Finnish Agriculture and Rural Industries Rural and 2015 Agriculture Finnish luke.fi Natural Resources Institute Finland (Luke) Natural resources and Viikinkaari 4 bioeconomy FI-00790 Helsinki studies 26/2015 FINLAND Finnish Agriculture and Rural Industries 2015 Jyrki Niemi and Jaana Ahlstedt (eds.) Natural resources and bioeconomy studies 26/2015 Finnish Agriculture and Rural Industries 2015 Edited by Jyrki Niemi and Jaana Ahlstedt Natural Resources Institute Finland, Helsinki 2015 Report drawn up by Ahlstedt Jaana layout, editor Jansik Csaba chapter 2.5 Knuuttila Marja chapter 1.1 Koikkalainen Kauko chapter 5 Koivisto Anu chapter 2.3 Latukka Arto chapter 4.2 Liesivaara Petri chapter 2.2, 3 Miettinen Antti chapter 5 Niemi Jarkko chapter 2.4 Niemi Jyrki chapter 2.1, 2.5, 3, editor Pyysiäinen Jarkko chapter 6 Rantala Olli chapter 4.1 Rantamäki-Lahtinen Leena chapter 1.2 Sulkava Mika chapter 4.2 Tauriainen Jukka chapter 4.1 Toikkanen Heini chapter 2.5 Väre Minna chapter 1.3 Wuori Olli chapter 6 ISBN: 978-952-326-028-3 (Online) ISBN: 978-952-326-029-0 (Printed) ISSN 2342-7639 (Online) ISSN 2342-7647 (Printed) URN: http://urn.fi/URN:ISBN:978-952-326-028-3 Copyright: Natural Resources Institute Finland (Luke) Authors: Jaana Ahlstedt, Csaba Jansik, Marja Knuuttila, Kauko Koikkalainen, Anu Koivisto, Arto Latukka, Petri Liesivaara, Antti Miettinen, Jarkko Niemi, Jyrki Niemi, Jarkko Pyysiäinen, Olli Rantala, Leena Rantamäki-Lahtinen, Mika Sulkava, Jukka Tauriainen, Heini Toikkanen, Minna Väre, Olli Wuori Publisher: Natural Resources Institute Finland (Luke), Helsinki 2015 Year of publication: 2015 Cover photo: Markku Vuorikari Foreword This is the 37th time that the annual review of Finnish agriculture and rural industries is published. The first review was published in 1979 by the Agricultural Economics Research Institute of Finland, which in 2001 was merged into MTT Agrifood Research Finland. Since the beginning of 2015, MTT has been part of the Natural Resources Institute Finland, having merged with the Finnish Forest Research Institute, the Finnish Game and Fisheries Research Institute and the statistical services of the Information Centre of the Ministry of Agriculture and Forestry. Due to the merger, this review is released in the publication series of the Natural Resources Institute Finland. As in the previous years, the review presents the current outlook for the sectors covered and the most recent research data in a single volume. It provides comprehensive information on the operating environment in agriculture and the food sector, the development of the agricultural and food markets, agricultural policy, the economic situation in agriculture, interaction between rural areas and the environment, and the socio-economic development of rural areas. The publication’s special theme is foreign trade in food and other agricultural products, since the growing deficit in Finland’s food trade has attracted a great deal of attention in recent years. Concerns over the modest growth rate of Finland’s food exports have been frequently expressed in public debate. Export promotion has therefore been set as an important goal. Thematic articles explore reasons that explain, on the one hand, why Finland’s food exports have grown slowly and, on the other, why imported food has gained a significant foothold in the Finnish food market. Other topics include the ongoing free trade negotiations between the EU and the US, and the related opportunities and problems from the food sector’s perspective. I hope our readers in and outside Finland will find this report useful. Helsinki, 27 April 2015 Jyrki Niemi Professor Natural Resources Institute Finland (Luke) Economics and society Contents 1. Operating environment of agriculture ............................................................ 5 1.1. Agriculture and the food sector in the national economy ........................ 5 1.2. Rural enterprises .................................................................................... 9 1.3. Finnish farm ........................................................................................... 13 2. Agricultural and food market ......................................................................... 22 2.1. Trends on the world market .................................................................... 22 2.2. Arable crops ........................................................................................... 24 2.3. Horticultural production ........................................................................ 29 2.4. Livestock production .............................................................................. 34 2.5. Food market ........................................................................................... 39 3. Agricultural policy ......................................................................................... 49 3.1. Common agricultural policy of the EU .................................................. 49 3.2. EU support payments in Finland ............................................................ 52 3.3. National aid ........................................................................................... 55 3.4. Structural support for agriculture and farm relief services ........................ 57 4. The economic situation of agriculture ............................................................ 60 4.1. Development of results and profitability in agriculture and horticulture .. 60 4.2. Economic development of Finnish agriculture and horticulture .............. 66 5. Agriculture and the environment ................................................................... 69 5.1. Environmental impacts of agriculture ..................................................... 69 5.2. Agri-environmental regulation ................................................................ 72 5.3. New plans for water management ........................................................... 74 5.4. Main topics and future perspectives ........................................................ 75 6. Socioeconomic development of the Finnish countryside ................................ 80 Appendices ......................................................................................................... 91 Special topics Retailer brands speed up food imports from Germany ........................................ 18 A boost to Finland’s food exports ....................................................................... 46 Agriculture a source of contention in the EU–US free trade negotiations ............ 58 Nitrates Decree revised to improve the protection of waters and air .................... 78 1. OPERATING ENVIRONMENT OF AGRICULTURE 1.1. Agriculture and the food Share of foodstuffs and non-alcoholic bever- ages in consumer expenditure of households, %. sector in the national economy 2012 2013 Belgium 12.7 12.9 In Finland, the total annual consump- Denmark 11.2 11.2 tion expenditure on food and beverages is Estonia 19.9 20.7 €23.2 billion. Food and non-alcoholic bev- Finland 12.3 12.8 erages consumed at home account for a lit- France 13.3 13.4 tle over half of this, €13.6 billion. Germany 10.1 10.4 5 Greece 17.4 17.2 As living standards have risen, the Italy 14.3 14.4 share of food and non-alcoholic beverages Norway 11.9 11.7 consumed at home in the total consump- Portugal 17.4 18.0 tion expenditure of Finnish households has Sweden 12.4 12.4 decreased to about the same level as in the United Kingdom 9.0 9.1 old EU countries. In 2013, this share was Source: Eurostat National accounts. 12.8%, slightly up from the previous year. When alcoholic beverages and eating Agriculture and horticulture out are also included, food accounts for 21.9% of household consumption expend- According to national accounts, agricul- iture. The share of eating out is 5.9%, a tural and horticultural output was €6.9 bil- little lower than in the old EU countries lion in 2013, when €2 billion of produc- (7.2%). tion aid is included. Output grew by 1.9% The total value of annual cash flows from €6.8 billion in the previous year. in the food sector is around €27.2 billion Intermediate products accounted for when food exports and agricultural sup- about half of agricultural output in 2013, port, in addition to the total public and amounting to €3.6 billion. This represents private consumption expenditure, are an increase of 3.9% from the previous year. taken into account. This is just over 10% The main intermediate products are ferti- of Finland’s GDP. lisers, feedstuffs, electricity, transport fuels and various services that support produc- tion. Consumer expenditure on foodstuffs and bev- The value added produced by horti- erages, € million. culture and forestry was €3.3 billion, and its impact on Finnish GDP was roughly 2012 2013 % change the same as in the previous year, 1.9%. In addition to weather conditions during Total 22,354 23,214 4 the growing season, fluctuations in prod- Foodstuffs* 11,618 12,349 6 uct and input prices influence the financial Non-alcoholic beverages* 1,214 1,214 0 out-turn of these sectors more than before. Alcoholic beverages* 3,414 3,415 0 Agriculture is very capital-intensive Catering services because of the machinery, buildings and (eating out) 6,108 6,236 2 fields needed in production. Investments *Food consumed at home accounted for nearly 40% of the value Source: Statistics Finland, National accounts. added. In 2013, the share of agriculture in Maatalous Tuoteverot (alv, alkoholi, makeis, the total investments of the national energia