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The Feasibility of Meeting the Demand for Fresh Food from Horticulture in Iceland

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Final Thesis for MS-Degree in Environment and Natural Resources The Feasibility of Meeting the Demand for Fresh Food from Horticulture in Iceland Azusa Yamada Supervisor: Sveinn Agnarsson Ragnheidur Inga Thorarinsdottir The Feasibility of Meeting the Demand for Fresh Food from Horticulture in Iceland Azusa Yamada Final Thesis for MS Degree in Environment and Natural Resources Supervisors: Sveinn Agnarsson Ragnheidur Inga Thorarinsdottir Faculty of Business Administration School of Social Sciences, University of Iceland Graduating February 2020 1 The feasibility of meeting the demand for fresh food from horticulture in Iceland. This is a 30-credit thesis submitted in fulfilment of the requirements for an MS degree in Environment and Natural Resources linked with the Faculty of Business Administration, School of Social Sciences, University of Iceland. © 2020 Azusa Yamada This thesis can be copied only with the author’s permission. Printed by: Háskólaprent Reykjavík 2020 2 Acknowledgements First and foremost, I would like to express my deepest gratitude to my supervisors, Ragnheidur Inga Thorarinsdottir and Sveinn Agnarsson. Thank you, Ragnheidur, for seeing the potential in this topic at an early stage and encouraging me with constructive advice. Sveinn, thank you for your profound belief in my work and unparalleled support. I couldn’t have come this far without your support and guidance. I would also like to acknowledge and thank all of the interviewees and experts, whose names cannot be disclosed, who were involved in this project. Their passionate participation and input were indispensable to this work. I am also grateful to the Watanabe Trust Fund of the University of Iceland scholarship programme for allowing me to explore my passions and cultivate my intellectual curiosity in this beautiful country. I am grateful also to Daníel Charles Kavanagh for his help with contacting local growers and his continual words of encouragement. I am also indebted to Claudiu Eduard Nedelciu, Jackson Rose, and Súsanna Rós Westlund for the time they devoted to reading this thesis and their valuable comments. Their willingness to provide their help so generously has been very much appreciated. Finally and most importantly, none of this could have happened without my friends and family. This dissertation stands as a testament to your unconditional love and support. For that, I am forever grateful. 3 Abstract Iceland has successfully produced a variety of vegetables all year round using greenhouses. Despite the ability to produce fresh food products in the country using natural resources, imported products have accounted for a considerable portion of Iceland’s market. However, the threats generated by growing global food demand and changing food production systems due to climate change will become a concern for Iceland, as food safety and security are necessary for national security. Given Iceland’s abundant natural resources, is it possible to increase domestically produced food in the market? This study examines the competitiveness of the Icelandic horticultural industry in order to evaluate the feasibility of increasing food production. This study analysed the current market for the main horticultural crops cultivated in the country – tomatoes, bell peppers, salads, mushrooms, and cucumbers – and evaluated the competitiveness of the industry using Porter’s five forces. Prior to the evaluation, interviews were conducted with Icelandic growers to reflect local inputs, and the results were applied to each competitive force. The overall assessment of each force applied to the industry reveals that Iceland’s horticultural industry has moderately high competitiveness, indicating that the industry should be able to increase domestic production using Iceland’s current resources. However, the industry’s products face a strong threat of substitutes, making it difficult to increase food production under the current circumstances. Hence, effective measures should be implemented where needed by taking advantage of two industry strengths: the low power of suppliers and new entrants. Keywords: Horticulture; competitiveness; Iceland; climate change; local product 4 Útdráttur Ísland hefur náð með góðum árangri að rækta allan ársins hring grænmeti af ýmsum toga með notkun gróðurhúsa. Þrátt fyrir getuna til þess að rækta ferskar matvörur í landinu með því að nota náttúruauðlindir hefur komið fram að innfluttar vörur hafa verið töluverður hlutur af markaðinum á Íslandi. Hins vegar mun hættan sem kemur frá vaxandi eftirspurn eftir matvælum á heimsvísu og breytt matvælaframleiðslukerfi sökum loftslagsbreytinga verða áhyggjuefni þar sem matvælaöryggi er mikilvægt fyrir þjóðaröryggi Íslands. Miðað við að Ísland er auðugt af náttúruauðlindum er þá möguleiki á að auka matarframleiðslu innanlands fyrir markaðinn? Þessi rannsókn athugar samkeppnishæfni íslenska garðyrkjuiðnaðarins til þess að meta möguleikann á að auka matarframleiðslu. Þessi rannsókn greindi markaðinn fyrir aðalgarðyrkjuafurðir sem eru ræktaðar í landinu sem er í gildi: tómatar, paprikur, kál, sveppir og gúrkur, og gerði mat á samkeppnishæfi iðnaðarins með því að nota fimm þætti Porters. Áður en matið var gert var tekið viðtal við íslenska ræktendur til þess að endurspegla inntak heimamanna, og var niðurstöðunum beitt á hvern samkeppnisþátt. Heildarmat frá hverjum þætti sem beitt var á iðnaðinn sýndi að garðyrkjuiðnaður Íslands hefur hóflega mikla samkeppnishæfni sem bendir til þess að iðnaðurinn ætti að geta aukið matarframleiðslu innanlands með því að nota núverandi auðlindir Íslands. Hins vegar stendur mikil hætta fyrir vörur markaðarins af staðgenglum sem gerir það erfitt undir núverandi aðstæðum að auka matarframleiðslu. Þar af leiðandi ætti að gera árangursríkar ráðstafanir þar sem þarf með því að notfæra sér tvo stærstu styrki iðnaðarins: lítið afl byrgja og nýja aðila. Lykilorð: Garðyrkja; samkeppnishæfni; Ísland; loftslagsbreytingar; staðbundin vara 5 Table of contents Acknowledgements .................................................................................................................... 3 Abstract ..................................................................................................................................... 4 Útdráttur .................................................................................................................................... 5 List of Figures ............................................................................................................................. 9 List of Tables ............................................................................................................................. 11 Abbreviations ............................................................................................................................ 12 1. Introduction .................................................................................................................. 13 1.1. Objective ............................................................................................................................ 14 1.2. Thesis framework ............................................................................................................... 14 2. Background ................................................................................................................... 15 2.1. Growing food demand ........................................................................................................ 15 2.2. Agriculture and land use ..................................................................................................... 17 2.3. Climate change ................................................................................................................... 18 2.3.1. Rising global temperature .................................................................................................. 18 2.3.2. Impacts of climate change in Arctic regions ...................................................................... 19 2.3.3. Impacts on agriculture ....................................................................................................... 21 2.4 Technological development in agriculture ............................................................................ 22 2.5. Agriculture in Iceland .......................................................................................................... 23 2.5.1. Food demand in Iceland ..................................................................................................... 24 2.5.1.1. Population growth ..................................................................................................................... 25 2.5.1.2. Tourism ....................................................................................................................................... 25 2.5.1.3. Fruit and vegetable consumption ............................................................................................. 26 2.5.2. Local food production ........................................................................................................ 30 2.5.2.1. Historical overview .................................................................................................................... 31 2.5.2.2. Agricultural industry .................................................................................................................. 31 2.5.2.3. Utilisation of natural resources ................................................................................................
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