(19) Biological assets

(EUR x million)

     2009

    2008

As at 1 January

102.6

75.0

Expenses capitalised

640.8

607.8

Decrease due to harvest and sales

-640.5

-589.3

Change in fair value

2.2

-0.5

Acquisitions/divestments through business combinations

-0.8

10.4

In 2009, biological assets increased by EUR 2.3 million of which EUR 0.8 million relates to the divestment of Integra. The increase before the divestment effect is EUR 3.1 million.

The biological assets at 31 December 2009 mainly relate to animals held in Spain for EUR 97.6 million (2008: EUR 94.7 million) and Canada for EUR 5.8 million (2008: EUR 4.4 million). The biological assets in Spain relate to the poultry stock for an amount of EUR 64.8 million (2008: EUR 58.0 million) and to the pigs stock for an amount of EUR 32.8 million (2008: EUR 36.7 million).

Spain

The poultry stock in Spain comprised approximately 19.0 million animals (2008: 21.6 million). During the year Nutreco processed 145.7 million animals (2008: 146.0 million).

The pigs stock in Spain at 31 December 2009 comprised approximately 544,000 animals (2008: 408,000). During the year Nutreco sold 835,000 animals (2008: 716,000).

In Spain, Nutreco applies a cost plus method to the customer price of its end-products. For the valuation of most of the biological assets, Nutreco uses the cost plus model as an approximation of the fair value price.

In February 2008, 79,555 pigs of Copaga with a fair value of EUR 9.1 million were acquired.

Canada

The poultry stock in Canada comprised approximately 1.8 million animals (2008: 1.7 million). During the year Nutreco sold 12.8 million animals in Canada (2008: 13.2 million).

In Canada, Nutreco applies a cost plus method to the customer price of its end-products. For the valuation of biological assets, Nutreco uses the cost plus model as an approximation of the fair value price.

Breeding eggs and parent stock

For a part of the breeding eggs and parent stock, both in Spain and Canada, the fair value cannot be determined reliably as no liquid market is available. This part is, therefore, valued at cost, which totals EUR 13.9 million (2008: EUR 11.8 million).

Czech Republic

With the acquisition of Biofaktory in August 2008, and its majority shareholding in Integra, Nutreco acquired 236,000 numbers of poultry with a fair value of EUR 1.3 million. In October 2009 the participation in Integra was divested.

Risks

Nutreco is exposed to a number of risks related to biological assets:

Regulatory and environmental risk

Nutreco is subject to laws and regulations in various countries in which it operates. The Company has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

Supply and demand risk

Nutreco is exposed to risks arising from fluctuations in the price and sales volume of poultry and pigs.

In Spain and Canada, Nutreco applies a cost plus method for determining the sales price for 50% of Nutreco’s poultry and pork activities.

Diseases and other risks

Animal diseases can have a financial impact on individual Nutreco businesses. The regional spread of Nutreco’s activities and the variety of animal species for which feed is supplied does, however, mean that this risk is partly mitigated. As in previous years an example of this was the low production of feed volumes of salmon in Chile, which were partly offset by higher feed volumes in Norway and Canada. Nutreco owns a limited number of pigs and poultry mainly in Spain.

In 2009 no special events related to the biological assets owned by Nutreco occurred that have had a material impact on the consolidated result of Nutreco.

The nature of the biological assets is explained more extensively in this annual report on page 55.

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