Support accounts for a third of agricultural total gross return
Agricultural support forms an essential part of Finnish farmers’ income. The total calculation statistics compiled by the Natural Resources Institute Finland (Luke) indicate that in 2014 support accounted for an average of 34% of the total gross return of Finnish farms. After deducting the farmer’s own wages and return on capital, the direct production costs of agricultural production totalled approximately €5.1 billion, market return approximately €3.8 billion and all support (incl. investment support) slightly below €2 billion. In other words, production costs were clearly higher than the market return. Therefore, it would be impossible to continue the present scale of domestic primary production of food in the Finnish conditions without support instruments.
The extent and significance of support varies for different kinds of agricultural production in different regions of Finland. Support coupled to production generally has the same level per unit, regardless of the scale of production. The definition of ‘active farmer’ has been defined in more detail particularly in EU support schemes, but farmers’ other forms of income do not affect obtaining agricultural support. That is justified because the overall aim of support is to enable farming and compensate for the negative impacts of the northerly locations of Finnish farms. On average, incomes from farming typically only form part of the total incomes of Finnish farming families. Other sources of income include forestry work and timber sales, non-agricultural jobs, benefits and pensions.
Agricultural support ensures domestic food production and its development
Conditions for farming in Finland differ considerably from those in many other EU countries. Due to the special characteristics of Finnish agriculture, like our northern location and smaller farm sizes, the production costs of agricultural products in Finland are significantly above the EU average. Income from the sales of agricultural products only covers a part of the production costs. For instance, the average farm-level production costs of one litre of milk are approximately twice as much as the price paid to the producer.
One of the key aims of the EU’s agricultural policy is to ensure that food is available to consumers at reasonable prices. In the EU, the prices of many agricultural products are close to average world market prices, and the price level in the internal market is essentially the same in different parts of the EU. Due to the price level, it would be impossible to produce certain vital agricultural products in Finland without support from the society. The same is true also in other EU countries, at least in terms of current production levels. To ensure the viability of production, agriculture is supported through budget funds in all EU countries. The support forms can be fully EU-funded, co-financed by the EU and the Member State or fully financed from national funds.
In the EU, agricultural policy falls under the EU’s competence and decision-making power, and Member States’ national aid systems must comply with the objectives of the common agricultural policy. The basic principle of the CAP is that its targets should be primarily reached through EU instruments. Any remaining problems can be addressed through national special arrangements that are based on regulations adopted by the European Parliament and the Council or on regulations and decisions issued by the Commission.
Finland is divided into different support areas to enable the application of different support levels in different regions. For example in milk and beef production, support payments increase from south to north. In crop farming, the support per hectare is nearly the same across the country when all forms of area-related aid are taken into account.
In addition to annual aid, farmers may also receive structural support. The aim of these support forms is to improve agricultural productivity, develop the structure of agriculture and promote generational renewal.