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PTT: Finland's food prices to grow by 11% this year

The independent economics research group said that Finland's grocery prices may grow at the fastest pace since it joined the EU in 1995.

A supermarket shelf filled with tomatoes and cucumbers, file photo. Image: Henrietta Hassinen / Yle

The global food production system is being tested by Russia's invasion of Ukraine and the price of food in Finland is expected to continue rising this year, according to the Pellervo Economic Research Institute (PTT).

The institute said it expects that the overall price of food will grow by 11 percent this year, with cost growth expected to exceed the general inflation rate already this spring.

"The rise will be clearly greater than the general inflation trend," PTT research director Sari Forsman-Hugg said in a statement.

However, the institute said it was difficult to predict the precise timing of the price increases, but there will be upward pressure on prices across all food products, with major variations among product groups.

Russia's invasion of Ukraine is behind the spike in food prices, but PTT noted that grocery bills were rising even before the war broke out. The institute said its forecast was based on an assumption that the conflict will drag on and that severed economic ties between Russia and the West will continue.

Uncertainty

The conflict will have long-lasting effects on the global agricultural and food production sectors, even if the war abruptly ends, according to the institute.

A PTT senior agricultural economist, Päivi Kujala, said Finland's agricultural sector could face the greatest uncertainties and risks next year.

"The risks include weakened financial stability of farmers, possible production reductions or cessations and declines in food self-sufficiency," Kujala said.

The rising prices of food and related problems are not limited to Finland, as Ukraine and Russia have both been major global suppliers of grain, the price of which has risen to peak levels since the war broke out. Many countries are struggling to boost food production independently, but some are facing difficulties due to the rising costs of fertilisers needed to do that.

PTT said Russia has become a significant source of ammonia and potassium-based fertilisers for Finland in recent years.

Finland's livestock sector has suffered in particular due to rising production costs and other farmers have been unable to get needed fertilisers due to liquidity problems, according to the institute.

Security of supply

In terms of food security, Finland's grain production levels are expected to be sufficient this year, if weather conditions are favourable during the growing season, PTT said. It noted that this would require the optimised use of fertilisers as well as ensuring that the farmland that is cultivated is economically viable.

Questions about Finland's security of supply could increase if the war — and related fertiliser availability issues — continue into next year.

The economic institute pointed out that rising food prices will help to increase the overall turnover of Finland's food industry, but exports will drop off and consumers may increasingly switch to more affordable products.

There is also a risk that logistical bottlenecks could delay transportation of raw materials, with PTT noting that the recent outbreak of Covid-19 in China may also cause further disruptions.

However, there is no current risk of food running out in Finland or Europe, but food shortages could be possible if the war in Ukraine evolved into a broader, global conflict, according to the institute.