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Luke: Average household faces €500 rise in grocery bill this year

The average price of food will increase by about 10 percent this year compared to 2021, the Natural Resources Institute Finland (Luke) says.

The rise in food prices is being driven by factors such as increased energy costs and a spike in the price of fertilizer. Image: Petteri Juuti / Yle

Predicted rises in the prices of grain, meat and dairy products could see an average household's grocery bill increase by up to 500 euros this year, according to a report by the Natural Resources Institute Finland (Luke).

In a press release published on Tuesday morning, the institute noted that the average price of food is expected to rise by as much as 10 percent this year compared to last year's levels.

"The rise in prices will also affect consumers' purchasing behaviour and will lead them to buy cheaper products within the product group or seek completely different alternatives," Luke's senior scientist and research manager Hanna Karikallio wrote in the press release.

The rising cost of food has already been observed throughout the first few months of this year, with the price of coffee, fish and vegetables increasing at a rapid rate. The price of coffee in February was more than one third higher when compared to the same month last year.

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Finland must replace imports from Russia

The BBC reported last week (siirryt toiseen palveluun) that Russia's invasion of Ukraine could result in a global food crisis, with the price of cooking oil as well as cereals such as maize and wheat rising to record high levels on global markets.

Both Russia and Ukraine are major producers of cereals and oilseed products.

Although Finland is largely self-sufficient when it comes to grain production, last year's poor harvest has led to a reliance on imports to cover the shortfall from domestic production.

In addition, the demand for oilseed products and cereals in Finland has long exceeded supply, with foods such as soybeans, rapeseed oil and sunflower oil essential for livestock farming.

A decline in the domestic production of these products has led to an over-reliance on imports from Russia in recent years, with over a third of Finland's soybeans, rapeseed oil and sunflower oil last year coming from across the eastern border.

Imports of these products ended in March this year however, shortly after Russia's invasion of Ukraine.

Luke: Poor profitability of farms continues

The causes behind the rise in food prices include increased energy costs as well as the price of fertilizer. This spike in costs is having a direct knock-on effect on the profitability of Finnish farms, Luke noted.

"The income of agricultural businesses is quite sensitive to changes in the prices of products and ingredients. The most sensitive are cereals, oilseeds and protein crops," Luke researcher Jukka Tauriainen wrote in the Tuesday press release.

The average hourly wage of a farmer will drop to about 7.10 euros this year, Luke added, while interest on equity will be at 1.6 percent. Finnish agriculture has long suffered from productivity problems.

In addition, rising feed and grain prices are hitting the profit margins of meat producers particularly hard.

Based on current forecasts, total meat production and consumption in Finland is expected to remain at a similar level to last year. However, the rising price of meat products and the increasing cost of production may lead to a slight reduction in both meat consumption and production towards the end of the year.