Danish conditions
In Denmark, the price of agricultural land has risen rapidly over the past five years. It is not unusual that the price has doubled, and prices of up to DKK 150,000-200,000 per hectare are not uncommon. Under these conditions, it is very difficult for Danish farmers to enlarge their farms, especially, for young people who wish to set up their own farm operation. It is almost impossible for them to raise enough money.
The financial situation is one problem. Another problem is that the rate of return on investments in farm land does not correspond with the purchase price. Thus it is not operationally viable to grow crops.
These are some of the reasons why Danish farmers who wish to enlarge their farms or young farmers who wish to set up a farm are tempted to go abroad.
Economies of scale
t is a well-known fact that agricultural production offers significant economies of scale. However, these economies of scale cannot be achieved to any appreciable extent under Danish legislation, whereas they are significant in many Eastern European countries. On farms of 2,000-5,000 hectare, it is possible to utilise specialised knowledge within each link of the production chain. In this way, it is possible to utilise Danish know-how and capital to the advantage of the Danish investor.
Fewer links in the production chain
For decades, Danish farmers have organised themselves in such a way that they participate in many links of the production chain. This organisation is rooted in the co-operative system where farmers own, among others, the breeding, feed and slaughterhouse units. In Eastern European markets, this is not the case. Therefore, it must be assessed whether it is necessary to invest in the entire production unit, and in that case how large the farm has to be before it is profitable for the farmer to invest in his own feed mill and slaughterhouse.
Location
When establishing oneself in a new market, it is important to examine the sales potential of this market. The chances of locating oneself in a market that is growing rapidly in the next few years are good (in Eastern Europe). In general, Eastern European consumers become richer. Therefore, the demand for, among others, food products will increase at a pace that has never been experienced in Western Europe. The decision of which country to establish oneself in depends on many factors and is hence an individual decision.
Extent of investment
In order to optimise the financial resources a certain farm size is necessary. It is also necessary to consider if it is worthwhile to establish own feed mill, slaughterhouse, etc.
Use of time
The time from project idea until the first pig is slaughtered or the first milk is sold is long and difficult. In the majority of the cases, it will take a minimum of three years. Therefore, it is necessary to ensure that the project progresses constantly and smoothly in order for the project members to be content.
It is difficult to predict how the markets will develop in the future. A business plan will ensure a systematic review of the project quality and the time spent on the project.