December 30, 2013

Finland's milk production to face challenges in coming years

The cost effective but labour intensive milk production in Finland is facing challenges in the coming years, with the end of quota system at sight in 2015.

According to the Finnish Dairy Nutrition Council and Agricultural Statistics, milk consumption in Finland is one of the highest in the world even though it has fallen to one third of its highest level in the 1950's.

Historically in the northern European countries people tend to drink milk more than in southern Europe due to earlier decades' milk preservation problems.

Per capita milk consumption in Finland totalled 130 litres in 2012, which has been an average rate during this decade.

Docent Pia Jallinoja, head of research in the National Consumer Research Centre, said there are many reasons for the Finns' preference for milk.

"It is partly because of our long tradition of agricultural policies. In addition, especially children drink a lot of milk due to recommendations of health officials. And unlike meat and prepared food, it has not been part of any food scandals," said Jallinoja.

Jallinoja reminded that not so long ago Finland was an agricultural country where milk was an important source of energy and nutrition. Nowadays dairy consumption has changed. Yoghourt and cheese are on the rise.

Jallinoja predicted that as a future trend milk consumption will reduce especially among adults. Milk is being used more with coffee as a caffe latte and less as a food beverage.

In the early 1990s there were over 45,000 milk producers in Finland. Since the year 2012 the total number has been less than 10,000.

According to Agricultural Statistics, milk production has nevertheless stayed almost at the same level. Approximately 2,200-2,400 million litres of milk is annually produced in Finland.

Agrologist Jaakko Ahola from the Central Union of Agricultural Producers and Forest Owners (MTK) believed that it is because producers' unit sizes have grown and the average milk output is increasing too.

In their negotiations on the future of the Common Agricultural Policy (CAP), the European Commission, the Council of Agriculture Ministers and the European Parliament agreed on June 26, 2013, to end a market regime, whose basic elements of a quota system has been in place since 1984.

Future policies on unit and production facility support of the milk industry seem better than expected, but yet challenging, especially for Finland.

MTT Agrifood Research Finland, Economic Research has made similar conclusions in their recent report -- Impacts of phasing out EU milk quotas on Finnish milk sector.

Due to the low temperature and strictly followed criteria, Finnish dairy sector production costs, as well as the producer price of milk, are among the highest in the EU. Including the value for farm labour, the milk production cost will be about US$0.50 per litre.

The self-sufficiency rate of dairy products varies between 110% and 130%, partly due to the milk quota system. Any changes in the EU and Russian markets or in quota system may have large impacts on Finland.