News Agriculture, Economy, Garden

The recent annual review of agriculture and food production by the Natural Resources Institute Finland (Luke) indicates that, despite the rapid decrease in the number of farms, the level of production has remained nearly unchanged in Finland. However, the profitability of agricultural and horticultural enterprises has been low in recent years. In 2017, exports of food products from Finland grew after a four-years decline, but this growth is expected to be temporary. The price of food has started to rise driven by increasing consumption and production costs.

Last year, the total number of farms which applied for agricultural support was slightly over 50,000, whereas in 2000 subsidy applications were received from nearly 78,000 agricultural farms. The number of farms has decreased fairly steadily at a rate of nearly 3% a year, and in the livestock sector even more rapidly. For example, the number of farms specialising in milk production has decreased by roughly 7% a year.

According to Minna Väre, senior scientist at Luke, the structural change in agriculture is not, however, homogeneous and steady.

“Some farmers are responding to more demanding financial conditions by expanding their production noticeably, while others close down their enterprises. What is more, some farms diversify their activities and some farmers seek a regular job outside their farms. Crop farms, in particular, have rapidly become part-time enterprises run alongside regular jobs.”

As the number of farms has decreased, the average size of farms has increased. From 2000 to 2017, the average cultivated area on active farms increased by 60% from less than 28 hectares to nearly 45 hectares. In milk production, the average herd size has more than doubled from 17 to 38 cows.

Despite this increase in the average size of farms, Finnish farms are still relatively small. In 2017, a little more than 10% of all farms were large farms of more than 100 hectares, and roughly 5% of milk farms had more than 100 cows. However, these farms produced more than 20% of all milk in Finland.

Domestic animal production increasing

In recent years, the average income and profitability of agricultural and horticultural enterprises have developed very poorly. Prices of production inputs have for long increased more rapidly than producer prices, which in turn has increased costs and reduced profitability. Moreover, prices of material, energy and fertilizers in particular, have increased steeply. Regardless of poor profitability, production volumes in agriculture, domestic animal production in particular, have remained nearly unchanged.

Milk production, which continues to be the most significant production sector in Finnish agriculture measured by the total value of production, has largely maintained the level that preceded Finland’s EU membership.  In 2017, a total of 2,297 million litres of milk were delivered to dairies. Nearly 40% of raw milk was used to produce cheeses, roughly 25% to produce liquid milk products and more than 25% to produce butter and powdered milk.

The total production of meat stood at nearly 400 million kilos in 2017. This was 5 million kilos smaller than in 2016 but 15 million kilos higher than in 2012. The consumption of meat totalled 433 million kilos. This means that the self-sufficiency ratio was 92%.

In 2017, nearly 74 million kilos of eggs were produced, which is a little over 1% more than in the previous year. Over the five years 2012–2017, the production volume has increased by up to 18%. Furthermore, the consumption of eggs has increased fairly steadily in Finland over the past few years.

In crop production, there is higher variation in production from one year to the next than in domestic animal production. In 2017, the grain harvest was lower due to record-breaking rainfall, cold periods and poor harvesting conditions in parts of Finland. The total grain harvest of 3.4 billion kilos remained the second smallest in the 2000s.

However, the cultivation areas of different crops have remained fairly stable in recent years. In 2018, more barley is being cultivated than in the previous year, while the cultivation areas of oats, wheat and rye are lower. In addition, the total cultivation area of oil plants, i.e. turnip rape and rapeseed, fell in the spring of 2018.

Increase in food exports threatens to stop

In 2017, exports of food products from Finland finally grew after four years of decline. Last year, food products were exported from Finland at a value of EUR 1,579 million, showing an increase of nearly 10% from 2016. At the same time, the value of exports returned to the level preceding the sanctions imposed on Russia. Dairy products continued to form the most significant single product group.

According to Jyrki Niemi, research professor at Luke, the increase in exports can be explained by a number of factors.

“Increasing prices of food products in international markets particularly boosted the increase in the value of exports. In addition, new market areas identified for Finnish food products helped to increase exports.”

However, this increase threatens to stop this year. During the first five months of 2018, the value of exports was 7% lower than in the year before.

In 2017, the deficit of food trade grew by EUR 123 million from EUR 3,504 million to EUR 3,627 million, regardless of the rapid increase in exports. This deficit has more than doubled over the past ten years.

Last year, food products were imported to Finland at a value of EUR 5,205 million, showing an increase of more than 5% from the year before. This increase can be explained, in particular, by higher prices of imported products.

The price of food has started to increase

This year, the price of food has increased rapidly. In June 2018, consumer prices of food products were as much as 2.4% higher than in the year before. In particular, the prices of vegetables, fruit, berries, butter and meat products increased. Vegetables were up to 16% more expensive than in the previous year.

“These changes in prices are especially based on the situation in global food markets. The increase in the prices of imported products has decreased competition over prices in Finnish markets. This has allowed increases in costs in domestic agriculture and industry to be partially transferred to consumer prices. What is more, the purchasing power of consumers has improved, and more products are being purchased without the price being as important a factor as before”, Niemi says.

In 2014–2017, the consumer prices of food products fell by a total of 4% in Finland. Over the same period of time, the index of consumer prices increased by exactly 2%. This means that, for several years, the decreasing prices of food products slowed down the general rate of inflation.