News Agriculture, Economy

Natural Resources Institute Finland (Luke) has performed a profitability accounting assessment for reindeer herding, according to which the profitability of this sector rose slightly during the 2016–2017 herding season. The profitability coefficient was 0.57, meaning that, on average, those in the reindeer herding business earned an hourly wage of EUR 9.00, and nearly 3% interest on their equity. Herding companies’ income from their own labour and equity rose about 5% from the previous year, to EUR 13,200.

Meat production is still the single most important source of income from reindeer herding.  Revenues from the sale of meat averaged EUR 20,500 per company.

“More than half of income from the sale of meat is already obtained through direct sales, and the percentage of income coming from direct sales is growing steadily. By contrast, the share of sales made through reindeer herders’ cooperatives is decreasing. Other revenue, such as labour remuneration from the herders’ cooperatives, damage compensation, and support funds, totalled almost as much all together as revenue from meat sales”, according to researcher Marja Vilja from Luke.

Damage compensation sums from traffic accidents and predator incidents in which reindeer were involved rose 60% from the previous year, to EUR 8,640. Damage compensation amounts have risen almost every year. Various types of mortality transmitters have become helpful in the reindeer herding industry. They make dead reindeer easier to locate. This then becomes reflected in damage compensation amounts.

Total revenues in the reindeer herding sector were approximately EUR 42,100, 13% of which consists of support funds. By way of comparison, 44% of the total revenue of agricultural companies in Finland’s Lapland region consists of support funds.

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Production expenses unchanged

Production expenses in the reindeer herding sector remained unchanged from the previous year, totalling EUR 50,400.

“The biggest increase was in the amount spent on feed (23%). Winter weather conditions have a significant effect on feeding requirements, and extra feedings help to ensure that the reindeer stock will remain in good health through the winter”, Marja Vilja explains.

Fuel- and operating expenses for machinery rose slightly, while there was a corresponding drop in expenses for supplies and management fees paid to the reindeer herders’ cooperatives. The average number of hours worked in family reindeer-herding businesses remained unchanged, at 1,320 hours. The average equity of companies in the industry was EUR 89,900. The average equity ratio, i.e., the percentage of total capital made up by equity, was 94%.

Due to an increase in the number of reindeer left alive, the calculated production expenses for each unslaughtered reindeer decreased slightly, to EUR 263. In the smallest companies, where the number of unslaughtered reindeer was in the 80-100 range, production costs for each kilo of meat averaged EUR 26.20. In the largest companies, with over 230 unslaughtered reindeer, the corresponding cost was EUR 17.20.

Large differences between areas

Variation in profitability was particularly great between different reindeer herding areas. The profitability coefficient for the special reindeer herding area located in the northernmost part of Finnish Lapland was 0.62. This area consists of the Sámi area (where the coefficient was 0.92) and other special reindeer herding areas (where it was 0.17). The southern part of the reindeer herding areas is termed “Other reindeer husbandry area” for statistical tracking purposes. The profitability coefficient for these areas was 0.49.

Results from the reindeer herding industry available on the web

The results of tracking the reindeer herding industry can be seen in the “Reindeer farming” section of LUKE’s EconomyDoctor website. You can view more detailed results for the reindeer herding industry by clicking on the ”Own criteria” tab. The results are based on LUKE’s profitability accounting data for the reindeer herding industry, which consists of annual data on 75 reindeer herding companies that own 80 or more unslaughtered reindeer.

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