Iceland review - 2015, Page 44

42 ICELAND REVIEW
agriculture. people employed in the indus-
try number 4,800, which is 2.9 percent
of the labor force. Overall, 11,000 jobs in
Iceland are connected to farming in one
way or another, such as in the dairy indus-
try and service sectors. Most farms either
produce milk or lamb, or both, which
together account for almost half the agri-
cultural production. There are 2,000 sheep
farms in the country with an annual yield
of 9,000 tons of lamb—plus mutton, wool,
pelts and offal, and 640 dairy farms, aim-
ing to produce 140 million liters of milk in
2015. “production must increase by 20 per-
cent to meet domestic demand, mainly in
products high in fat,” explains Sindri. This
is due to growth in tourism and a changed
consumption pattern among Icelanders. “In
august 2013 the sale of butter and cream
increased by 20 percent between months
and it remains high,” elaborates Sigurður.
“Twenty to 30 years ago, saturated fat was
considered to be unhealthy, but not any-
more.”
caSH coWS and black SHeeP
There are two main pillars of agricultural
support in Iceland: market price support,
maintained by border control measures,
and direct payments based on payment
entitlements to cattle (mainly dairy) and
sheep farmers, and on a smaller scale to
certain greenhouse producers. Market
price support is provided for all livestock
products and some horticultural products.
The OECD estimates that in 2013, overall
support totaled ISk 19.2 billion (uSD 155
million), of which direct state funding was
ISk 12.1 billion. This accounts for 41.3
percent of the income of farmers, down
from 50.8 percent in 2008. Still, agricul-
tural support remains higher in Iceland
than in most other OECD countries apart
from Japan, South korea, Norway and
Switzerland.
Wholesale prices are managed for
approximately half the dairy products,
meaning that the producers obtain an 82
percent higher price for the milk than
they would have without state interven-
tion, the OECD concludes. Every year,
a government-chaired committee, repre-
senting the Farmers association and labor
unions, determines the guaranteed min-
imum prices for milk delivered within
production quotas. “The Competition
authority says that price management lim-
its the retailers’ flexibility for premiums,”
justifies Mp for the Independence party
Haraldur Benediktsson, a dairy farmer and
former chair of the Farmers association.
“according to the price survey of the
Icelandic Confederation of labor, there is
a 12 percent difference in the price of milk
between stores but a 70 percent difference
in some types of vegetables.”
Both quotas and entitlements for support
payments are tradable between farmers.
“If our intention is to reward former dairy
farmers, this system is excellent,” Daði
says ironically, reasoning that it’s expensive
for newcomers to start out as they have
to buy quota and retired dairy farmers
profit from selling theirs. He’s not the only
one critical of the system. “Controlled
production was relevant at the time—we
were looking at mountains of meat and
butter—but it has become obsolete and
a hindrance,” states Ástvaldur lárusson,
vice-chair of the Icelandic association of
young Farmers, which is independent of
the Farmers association. When the quotas
were established in the early 1980s, they
were a response to overproduction.
Haraldur maintains that the quota sys-
tem is on its way out. Due to increasing
demand, the production limit no longer
applies, he says. “It hasn’t mattered in
two or three years.” yet this doesn’t lead
to more farmers entering the industry.
“Everyone who wants to can produce milk,
but they won’t get funding unless they hold
quota, so it’s mostly existing dairy farmers
who are increasing their production. They
used to get a lower price for additional milk
but now the price is the same,” explains
Sindri. “This may be the first step towards
abolishing the quota but we will always
need a tool to control production so that
the milk won’t be wasted.”
In the mid-1990s, output payments for
sheep meat were replaced by payments
based on historical entitlements, which are
tradable between farmers. “Those who are
already in a good position accept direct
payment from the state and the sale of
entitlements results in those who are well-
off buying more while young farmers are
facing difficulties. I have witnessed this,
unfortunately, that market control of the
entitlements leads to inequality,” reveals
sheep farmer Jóhannes Sigfússon. The
Sheep Farmers association can publish
reference prices for meat but these have
no binding effect on slaughter companies’
pricing. Sheep farmers receive a 25 percent
lower price than the world market price for
lamb, says Haraldur. “Farmers are fighting
for a higher production price—the pricing
is not in line with expenses,” adds Sindri, a
sheep farmer himself. “When comparing a
sow and a ewe, the sow produces two tons
of meat per year, but the ewe 30 kilos.”
Icelandic lamb is a unique product, he rea-
sons. Roaming free in highland pastures in
the summer, the lambs feed on wild herbs
and “season themselves,” as he puts it.
broke bUt HaPPy?
The annual monthly salary of a dairy
farmer, excluding profits, is ISk 218,000
(uSD 1,770), and ISk 129,000 for the
average sheep farmer, as calculated in
issue 39-2014 of weekly business journal
Vísbending. Ástvaldur, an agriculturalist by
education, says there is significant interest
among young people in farming, “but it
isn’t attractive being a farmer, unless you
can live with being broke.” While agricul-
tural trade agreements are up for review,
Ástvaldur doubts revolutionary changes
are on the horizon. agricultural policies
in Iceland are determined by renewable
multi-year agreements for dairy, sheep and
horticulture between the government and
the Farmers association. The agreement on
horticultural production is up for renewal
in 2015, on dairy production in 2016 and
on sheep production in 2017. “I hope that
the new agreements will be modernized,
but the older generation is too comfortable.
The system wraps them up in cotton wool
and prevents progress, neither benefiting
farmers nor consumers.” a farmer’s son
from the West Fjords, Ástvaldur has aspi-
rations of venturing into farming himself,
but not under the current circumstances.
FArmiNG