Economic impact of organic production in Finland over EUR 680 million

Organic production is growing moderately in Finland. It has already had a clear impact on the Finnish economy and on employment growth. Multiplier effects included, organic production offers employment equalling 3,400 person years.

The economic impact of organic production in Finland is just over EUR 680 million. Arable crops have the greatest impact on the economy and on employment growth. The data mentioned here are available in the project report prepared in connection with the Organic Production 2020 – Regional Impacts and Position in the Public Sector study. The study was conducted by the Ruralia Institute of the University of Helsinki and involved an extensive investigation of the current state and way forward of organic production, covering all regions in Finland.  

There are manifest differences in the impacts of organic production on the economy and on employment growth in different regions. Organic production has the greatest impact in the Southern Ostrobothnia region (with over 600 person-years of employment and a contribution of approximately EUR 100 million to the national economy), which boasts the second largest area of organic production in hectares as well as extensive further processing and a large number of animals accepted for organic production. The regions of Northern Ostrobothnia and Pirkanmaa came in second and third place, respectively, in terms of impact.

The impacts of a reduction in conventional farming area undermine the benefits of organic production growth

According to calculations, the effects of increasing organic production to 20% of arable land, as recommended by the government, would be positive on regional economies and employment growth; however, the combined effects of increased organic production and the resulting decrease in conventional production would be negative on both the regional and national level. The negative combined effect is explained by, for example, differences in production methods, such as cost structures, crop yields, and consumer prices. Since organic and conventional  production require different inputs, purchase transactions affect the production chain in different ways and benefit other sectors and the entire regional economy differently. The price of organic products is often higher, leaving consumers with less money to spend on the products of other branches. However, the situation may be the opposite on the farm level: organic production may be more profitable for a farm than ordinary production.

Producers’ and municipal decision-makers choices between organic and conventional production are mostly based on money

The project included two comprehensive questionnaire surveys. According to the results of the questionnaire submitted to organic producers (840 responses), financial factors constitute the primary reason for transferring from conventional to organic production. Ecological soundness and sustainability were also important deciding factors. Investments need to be made in the profitability of organic production to encourage more farmers to make the transition to organic production and to stick with it over the long run. Also, respondents felt that the bureaucracy and monitoring of organic farming were both too taxing and even presented an obstacle to transferring to organic production.

According to the survey sent to municipal decision-makers (276 responses), municipal kitchens would buy more organic produce if they could afford it. When it comes to the procurement of organic produce in municipal kitchens, according to the respondents, the greatest obstacles are twofold. On the one hand, there is the higher price compared with conventional produce; on the other hand, there is the limited availability of funds. However, the attitudes of kitchen personnel and municipal decision-makers were not seen as an obstacle to procuring organic produce. While people trust the high quality of organic produce, the respondents reported that food services ordered it rarely. The respondents to the survey, which was submitted to municipal decision-makers, believed that more attention will be paid to raw materials in the future. Many municipalities had already made the decision to include a statement concerning the procurement of locally or organically produced raw materials in their procurement or food service strategy, or at least discussed the possibility of doing so.

The project was funded by the Ministry of Agriculture and Forestry and the Finnish Organic Research Institute.

Publication:
Viitaharju Leena, Kujala Susanna and Törmä Hannu (2017). Organic production 2020 – Regional Economic Impacts and Position in the Public Sector (Luomutuotanto 2020 – Aluetaloudelliset vaikutukset ja asema julkisella sektorilla). University of Helsinki, Ruralia Institute, Reports 170

Additional information:

Leena Viitaharju

Leena Viitaharju

Project Manager
Hannu Törmä

Hannu Törmä

Professor