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Food price continues to increase

Market for organic food growing fast

07 Jul 2019, 05:17 ( 4 Months ago)

DF Report
Organic food. Photo Luke by Erkki Oksanen.

Sales of organic food are growing robustly in Finland and across the globe, according to a review by Natural Resources Institute Finland (Luke).

At the same time, the amount of arable land in organic production is expanding rapidly. The increase in consumer food prices will continue this year.

Agricultural product and foodstuff exports are at a record high in Finland, said a press release.

Global sales of organic food and beverages are expected to grow to over EUR 100 billion this year. The annual growth rate has been around 10 per cent since 2000.

According to Jyrki Niemi, Research Professor at Luke, growth this fast is something the conventional food sector can only dream of. Moreover, the growth potential still seems huge.

“The popularity is based on consumers’ growing interest in organically produced food and their positive perceptions of organic food. Consumers buy organic because they think the products are healthy, genuine and original in terms of taste,” Niemi said.

In Finland too, sales of organic products have grown by more than 10 per cent a year in the 2010s. Last year, retail stores in Finland sold organic products to a total of EUR 336 million.

“For a long time, organic production was thought to serve consumers in the higher income bracket. But the markets are expanding from affluent consumers to the mainstream of consumers generally interested in the quality and safety of food. People’s interest in environmental issues contributes to the growing demand for organic produce,” said Niemi.

Organic food still accounts for only a small share, 2.4 per cent, of food retail sales. This share lags far behind the highest shares in the world: in Denmark, for example, more than 13 per cent of grocery purchases are organic. Even in our neighbouring country of Sweden, almost ten per cent of grocery sales are organic.

Last year, 13 per cent of Finland’s arable land, or nearly 300,000 hectares, was farmed organically. Some 5,000 farms, or 11 per cent of all farms, engaged in organic farming. The average size of organic farms is larger than that of conventional farms.

Finland also has roughly 1,000 organic livestock farms. Most produce beef or milk. Finland now produces four times as much organic milk as it did at the start of the millennium. Last year, dairies received almost 70 million litres of organic milk, which represents three per cent of all milk.

Organic beef accounts for approximately three per cent of all beef production, and organic pork for less than 0.5 per cent of all pork production, but seven per cent of all eggs are already organic. Organic egg production has tripled since 2010.

After declining for several years, the price of food began to rise again in Finland last year. The increase has continued this year. In April 2019, consumer prices of food products were two per cent higher than in the previous year.

Food prices have risen in all main product categories. Prices have increased especially for vegetables, meat, butter and eggs. Prices of vegetables and pork increased by more than nine per cent from the previous year.

“Most fluctuations in food prices can be explained by changes in world market prices. An increase in import prices decreases import-driven price competition in Finnish markets. In addition, the weak crops of last summer and autumn have materialised as price increases in agriculture and the food industry,” said  Terhi Latvala, Senior Scientist of Luke.

Agricultural product and food exports declined significantly in Finland last year. Foodstuffs were exported to a total value of EUR 1,520 million, which is four per cent less than in 2017. This year, however, food exports are growing at a record rate. During the first quarter of 2019, the value of exports was nearly 16 per cent higher than in the previous year.

According to Csaba Jansik, Senior Scientist of Luke, a number of factors explain the increase in exports.

“The value of exports has grown because of both export volumes and prices. New markets found for Finnish foodstuffs contribute to the growth in exports. Export demand for milk and meat products especially, as well as cereals and alcoholic beverages, has been growing strongly during the first half of the year.”

Milk products continue to be the most important individual product category in Finland’s food exports. However, the value of exports has declined by almost 30 per cent from its highest level of EUR 521 million in 2013. At the moment, the sector’s share is roughly a quarter of total food exports, whereas only a few years ago, milk products accounted for a third of all food exports.

Other key export products include meat, alcoholic beverages and cereals. Although the export of organic foodstuffs is growing rapidly, their share of total exports remains at around two per cent. In 2018, the value of exported Finnish organic produce came to slightly less than EUR 30 million.

Last year, food products were imported to Finland to a value of EUR 5,272 million, which is almost the level of the previous year. As a combined result of exports and imports, the food trade deficit rose to EUR 3,752 million. This deficit has more than doubled over the last ten years.