Drought throws dairy farming into severe crisis

The sad face of a dairy farmer's wife who was almost in tears on national television news on Tuesday reflected the impact of the current drought in Finland on agriculture.

She said she was contemplating which cows would have to be sent to be slaughtered due to the lack of hay to feed all of them over the winter.

During the key growing season in June, Finland saw very little rain. Harvests of grain will remain at roughly half of the normal level, with the southwestern coastal areas the worst hit. The hay to be stored for the winter feeding of cows has hardly grown.

While emergency economic assistance to farming is being worked out, experts predict the losses will speed up the decline in the number of farms in Finland and increase reliance on imports.

In June, Finland along with Sweden, Denmark and the Baltic countries asked the European Union (EU) to prepare crisis measures to tackle the impact of the dry growing season.

Jyrki Niemi, a professor of the Finnish Natural Resources Institute, said on Tuesday that the producer price of wheat is now one fifth higher than last year, but Finnish farmers do not have much to sell.

Drought has affected many regions of the globe this year, but the situation has been severest in Europe and in the Black Sea area. "There is also a shortage of oats used for fodder and malting barley," Niemi told national broadcaster Yle.

The recent agreement between the EU and the United States on increasing soy bean imports to the EU alleviates the situation somewhat. "The price of U.S. soy has also dropped recently as the U.S. is no longer able to sell that much soy to China," Niemi said, referring to the ongoing China-U.S. trade frictions.

TWO BAD YEARS

This is the second consecutive year of crop failure in Finland. In 2017, the late summer and autumn seasons were wet and harvesting could not be completed.

A Finnish language business daily newspaper, Kauppalehti, predicted this week that even though public subsidies may resuscitate the farming industry for another year, many farmers would give up their business after a second bad year. The number of farms in Finland has dropped to a half from the level of 1995 and the trend continues.

Farming has not been a very profitable business in Finland. Kauppalehti noted that in 2016, the actual yield of capital invested in agriculture was negative, at minus three percent. The average annual business income per farm was 11,000 euros (12,746 U.S. dollars). Many farmers have taken parallel jobs.

Despite the dire situation at farms, Finnish households will hardly notice any impact on store prices, unless they are consumers with particular sensitivity on the production areas.

Niemi pointed out that the producer price of flour comprises only five percent of the price of the bread on the super market shelves. "The wheat purchase price could double and it would still only mean a few percent increase in the price of bread."