Agriculture in Finland is becoming more market driven.
What will that mean? Fluctuation in prices, more so than with current EU and Finland subsidies and quotas, but better efficiency. Competition will mean fewer farms. The reason for the changes is because profitability continues to be poor despite strong spending by the government. The return on investment for taxpayer spending has been negative on average for the last 10 years. In 2011 in Finland, it was the third weakest in the EU, at -1.1 per cent. The brunt of that inefficiency is small farms kept going only because of subsidies. Half of the farms in Finland produce only 5 percent of the food.
Last year, an agreement was reached on the common EU agricultural policy that will be in effect until 2020, which means agricultural production volumes in Finland will remain at the current level because subsidies will remain in place to maintain production volumes - but their real value will still decrease. In order to maintain income levels, a larger part of agricultural revenue must be gained from products sold in the market, and that means capitalism.
"The markets will increasingly influence what happens to the production, income and profitability in the agricultural sector. Prices will fluctuate wildly, which means that the market risks of agricultural enterprises increase both in the sale of products and the acquisition of production inputs,” says Professor Jyrki Niemi, MTT Agrifood Research Finland.
The role of the state in the compensation of crop damages will also change. After a transition period, crop damages will no longer be compensated directly from state funds, instead the state will participate in covering crop damages by creating prerequisites for commercial crop damage insurance.
"The most important prerequisite for the creation of commercial insurance and insurance market is closing down the current system, which is completely funded by the state. The CAP reform requires that insurance systems will be implemented in co-operation with the state and the private actors as planned," says Professor Sami Myyrä, MTT Agrifood Research Finland, who believes that the new system will be both more equal and more transparent than the legacy system. The new insurance systems also open up the possibility of using the same policy instruments in the Finnish agricultural politics that have been used for a long time in countries such as the United States.
By 2020, output will increase but the number of agricultural enterprises will decrease, from the current 57,000 to about 48,000 farms, a decrease of about 15 percent. Only one fifth of farms would be livestock farms, approximately 10,000 farms, and the number of pig and dairy farms will decrease by roughly 40 percent, which leaves only 5,400 farms that produce milk. The declines will occur in the smallest farms so size of the remaining farms will increase.
The number of farms has decreased for years at almost a flat rate. The structural development forecasts are based on the assumption that the agricultural policy decisions will not change the long-term development trend in the future either, Latukka states.
Source: EU’s Common Agricultural Policy during 2014–2020 and Finnish agriculture
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