News Agriculture, Economy, Statistic

The profitability of reindeer husbandry has turned to a slight decrease following a few positive years. According to reindeer husbandry profitability accounting of the Natural Resources Institute Finland (Luke), the profitability factor of reindeer husbandry decreased to 0.4 during the 2017/2018 herding season from the previous season’s 0.57.

Total returns were EUR 40,980 on average. The majority of returns came from meat sales. The price of reindeer meat remained at the previous year’s level and there were no major changes in the sales volume of reindeer meat. As a result, sales gains remained at EUR 19,400. Compensation for work paid by reindeer herders’ cooperatives increased by 17% from the previous year to EUR 5,880. Correspondingly, compensation paid for traffic accidents and predator incidents involving reindeer decreased from the previous year’s EUR 8,600 to EUR 7,600. Subsidies account for roughly 14% of total returns on reindeer husbandry.

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Costs showing an increase

During the 2017/2018 herding season, production costs increased by 11% to EUR 53,300. Of different cost items, feed costs increased by one third. In addition, herding and equipment costs, plus management fees paid to reindeer herders’ cooperatives, increased. Production costs, excluding the salaries of entrepreneur families and return on equity, were EUR 30,600.

“The increase in the price of purchased feed partly explains the increase in feed costs. In addition, during the 2017/2018 herding season, the summer was rainy and the spring came late. The harvested feed yield was poor, which is why herders needed to purchase their feed from other sources”, says Marja Vilja, research scientist at Luke.

Entrepreneur families allocated an average of 1,270 hours per year to reindeer herding. Of these working hours, roughly 40% are carried out for reindeer herders’ cooperatives. The average equity of reindeer husbandry enterprises was EUR 87,700. The equity ratio, i.e. the ratio between equity and total capital, was 90%.  The number of reindeer left alive increased from the previous year by five to 197 reindeer.

Large differences in profitability between regions

Entrepreneurial income is calculated by deducting fixed and variable costs and depreciation from total returns. This is the amount of compensation received by entrepreneurs for their input and the amount of interest paid on invested capital. The average entrepreneurial income was EUR 9,000, down by 30% from the previous year.

The profitability factor, which represents relative profitability, is calculated by dividing the entrepreneurial income by the total sum of salary and interest requirements. During the 2017/2018 herding season, the profitability factor of reindeer husbandry was 0.40 on average. There was significant variation in profitability between different regions. Profitability was the highest in the Sámi region in the northernmost part of Lapland where the profitability factor was 0.60. In the rest of the specific reindeer husbandry region, the profitability factor was negative at -0.01, while it was 0.44 in the southern reindeer husbandry region. Correspondingly, the profitability factor of agriculture in Northern Finland was 0.58 in 2017.

Returns do not cover costs

Average production costs per one kilogram of meat were EUR 24.7. Returns did not cover all production costs in any region. Of total costs, costs paid in cash made up approximately half, while the other half comprised calculated costs, including depreciation and costs arising from equity and work.

Results of reindeer husbandry available online

The results of reindeer husbandry profitability accounting are available in the “Reindeer Economy” section of Luke’s EconomyDoctor. The results are based on Luke’s profitability accounting data for reindeer husbandry, which consists of annual data about 75 reindeer husbandry enterprises that own 80 or more living reindeer.

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