According to a recent forecast by the Natural Resources Institute Finland (Luke), the profitability of reindeer meat production has slightly improved. The profitability coefficient for the reindeer farming year 2017/2018, which ended at the end of May, was 0.60, which means that the average reindeer herding entrepreneur received an hourly salary of EUR 9.4 and an interest of 1.7% on the equity of their reindeer herding business. These form the entrepreneurial income, which increased by 5.5% year-on-year to EUR 13,900.
The average total yield from reindeer meat production amounted to EUR 44,000 per company. Of this sum, the share of subsidies was 12% and the share of damages was 11%. Most of the yield comes from the sales of reindeer meat. For a long time now, the yield from direct sales has been higher than the yield from meat sold to meat processing companies.
Production costs increased by some 6% to EUR 53,200, mostly due to increased operating costs of machinery and increased cost of purchased animal feed.
North fares better
The profitability of reindeer meat production is expected to improve in all areas. Reindeer meat production is more profitable in the home region of the Sami, where the expected profitability coefficient is 0.93, compared to 0.23 in other regions especially reserved for reindeer herding and 0.54 in the southernmost regions or “other reindeer herding areas”.
“The regional differences in profitability are high. The northern and southeastern parts of the reindeer herding area are the most profitable. The entrepreneurs in the north profit especially from the sales of meat, while damages are a significant source of income in the southeastern part due to the current predator status,” Jukka Tauriainen, a researcher at Luke, explains the differences in profitability.
Forecasts in EconomyDoctor
The results for the reindeer farming year 2017/2018 are based on company-specific forecasts that were created for 75 reindeer meat production companies included in the scope of profitability accounting. The company-specific results have been weighted to describe the average results of some 900 of the largest reindeer production companies.
The forecasts account for changes in the prices of products and production inputs, as well as changes in regional production volumes per product. The forecasts are based on the assumption that the size of the companies remains the same and the companies produce the same products with the same production inputs as in the previous years.