Finland’s food exports have still not recovered from the decline caused by Russia’s sanctions. Although the drop in 2016 was considerably smaller than the previous year, exports to Russia were down for the third consecutive year. Between 2013 and 2016, Finland’s food exports to Russia have decreased by 72 per cent, dairy products being the most affected category.
In the peak year of 2013, the value of food exports to Russia was €440 million. In 2016, they crashed down to €117 million. Key reason for the decline is Russian import embargo imposed on August 2014 on certain food products from the European Union (EU).
“The collapse of oil prices and the related depreciation of the Russian ruble have further strengthened the export decline. Both have weakened the purchasing power of Russian enterprises and households,” says agricultural economist Jyrki Niemi, Luke.
Russia has been by far the most important destination for Finnish food exports. Around 26–28% percent of all food exports used to go to Russia. Now, the number has fallen to 8%. Exports to other countries have been increased, particularly in Sweden, the Netherlands and France.
Doubling up the value of food export
According to Niemi, the Russian import embargo has been a wake-up call for the Finnish food industry, forcing it to pay attention to the excessive geographic concentration of its exports. It has also awakened the industry to the necessity of change.
In 2014, Finnish government launched a new food export program together with Finpro, a national organisation promoting Finnish export companies and investment opportunities. The goal of the program is to double the value of exported Finnish food products to 3 billion euros.
In 2016, the total value of food exports from Finland was €1,431 million, indicating a fall of 10% compared to 2013. According to a prediction based on the January–April 2017 figures, the total value of food exports from Finland in 2017 will stay at the same level as the previous year.
The value of food imports to Finland in 2016 was €4,935 million, which is up just over 1.6% compared to 2013. After several years of strong growth, the development of food imports has been moderate since 2013. Explaining factors are consumers’ decreased purchasing power and the fact that some goods intended for exports remained in the domestic market.
Dairy products lead the way
The deficit in the food trade grew moderately during 2013–2016, from €3,260 million to €3,504 million. Traditionally, the trade deficit has mainly been caused by large import volumes of fruit, vegetables, raw coffee, alcoholic beverages and tobacco.
Other important products imported to Finland include vegetables, cheeses and cereal products. However, in recent years, the Finnish food industry has been faced with competition in product groups that used to be dominated by domestic production, such as meat, dairy and fish.
There have been no significant changes in the geographical distribution of imported agricultural and food products. In 2016, the majority (65.3%) of Finnish food imports came from the old EU-15 countries. Food imports from countries that joined the EU in 2004 or later decreased from the previous year and were at 9.2%. The share of non-EU countries rose to 25.5%.
Despite Russia’s ban on food imports, dairy products were still the most significant single product group in food exports. However, in just three years the exports of dairy products have gone down from €533 million to €357 million, and the sector’s share of total exports has declined from 33% to 25%.
The dairy industry continues to be the only industry in the Finnish food sector that has maintained a positive trade balance throughout Finland’s EU membership. However, in 2016 the trade balance was barely positive, following a dive from €162 million in 2014 to €13 million in 2016.