safe and healthy mean there’s no demand and no sales. We think we should do everything within our reach to maintain stable and remunerative prices. Our safeguard measures help us better manage supply against demand and this leads to ‘reasonable’ prices for the limited portion of the product that continues to sell under the clock. Reasonable, that is 20 per cent lower than is usual at this time of the year. A time that would usually be the peak demand period.”

The auction’s newly implemented safeguard measures are a combination of a temporary adjustment of minimum prices and ‘maximum daily volume per product group and grower’, based on the grower’s total supply volumes in 2019 (direct sales and clock sales combined). In this quota system, the auctioneer plays a crucial role as he or she decides daily what portion of products a grower can auction off in a specific product group. This decision is often not more than 30 to 40 per cent of products he usually puts to auction.

Van Schilfgaarde says that growers have every interest to respect the new rules. “If not,  growers can expect refusal at the clock.”

He stresses that the world’s famous hub for flower trade has mainly been affected by the economic slowdown but has certainly not come to a complete standstill as sales outlets in Germany and in the Netherlands for example are still open. “We have scaled back our activities as supply volumes are lower. Auction trolleys, crates and part of the motorised vehicles that normally move the flowers and plants to the buyer’s area are now parking on the work floor. However, a portion of the business is still going through.”

The auction’s total turnover on Thursday 1 April (clock and direct sales) amounted to 8.26 million euros. A decrease of 57.3 per cent compared to last year (Wednesday 3 April 2019).

The clock turnover was 2.72 million euros. Overall, supplying almost 12.8 million units for the clock of which 1.9 per cent remained unsold (in cut flowers 1.7 per cent, in potted plants 8.6 per cent and garden plants 0.6 per cent). According to the auction, the overall rate of an unsold product is lower than the day before when for 3.3 per cent of flowers and plants the auction was unable to find a buyer.

Again, prices across all categories have been significantly lower than is usual in this time of year with median clock prices for cut flowers, potted plants and garden plants 17.2 percentage points, 38.8 percentage points and 33.1 percentage points lower respectively than in 2019. The level of unsold products in Aalsmeer, Naaldwijk and Rijnsburg was 1.6 per cent, 3.5 per cent and 0.7 per cent respectively.

Due to the current market conditions, there have been minimum prices adjustments for the following  product groups: lisianthus, cut hyacinth, gerbera, freesia, cymbidium and potted phaleanopsis. This change was implemented on Friday 27 March and on 30 March.

An auction representative says, “We are adhering as much as possible to the existing regulations and are considering as much as possible the advice of our auctioneers and that of the FloraHolland Product Committees (FPC). The increases are temporary and are related to the consequences of the coronacrisis pandemic. Auctioneers keep in contact with the relevant FPC’s about the effect of the increases. If further adjustments to minimum prices and supply percentages are necessary, we will coordinate this in the first instance with the FPC chairmen.”

Acknowledging that people feel the pain of losing money more than they enjoy gains, the emotional reactions to the market decline are perfectly normal. However, Bougainvillea grower Frans van den Bos, serving as a Royal FloraHolland Council Member took to YouTube. In a video message, he was urging his fellow growers to stay calm, use common sense and to be respectful to auction reps as their jobs are equally at risk.

Auction boss Van Schilfgaarde has welcomed the stimulus package the Dutch government announced two weeks ago for the Dutch economy. He said that the €20bn bailout package would help the 7,000 horticultural business pay their bills. However, he was quick to add that the bailout package is enough to rescue a sector which represents an export value of €6.2 billion. He, therefore, calls for an emergency fund for Holland’s ornamental horticulture sector.

The Dutch government announced in week 12 its willingness to pay up a maximum of  90 per cent of worker’s wages. The three-month wage subsidy (effective as of 1 March 2020) applies to companies that suffered a loss in revenues of at least 20 per cent. In case of a revenue loss of 100 per cent, the government covers 90 per cent, when the revenue loss is 50 per cent the government covers 45 per cent. Revenues correlate with a quarter of total revenues in 2019, without taking into consideration the growers of seasonal crops who generate more than half of their turnover between March and May.

It now appears that the Dutch sector body LTO Nederland has not been able to convince Dutch employment minister Wouter Koolmees about the sector’s seasonal character. LTO Nederland had urged the minister to use a different calculation tool based on a comparison between the revenue in March, April and May 2019 and the income over the same months in 2020. Growers of seasonal crops now risk not getting compensated for their worker’s wages.

The financial losses in the Dutch ornamental horticulture industry could be as high as 2 billion euros.

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