Profitability of farming to slide this year

The profitability of agriculture in 2019 will be lower than that in the previous year, according to an estimate of the Natural Resources Institute Finland (Luke).

The entrepreneurial income will remain at EUR 13,000 per enterprise, falling 33 per cent short of the target level, said a Luke press release on Wednesday.

This year’s average total profit of agricultural enterprises will be EUR 159,000. Subsidies make up 32 per cent of the total profit. Production costs will increase by roughly 5 per cent from that in the previous year to EUR 199,000. After production costs are deducted, the average loss of agricultural and horticultural enterprises will be EUR 28,000.

“In 2019, the profitability factor will remain at 0.33. This means that an agricultural entrepreneur’s hourly salary will be EUR 5.4 and the net interest income from equity will be 0.98 per cent. The decrease in the total return on equity from -1.3 per cent to -2.7 per cent is also an indicator of decreasing profitability,” said JukkaTauriainen, a research scientist at Luke.

According to Luke’s preliminary data of crop production statistics, the 2019 cereal harvest will increase by more than a quarter from that in the previous year. As a result of lower cereal producer prices, the turnover of cereal farms will, however, decrease from that in 2018.

The profitability of cereal farms will decrease from the previous year, with the profitability factor falling to 0.30. In addition, the profitability of other crop production farms will decrease.

The profitability factors of dairy farms and other cattle farms will decrease to 0.34. Growing costs and the slightly decreasing milk producer price reduce the profitability of cattle farms. The profitability factor of pig farms will decrease to 0.69.

Due to a small sample size, the profitability estimate of poultry farms cannot be considered to be as reliable as the estimate of other production sectors. On poultry farms, the entrepreneurial income is low in relation to high production volumes.

This decreases the accuracy of the estimate, as minor changes in the prices of products or production inputs are reflected many times over in the entrepreneurial income and profitability.

“According to the estimate, the profitability of poultry farms will be negative this year. Considering the reliability of the estimate, this means that profitability will be low, and it will not increase from the previous year, at least not notably,” said Tauriainen.

The enterprise-specific results have been weighted to represent the average results of the 35,200 largest agricultural and horticultural enterprises. The weighting addresses any changes in the structure of agricultural farms by means of Luke’s structural development forecasts.