Total Incomes of Farm Families in Finland

In 1995 Finland joined to the European Union as the northernmost country. The membership in the EU caused significant changes in the Finnish agricultural sector. The whole food production chain had to face a new competitive situation. Changes concerning the abolition of border controls and decrease in the producer prices had a great influence on the livelihood of the farming population. The number of farms engaged in agricultural production has fallen rapidly in the last decade, and the average farm size is increasing. Both of these trends are expected to continue. Income development of farmers and profitability of agriculture are most critical issues in the adjustment process of agriculture, and some results of the recent studies on income development and estimates concerning the Agenda regime have been presented in this paper. Discussion on the increased support bound of the agriculture cannot be avoided, because in Finland the farm income would be zero or negative in all production lines without any direct support. According to some recent studies on the impacts of Agenda 2000, the average farm income would slightly increase at the farm level. However, the positive income development depends on the development of input and output prices, of which input prices have mainly raised according to the general inflation. Most of the national aid is longstanding, but for the livestock and horticultural production in the southern parts of the country the agreement has to be renegotiated every few years. Next time the aid measures for South Finland will be reassessed in 2003. MTT Economic Research is responsible for most of the income and profitability calculations needed in the Ministry of Agriculture and Forestry for the negotiations. From time to time income studies have been more in focus in Finnish agricultural policy; in late80s and early 90s comparisons of income development between farmers and other salary earners were mentioned in the agricultural income laws, and for that the MTTL had a longstanding research project in collaboration with the authors of income statistics. In that connection research was mainly directed to income concepts and development of data sources (Puurunen 1990). When Finland joined to the EU effects of the common policy on farmers' income and profitability of agriculture became very important research themes and separate research programmes were based for that in Finland. At that time more effort was put to the prognoses of income and profitability development. The old income study became also topical especially for the total income formation of farm families. Pressures for a strong structural reform were seen in agriculture, which emphasised additional need for part time farming and importance of income sources out side of the farm. In 2000 Minna Vare brought up to date farmers' income study (Vare 2000). In the following we have first briefly described the change in the farm structure and investments during the EU-membership, which is on the background of the income development of farmers in recent years. Some income concepts and structure of the statistics used in the income comparisons of Finnish farmers and other population groups has been examined in chapter 3. Income development of farmers in sector level and in different farm groups are examined in the chapter 4. In the beginning of the chapter 4 some figures of the total calculation of agriculture have been presented, and in addition to the income developments during past few years some references to the ongoing scenario work on the effects of Agenda 2000 at the MTTL have been taken with. On the farm level the income formation of farmers is examined in the different farm size groups, in different parts of the country, maybe less attention has been paid to the production line, but more to the part time/full time grouping of farms and conclusions from that.