The Finnish agri-food sector outlook of the Natural Resources Institute Finland (Luke) shows that the food market has functioned well in Finland in 2020, regardless of the coronavirus pandemic. There have not been any significant changes in the average consumer prices of food products during the year. Foreign trade in agri-food products has increased fairly moderately.
Food supply in Finland has not been threatened by the coronavirus pandemic, even though the situation has tested the functioning of the food supply chain. Milk, meat and cereals are still being produced in Finland almost in line with consumption. Food supply has also remained relatively unchanged as a result of well-functioning international trade relations and procurement chains.
According to Jyrki Niemi, research professor at Luke, food supply might face major problems if the coronavirus crisis persists for more than a year, extending to the next growing season.
“There would be significant uncertainties in the food sector if a large number of farmers and workers in the food chain were seriously affected by coronavirus at the same time, resulting in a break in the food logistics chain, for example.”
“In the logistics system supporting the food chain, main concerns caused by the coronavirus situation are also related to the illness of workers and consequently to potential breaks in the production chain. So far, there have not, however, been any incidents that would significantly restrict the activities of primary production, food companies or trade”, Niemi says.
Producer prices at a reasonable level despite the pandemic
A key challenge for dairies and meat processing companies during the coronavirus crisis has been their adaptation to the reorganisation of the market, as restaurant demand has decreased and home consumption has increased. In some countries, mainly in individual dairy companies, the processing capacity has not adapted to the changes in demand but, in general, the dairy sector is doing surprisingly well.
“In Finland, milk production and the delivery of milk from farms to dairies have continued normally despite the coronavirus situation. The level of hygiene, which is also high in normal conditions, protects production and processing from these types of risks. Domestic demand for dairy products has remained stable in general, apart from a decrease in the consumption of liquid milk, following the current trend”, says Olli Niskanen, research scientist at Luke.
Export markets have shown growth, particularly in China, which is now nearly side-by-side with Sweden as the most important export country for dairy products, measured by value. However, uncertainties are expected to continue in economies and international markets due to coronavirus and the Brexit, and there will be more than enough dark clouds in the sky during next year as well.
Food prices continue to increase moderately
Food prices have been steadily increasing in Finland since 2018. In the spring of 2020, the coronavirus situation was expected to cause a significant increase in prices, especially in the fruit, berry and vegetable sectors, as these are labour-intensive, and the mobility of foreign seasonal workers was restricted in Finland and in other parts of Europe due to the pandemic.
“Prices of fruit and berries did indeed rise when the coronavirus pandemic broke out, but the increase stopped after September. Prices of vegetables normally fluctuate significantly, and this year has been no exception. The prices of meat products have also increased more than the average increase in food prices”, says Terhi Latvala, senior scientist at Luke.
Food exports to reach a new record
Exports of agri-food products are expected to increase to EUR 1.7 billion this year, setting a new record. However, the increase in exports has decelerated notably from the previous year. In 2019, exports increased by as much as 13 per cent from the year before, while the increase is projected to remain at a little more than two per cent this year.
According to Csaba Jansik, senior scientist at Luke, exports of certain product groups have, however, increased much faster than the average growth rate.
“Exports of meat, fish and cereal products are especially booming. The steady increase in the exports of milled products, mainly driven by flakes, is particularly good news. To increase added value, it is important that oats are rather exported as processed products as much as possible.”
Of the export destinations, China is showing rapid growth, driven by pork and milk powder. However, there is still work to be done in the promotion of exports, as the value of food imports into Finland is anticipated to reach EUR 5.3 billion in 2020. This means that the deficit in food trade is expected to account for nearly EUR 3.6 billion.
“The increase in the imports of agri-food products has, however, slowed down significantly since 2013, being very moderate this year. Imports of certain product groups have decreased considerably in the first eight months of 2020. For example, the imports of pork and poultry meat have decreased by nearly one fifth. Instead, the value of fruit and berry imports has increased”, Jansik says.