According to the Natural Resources Institute Finland’s (Luke) profitability bookkeeping, the average entrepreneurial income of agricultural and horticultural enterprises increased approximately eight per cent in 2018, which is EUR 17,500 per year. In total, the entrepreneurial income of Finnish agricultural and horticultural enterprises grew from EUR 516 million to EUR 529 million. The profitability ratio grew from 0.40 to 0.42. The profitability remains modest, which is also shown by the negative -1.6 per cent return on capital invested.
“In 2018, the return of agricultural and horticultural enterprises increased three per cent, to EUR 160,900, due to the growth of farm sizes, among other reasons. On the other hand, costs grew 2.56 per cent to EUR 185,200. Therefore, the difference of revenue and costs keeps the total loss roughly the same as before, EUR 24,400. The sales revenue and/or subsidies should have been that much higher or the costs should have been that much lower to reach a zero result,” says Arto Latukka, the senior scientist in charge of Luke’s profitability bookkeeping.
Entrepreneurial income continued to grow
With the costs of entrepreneur families’ personal labour and equity excluded, the average annual entrepreneurial income per enterprise was approximately EUR 17,500. Entrepreneurial income grew approximately 8 per cent from 2017.
According to Latukka, the EUR 17,500 of entrepreneurial income is enough to provide the entrepreneur family’s equity an interest of 1.5 per cent, and the compensation per working hour is EUR 6.70, including add-on costs. The profitability ratio 0.42 shows that compensation was 42 per cent of the target level of 3.69 per cent interest on equity and EUR 16 compensation per entrepreneur working hour. The level of hourly rate is based on what an agricultural worker is paid, including add-on costs.
In 2008, the profitability ratios of cereal farms and other crop farms grew to 0.40, sheep farms to 0.27, greenhouse enterprises to 0.96 and poultry farms to 1.12. The small-size sample may be a reason for the annual fluctuation in profitability ratios of poultry farms. The profitability ratios of dairy and other cattle farms decreased to 0.36 and 0.39, respectively and of pig farms to 0.62. On average, the profitability ratio of agricultural and horticultural enterprises increased from 0.40 to 0.42 in 2018. Current prognoses expect the profitability of 2019 to fall back to the starting level.
In agriculture and horticulture, the ratio of equity to total assets, i.e. the equity ratio, was 72 per cent, which means the field has not run into debt on average. Greenhouse enterprises are an exception from the rest with their 39 per cent equity ratio. Investment aids are included in equity and they improve the equity ratio, but they also increase depreciation costs. An amount corresponding to the depreciation from the investment aid is annually entered as income. Hence, the depreciation due to investment aids does not decrease entrepreneurial income.
Information in the EconomyDoctor online service
This information is based on the results of Luke’s annual profitability bookkeeping. For 2018, the calculations were based on the figures of some 725 selected farms and the results were weighted to reflect the 33,800 largest agricultural and horticultural enterprises in Finland. The detailed results are available in the Agriculture and Horticulture as well as Total Calculation sections of the EconomyDoctor service. Some central figures are also available at Luke’s website, stat.luke.fi.