Report from the Commission to the Council - 2001–2005 Report on the implementation of the long-term national aid scheme for agriculture in the northern regions of Finland pursuant to Commission Decision 2002/404/EC
Date: 2007-07-31
Institutions: European Commission
Subjects: Finland, State aid, agricultural region, aid system, aid to agriculture, regulation of agricultural production, report, utilised agricultural area

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 31.7.2007 
COM(2007) 459 final 

REPORT FROM THE COMMISSION TO THE COUNCIL 

2001–2005 report on the implementation of the long-term national aid scheme  
for agriculture in the northern regions of Finland pursuant  
to Commission Decision 2002/404/EC 

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REPORT FROM THE COMMISSION TO THE COUNCIL 

2001–2005 report on the implementation of the long-term national aid scheme  
for agriculture in the northern regions of Finland pursuant  
to Commission Decision 2002/404/EC 

TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

3.7. 

4. 

INTRODUCTION.............................................................................................................. 3 

Background .................................................................................................................. 3 

General principles ........................................................................................................ 3 

The sub-regions............................................................................................................ 4 

Administration and controls .......................................................................................... 4 

IMPLEMENTATION 2001–2005 ...................................................................................... 5 

Commission decisions.................................................................................................. 5 

Aid disbursed in Finland .............................................................................................. 5 

Community aid ............................................................................................................. 5 

Nordic aid granted by sector ........................................................................................ 6 

Supported production volumes .................................................................................... 6 

DEVELOPMENT OF THE AGRICULTURAL ECONOMY IN THE NORDIC AID REGIONS .......... 7 

Development of main products in sub-regions ............................................................ 7 

Development of land use.............................................................................................. 9 

Trends in the structure, productivity and production methods of agriculture.............. 9 

Income and profitability development of agriculture................................................. 11 

Socio-economic impact development ........................................................................ 11 

State of the environment ............................................................................................ 12 

Impact on the food chain............................................................................................ 12 

CONCLUSIONS ............................................................................................................. 12 

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1. 

INTRODUCTION 

1.1. 

Background 

Pursuant  to  Article  142  of  the  Act  of  Accession  to  the  European  Union  of  the  Republic  of 
Austria, the Republic of Finland and the Kingdom of Sweden, the Commission has authorised 
Finland  to  grant  long-term  national  aid  to  ensure  that  agricultural  activity  is  maintained  in 
northern  regions.  The  Nordic  aid  is  granted  in  particular  to  maintain  traditional  primary 
production  and  processing  naturally  suited  to  the  climatic  conditions,  to  improve  structures 
for the production, marketing and processing of agricultural products, to facilitate the disposal 
of  such  products  and  to  ensure  that  the  environment  is  protected  and  the  countryside 
preserved. 

The  regions  covered  by  the  Nordic  Aid  scheme  are  situated  north  of  the  62nd  parallel  and 
some  adjacent  areas  south  of  the  parallel  affected  by  comparable  climatic  conditions 
rendering  agricultural  activity  particularly  difficult.  The  following  factors  have  been  taken 
into  consideration  when  determining  the  areas;  low  population  density  (maximum 
10 persons/km2), Utilised Agricultural Area (UAA) as a proportion of the total area (less than 
10 percent)  and  agricultural  area  used  for  the  cultivation  of  crops  intended  for  human 
consumption as a proportion of UAA. The area covers a total of 1 417 000 hectares of UAA, 
which corresponds to 55.5% of Finland’s total UAA in year 1994.  

The Commission shall submit to the Council one year after accession and subsequently every 
fifth years a report on the authorisations granted and the results of the aid granted under such 
authorisations according to Article 143. Previous reports were made in 1996 and 2002. 

This  report  is  based  on  information  from  the  Finnish  authorities  and  conclusions  are  not 
drawn  on  whether  the  objectives  of  the  scheme  have  been  met.  The  Commission  has 
commissioned a separate study to address this point. 

1.2. 

General principles 

The  Nordic  aid  is  differentiated  by  regions  and  granted  on  the  basis  of  production  units, 
taking  into  consideration  the  restrictions  established  by  the  common  market  organisations. 
The  limitations  of  authorised  production  volumes  per  sector  are  set  at  total  level  while 
regional limits are set for the purpose of clarity. Aid may not be linked to future production or 
bring about an increase in production or an increase in the level of combined aid in relation to 
the aid granted during a reference period. 

Based on available national statistics with regard to quantities, the reference period for setting 
the different quantitative limits for agricultural production was based on the years 1991–1993 
before accession. The total aid was calculated on the basis of the differences between prices in 
Finland and those in the Community (indirect supports) in 1993 as well as on the basis of the 
difference between the direct aid financed from the national budget and the amount of direct 
aid available from the common agricultural policy (CAP). 

By Commission decision the maximum aid levels are defined for the Nordic aid by product 
and sector. The aid for all plant products is granted per hectare. For livestock production, aid is 
expressed per livestock unit (LU) for bovine animals, equines, ewes, goats, swine, poultry and 
per  head  for  reindeer.  Aid  to  milk  is  granted  per  kilogramme.  Aid  is  also  granted  for  the 
storage of fruit and vegetables. For young farmers (under 40 years of age), provision is made 

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for a flat-rate aid per hectare used for growing grass and cereals. Aid can be disbursed to a 
producer who (or whose spouse) is at least 18 years of age and not more than 65 years of age. 
Aid recipients must be in possession of at least three hectares of arable land or at least half a 
hectare under horticultural cultivation. 

1.3. 

The sub-regions 

The Finnish Nordic aid region comprises five sub-regions, i.e. C1, C2, C2 North (including all 
the islands of the C1 and C2 areas), C3 and C4 (Figure 1). This subdivision makes it possible 
to  modulate  support  for  agriculture  by  taking  account  of  the  special  features  of  the  regions' 
agricultural economy and the severity of the natural handicaps. 

C4
C4

C3
C3

C2P
C2N
C2
C2
C1
C1
B
B
AA

Figure 1 – Agricultural aid areas (sub-regions C1 to C4 are included in Nordic aid) 

1.4. 

Administration and controls 

Fifteen  regional  Employment  and  Economic  Development  Centres  (EEDC)  operate  as 
regional organisations for the administration of agriculture.  

The  municipalities'  administrations  receive  applications  for  aid  from  farmers  and  record  the 
application data in the IACS system. The administration carries out the aid calculations and 
sends the aid authorisation to the farmers. Officials from the EEDC exercise control over the 

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recipients  of  national  aid  as  carried  out  for  EU  aid.  Each  year  5%  of  all  applications  are 
verified on-the-spot. 

Finland has to forward to the Commission each year an annual report on the effects of the aid 
granted,  including  the  Community  aid,  and  in  particular  on  the  trend  in  production  and  the 
related  means  that  are  qualifying  for  the  aid,  the  trend  in  the  economy  of  the  regions 
concerned and the effects on the protection of the environment. On the basis of this report and 
other available information the Commission verifies the compatibility of the implementation 
with the relevant provisions. 

2. 

IMPLEMENTATION 2001–2005 

2.1. 

Commission decisions 

The  Nordic  aid  scheme  for  Finland  was  approved  by  Commission  Decision  95/196/EC  on 
4 May 1995. 

During  the  previous  reporting  period  1996–2000  this  Decision  was  amended  twice  by 
Commission  Decisions  97/279/EC  and  2000/405/EC.  In  2002  the  Decision  concerning 
Finland  was  replaced  by  Decision  2002/404/EC.  The  Decision  firstly  corrected  certain 
amounts  of  aid  due  to  the  exchange  rate  changes  and  differences  in  reference  prices. 
Secondly,  certain  sectors  or  sub-sectors  were  combined 
the 
administration.  Limitations  of  the  aid  levels  per  unit,  total  amount  of  aid  per  sector  and 
number of units covered by the aid were decided to be sufficient to prevent possible increases 
of production. 

to  simplify 

in  order 

Since  then  the  Decision  has  been  amended  by  Decision  C(2004) 2711  to  allow  higher 
investment aid to be paid in certain sectors until 2007 and to allow aid for suckler cows also 
to  be  paid  for  heifers.  Second  amendment  to  include  the  SLOM-amounts  for  milk  and  to 
reintroduce  the  quota  link  from  2005  onwards  was  approved  by  Decision  C(2005) 122. 
Finally  Decision  C(2005) 5599  reduced  the  total  aid  amounts  from  EUR 486.69 million  to 
EUR 448.59 million  to  take  into  account  the  nationally  financed  less  favoured  areas  aid 
scheme and adjusting to the development of the CAP to abolish certain animal density limits. 

2.2. 

Aid disbursed in Finland 

In the beginning of the period the Nordic aid granted increased slightly for each year, from 
EUR 351 million  in  2001  to  EUR 385  million in  2004.  A  decrease  to  EUR 328.1  million  in 
2005  is  explained  by  the  abovementioned  introduction  of  the  nationally  financed  LFA 
scheme, which was financed by a reduction of a corresponding amount of the Nordic aid. In 
the end of the period the Nordic aid amounted to 34% of total agricultural support paid in the 
Nordic  aid  regions.  Approximately  74%  of  the  payment  authorisations  available  for  Nordic 
aid in 2001–2005 were used. 

2.3. 

Community aid 

Agriculture in the support areas of the Nordic aid scheme is also benefiting from instruments 
financed by  the EU,  for example the two pillars under the common agricultural policy. Aid 
from these two pillars, as shown in table 1, has increased by 15 % from 2001. This is to some 
extent explained by the introduction of direct payments in the dairy sector as a result of the 
2003 CAP reform and higher than expected up-take of the agri-environmental payments. 

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Table 1 – Summary of certain Community supports in 2001 and 2005 

Year 

2001 

2005 

CMO payments 
mio €  

Compensatory allowance, 
LFA∗, mio €  

Agri-environmental 
payments, mio €  

202 

254 

230 

234 

133 

162 

Total 
mio €  

565 

650 

∗ 

less-favoured areas 

2.4. 

Nordic aid granted by sector 

In  all  sectors  the  total  aid  granted  has  remained  under  the  permissible  amounts  (tables 2a 
and 2b). This is mainly explained by the thrift budget discipline and by lower than expected 
production levels in some sectors. 

Table 2a – Summary of the Nordic aid amounts linked to livestock, 2001 and 2005 

Product 

Total aid granted 2001 
mio €  

Total aid granted 2005 
mio €  

Permissible Nordic aid 
2005, mio €  

Beef 

Mutton and goat 

Pork and poultry 

Reindeer 

Equines 

Milk 

Transport aid for milk and meat 

Total 

51.1 

2.5 

46 

2.7 

2.1 

182.5 

1.6 

288.5 

54.9 

3.25 

37.03 

3.49 

2.23 

158.9 

2.15 

261.9 

91.17 

3.50 

61.3 

6.16 

2.52 

225.22 

2.27 

392.2 

Table 2b – Summary of the Nordic aid amounts linked to area, 2001 and 2005 

Product 

Total aid granted 2001 
mio €  

Total aid granted 2005 
mio €  

Permissible Nordic aid 
2005, mio €  

Sugar beet 

Starch potatoes 

Cereals and other arable crops 

Horticulture 

Outdoor vegetables and apples 

Aid for storage 

UAA (pasture, fallow land, etc.) 

Young farmers 

Total 

0.5 

0.9 

9.9 

21.4 

0.8 

1.07 

15.7 

12.1 

62.4 

0.38 

0.65 

12.90 

21.43 

0.64 

1.00 

16.48 

12.68 

66.16 

1.34 

1.24 

15.14 

24.69 

0.90 

2.86 

27.87 

16.66 

89.95 

During  2005  a  temporary  investment  aid  has  been  granted  to  the  milk,  beef  and  sheep  and 
goat  sector  including  support  to  feed  and  manure  storages  and  walking  pens.  917  projects 
have received support to an amount of EUR 14.14 million.  

2.5. 

Supported production volumes 

The  Nordic  aid  decision  defines  the  maximum  production  volumes  to  which  aid  can  be 
granted. During 2001–2005 the maximum production limits have been breeched slightly for 
pork and poultry and for equines during some years and the amounts of aid or units have been 

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cut accordingly. The number of reindeers for which subsidies have been paid has decreased 
due to the introduction of a 50-head limitation per applicant. 

Table 3a – Summary of the supported production volumes in 2001 and 2005, livestock 

Product 

LU with subsidies 
2001 

LU with subsidies 
2005 

LU reference levels 
2005 

Excess/shortfall 
2005, % 

Beef 

Mutton and goat  

Pork and poultry 

Reindeer(heads) 

Equines 

Milk (t) 

120 344 

4 740 

147 764 

185 731 

7 754 

130 862 

5 668 

133 967 

155 254 

5 593 

167 274 

5 886 

139 200 

229 000 

6 000 

1 848 123 

1 825 664 

1 759129 

–22% 

–4% 

–4% 

–32% 

–7% 

4% 

In  total  for  the  period  the  production  has  stayed  under  the  permissible  volumes  in  all  crop 
cultivation  sectors,  but  has  in  some  individual  years  exceeded  the  thresholds  slightly 
(table 3b). 

Table 3b – Summary of the supported areas, 2001 and 2005 crop production 

Product 

Hectares with 
subsidies 2001 

Hectares with 
subsidies 2005 

Hectare reference 
levels 2005 

Excess/shortfall 
2005, % 

Sugar beet 

Starch 

2 302 

4 933 

Cereals and other arable crops 

304 707 

Horticulture 

Outdoor vegetables and apples 

216 

2 080 

UAA (pasture, fallow land, etc.) 

421 738 

2 034 

4 546 

315 975 

190 

1 774 

427 022 

3 750 

6 580 

557 700 

203 

2 095 

848 812 

–46% 

–31% 

–43% 

–6% 

–15% 

–50% 

3. 

DEVELOPMENT OF THE AGRICULTURAL ECONOMY IN THE NORDIC AID REGIONS 

The conclusions in this chapter are based on information from the Finnish authorities pursuant 
Article 143(2) of the Act of Accession. 

3.1. 

Development of main products in sub-regions 

The main agriculture sectors in the Finnish northern regions are milk, beef and pigs. Together 
they present 72% of the market revenue. The following sections picture the development of 
the  main  products  in  the  different  sub-regions.  The  development  within  the  sub-regions 
cannot be analysed from the available information. 

Milk 

The production of milk in the support area represents about 77% of the total milk production 
in Finland. This relation has basically stayed the same over the period. Except some variation 
in  the  volumes  between  2000  and  2005  the  production  volume  has  decreased  by 
approximately 1.2%, though the changes differ between the support regions. 

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Table 4a – Milk production (1 000 t) in sub-regions, 2001–2005 

Aid area / 
quota period 

2000/2001 

2001/2002 

2002/2003 

2003/2004 

2004/2005 

2005/2006 

C1 

C2 

C2N 

C3 

C4 

527.5 

1 022.1 

105.4 

172.6 

23.0 

535.5 

1 047.4 

108.2 

177.1 

23.5 

521.0 

1 031.8 

107.5 

178.4 

23.3 

512.1 

1 026.5 

107.3 

174.4 

22.4 

501.1 

1 016.7 

103.1 

168.8 

20.6 

501.4 

1 032.1 

104.9 

170.5 

20.5 

Total 

1 850.6 

1 891.7 

1 862.1 

1 842.7 

1 810.4 

1 829.3 

Note: 

The  figures  are  the  total  milk  production  volume  in  the  Northern  areas  (incl.  production  without 
Nordic aid). 

Beef 

Also  in  relation  to  beef  do  the  Nordic  aid  regions  represent  about  77%  of  the  Finnish 
production.  Due  to  stronger  market  demand  the  production  volume  increased  in  2003  and 
2004. The support regions' share of beef production has changed slightly, though the changes 
differ  again  between  the  sub-regions.  It  should  be  noted  that  the  changes  in  milk  and  beef 
follows more or less each other implying a correlation between the productions. 

Table 4b – Beef production (1 000 t) in sub-regions, 2001–2005 

Aid area / year 

2001 

C1 

C2 

C2N 

C3 

C4 

Total 

19.8 

37.7 

3.7 

5.4 

0.6 

67.2 

Pig production 

2002 

19.9 

38.6 

3.6 

5.5 

0.5 

68.1 

2003 

20.2 

41.6 

3.9 

6.1 

0.6 

72.4 

2004 

19.6 

41.3 

3.7 

5.7 

0.6 

70.9 

2005 

18.2 

38.2 

3.6 

5.3 

0.6 

65.9 

The support area produces 43% of the Finnish pig meat. In 2000–2005 pig meat production in 
the  area  grew  by  about  22%,  but  its  share  in  pig  meat  production  in  the  whole  country  has 
stayed about the same.  

Table 4c – Pig production (1 000 t) in sub-regions, 2001–2005 

Aid area / year 

2001 

C1 

C2 

C2N 

C3 and C4 

Total 

47.9 

23.9 

1.2 

1.1 

74.1 

2002 

50.1 

25.7 

0.9 

1.0 

77.7 

2003 

53.5 

27.9 

1.1 

1.0 

83.5 

2004 

55.2 

28.7 

1.2 

1.0 

86.1 

2005 

57.9 

28.0 

1.2 

1.0 

88.1 

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3.2. 

Development of land use 

In  2005  the  utilised  agricultural  area  in  the  support  area  covered  by  the  Nordic  aid  scheme 
totalled to 1,185 million hectares, which is about 52% of the total utilised agricultural area in 
Finland. Of the agricultural land in the northern regions 39% is in area C1, 49% in area C2 
and 12% in the northernmost areas C2N-C4.  

In the whole support region the utilised agricultural area grew by 4.4%, or 50 400 hectares, in 
2000–2005 due to clearance of overgrown fields following expectations of the coming CAP 
reform. The area is still about 16% smaller than the maximum area laid down in Commission 
Decision 2002/404/EC. 

The use of agricultural land has continued, but some of the most remote arable fields in the 
support area are being excluded from production. There is no willingness to lease the land at 
any  price,  because  the  cost  of  cultivating  the  land  is  too  high  due  to  the  small  size  of  the 
parcels  and  long  distances.  The  average  trend  in  the  price  of  additional  land  has  been  quite 
moderate in the north, even if the prices may be rising more steeply than the average due to 
competition for land offered for sale or lease close to livestock farms.  

In 2005 44% of the UAA was under cereals, 40% was under grass, 6% was under other crops 
and  10%  set  aside.  Between  2000  and  2005  the  cereal  and  set-aside  area  increased  and  the 
area under grass decreased. This change was mainly caused by the fact that many farms quit 
livestock production while, especially in the southern parts of the support area, the production 
of  fodder  cereals  and  other  crops  was  continued  or  the  part  of  the  lands  were  leased  to 
expanding farms. 

3.3. 

Trends in the structure, productivity and production methods of agriculture 

In the 1990s the structural change of agriculture progressed rapidly in the regions covered by 
the  Nordic  aid  scheme.  The  trend  continued  in  the  early  2000s,  smaller  farms  quitting 
livestock  production  and  turning  into  part-time  crop  farming  or  leasing  their  lands  to  larger 
farms.  Leasing  of  arable  land  has  increased  in  the  whole  of  the  support  area,  and  in  2005 
about  35%  of  the  arable  area  of  farms  that  continued  their  production  was  leased.  About  a 
third  of  the  farms  quit  production  between  1995 and  2005  and  the  average  farm  size  in  the 
support region grew from 19 to 31 hectares. In 2005 there were 39 650 farms in the support 
area. The decrease has been slowest in support regions C2N and fastest in support region C3. 

Table 5a – Number of holdings in different sub-regions and in the whole country (2001–2005) 

Area / year 

2001 

2002 

2003 

2004 

2005 

change  
2001–2005 

% change 
2001–2005 

C1 

C2 

C2N 

C3 

C4 

18 347 

20 153 

2 073 

3 242 

734 

17 720 

19 713 

2 223 

3 163 

731 

17 264 

19 257 

2 152 

3 075 

710 

16 820 

18 877 

2 103 

2 972 

689 

16 281 

18 285 

1 999 

2 865 

666 

–2 066 

–1 868 

–74 

–377 

–68 

Finland 

77 320 

75 474 

73 714 

72 054 

69 517 

–7 803 

–11% 

–9% 

–4% 

–12% 

–9% 

–10% 

Since  2000  the  number  of  farms  having  over  100  hectares  has  more  than  doubled  and  their 
share of the total area has gone up from 6% to 13.6%. 

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Table 5b – Number and distribution of farms in the Nordic aid region, 1995, 2000 and 2005 

Distribution (%) and total 
number of farms in 
Nordic aid area 

Distribution (%) and number of farms 

Distribution (%) of land and average 
farm size (ha per farm) 

2005 

1995 

2000 

2005 

under 20 ha 

20–29 ha 

30–39 ha 

40–49 ha 

50–99 ha 

100–… ha 

1995 

62.1 

20.5 

9.6 

4.2 

3.3 

0.3 

2000 

48.6 

19..8 

12.8 

7.5 

10.1 

1.2 

44.2 

18 

12.3 

8.5 

14.1 

2.9 

Total / average 

58 115 

44 326 

39 649 

34.9 

25.9 

17.0 

9.7 

10.8 

1.8 

19.3 

20.6 

18.7 

16.9 

12.8 

25.1 

6.0 

26.2 

15.5 

14.3 

13.8 

12.2 

30.6 

13.6 

31.1 

The average herd size on dairy farms in the support area grew from 12 to 20 in 1995–2005. At 
the same time the share of the milk produced in farms with over 50 cows has gone up from 
0.3% to 8.5%. 

On  other  cattle  farms  the  average  number  of  animal  places  has  increased  correspondingly 
from 20 to 50. Almost one third of the other cattle farms have more than 50 bovine animals 
per farm while in 1995 their share was less than a tenth. 

Table  5c  –  Number  and  distribution  of  dairy  and  cattle  farms  in  Nordic  aid  area  in  1995, 
2000 and 2005 

Nordic aid areas 

Distribution (%) and number of farms 

Distribution (%), total and average 
number of animals 

1995 

2000 

2005 

1995 

2000 

2005 

Dairy farms 

under 10 cows/farm 

10–19 cows/farm 

20–29 cows/farm 

30–49 cows/farm 

50+ cows/farm 

35 

54.9 

9.2 

0.9 

0.1 

21.3 

50.2 

21.6 

6.2 

0.6 

15.9 

44.6 

24.8 

12.1 

2.5 

19.1 

61.4 

16.8 

2.4 

0.3 

8.7 

44.3 

31 

13.5 

2.5 

5.5 

33.1 

30.2 

22.7 

8.5 

Number of farms 

23 442 

16 422 

12 335 

288 456 

267 654 

240 645 

Average number of animals/farm 

Other cattle farms 

12.3 

16.3 

19.5 

under 10 bovines/farm 

10–19 bovines/farm 

20–29 bovines/farm 

30–49 bovines/farm 

50+ bovines/farm 

36.8 

27.3 

13.7 

13.3 

8.8 

24.8 

19.6 

13.5 

17.5 

24.6 

22.1 

18 

11.8 

16.9 

31.3 

8.9 

18.9 

16.2 

25 

31 

3.4 

8 

9.3 

19.3 

60 

2.2 

5.1 

5.8 

13.2 

73.8 

Number of farms 

5 436 

3 069 

2 760 

110 353 

108 805 

137 438 

Average number of animals/farm 

20.3 

35.5 

49.8 

In  2000–2005  the  share  of  farms  owned  by  farmers,  younger  than  40  years  has  decreased 
from 28% to 24%, but the average size of the farms owned by the young farmers was bigger 
and it has grown more than for older farmers.  

The farms in the support area invested (measured as gross investment expenditure) the most 
in  the  purchases  of  additional  land  (EUR 97.7  million),  followed  by  dairy  cattle  buildings 

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(EUR 75.8  million),  setting  up  farming  (EUR 57.0  million)  and  beef  production  units 
(EUR 27.5 million). 

Even if the traditional forms of agricultural production continue in the region, growth in the 
farm  size  has  led  to  the  adoption  of  production  technologies  and  methods  suited  to  larger 
farms, which will be reducing the costs in the long term. 

3.4. 

Income and profitability development of agriculture 

Because  of  the  unfavourable  development  of  the  ratio  between  the  market  return  and 
production  costs,  agriculture  in  the  Nordic  aid  regions  of  Finland  is  highly  dependent  on 
income  supports  paid  to  agriculture.  The  ratio  Nordic  aid/farm  net  value  added  (FNVA) 
varied between 0.4 and 0.5 for the period 2000–2006. 

The annual growth in the farm net value added per annual work unit (FNVA/AWU) was in 
average 1.8% in 2000–2004. During the same period the family farm income per family work 
unit (FFI/FWU) grew by 1.3% a year. 

In  2000–2004  the  family  farm  income  varied  considerably  in  the  different  parts  of  the 
northern region. In area C2 the average annual increase in the income was clearly smaller than 
in the other areas. One reason for this development in area C2 was the increase in the number 
of small cereal farms with low yields and high costs as farmers have been giving up livestock 
production.  

The  growth  in  family  farm  income  per  family  work  unit  is  mainly  due  to  structural 
development  in  agriculture  and  improved  production  efficiency.  Expanding  the  production 
and  improving  the  efficiency  have  been  the  one  among  the  means  for  family  farms  to 
maintain their incomes. The quite high investment aids have also encouraged to expanding the 
production and improving its efficiency.  

The increase of farm size and expansion of production is higher in the milk sector than in the 
beef sector. The development of producer prices for beef has been weak and increase in the 
costs  has  reduced  incomes  and  profitability  especially  towards  the  end  of  the  period 
concerned.  

Instead, on pig and cereal farms the benefits of scale are more clearly reflected in the income 
and profitability indicators, but on these farms, too, the average development of incomes and 
profitability has been decreasing towards the end of the period. 

3.5. 

Socio-economic impact development 

The role of the agricultural and food sector in the regional economies of the support area has 
been decreasing since 1995. In 2003 agriculture employed 61 150 persons and food industry 
13 900 persons in northern Finland. Between 1995 and 2003 the number of people employed 
in  agriculture  fell  by  more  than  25%,  while  the  number  of  people  employed  in  the  food 
industry stayed about the same. 

However,  in  the  Finnish  Nordic  aid  region,  and  especially  in  the  most  remote  parts  of  this, 
farmers represent a significant share of the rural population. The Nordic aid scheme is part of 
the measures taken by which an effort is being made to retain the population in northern and 
eastern regions. Long term northern aid has made a significant contribution to controlling the 
loss of the farming and rural population and alleviating the negative consequences of this. 

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3.6. 

State of the environment 

One aim of the Nordic aid system is that it shall positively influence the implementation of 
environmental protection and preservation by tying the disbursement of aid to conditions such 
as  the  use  of  arable  land  (good  farming  practices)  and  livestock  quantities  (maximum 
livestock density). Because several different operational programmes have an impact on the 
environment,  the  influence  of  any  individual  programme  is  difficult  to  separate  from  the 
whole. Agri-environmental measures under the Rural Development Policy apply to more than 
95% of the farms in the region and almost the same percentage of the arable area. 

The nitrogen and phosphorus indicators for the state of the environment in the area covered by 
the northern  aid scheme show  some improvement in  the  environmental  status.  Actions  with 
positive  impacts  on  the  environment  include  the  construction  of  additional  manure  storage 
capacity  and  reduced  use  of  artificial  fertilisers.  The  amount  of  manure  produced  in  cattle 
husbandry has decreased as the number of animals has fallen. 

3.7. 

Impact on the food chain 

The wholesale and  retail  trade,  processing and marketing situation of products belonging to 
the Nordic aid system remained fairly stable in the particular area during the period. Among 
food industry enterprises, the number of dairies and slaughterhouses purchasing raw materials 
from agriculture has fallen during the assessment period in the support area. 

The  northernmost  areas  can  be  somewhat  problematic  from  the  standpoint  of  processing 
enterprises  operating  nation-wide:  raw  material  volumes  obtainable  from  the  area  are  low 
compared to the overall volumes of such enterprises, transport costs are high and the markets 
are at a great distance. 

4. 

CONCLUSIONS 

This  report  gives  an  account  of  the  authorisations  granted  and  the  results  achieved.  It  was 
compiled  on  the  basis  of  data  supplied  by  the  Finnish  authorities  in  compliance  with 
Article 143(2) of the Act of Accession and is intended to be presented to the Council. Based on 
the report, main features are as follows: 

(1) 

(2) 

(3) 

Regarding most of the sectors receiving Nordic aid, permissible production levels for 
production  having  received  aid  or  aid  limits  in  total  were  not  exceeded  in  the 
assessment period. However, the production levels were occasionally exceeded in pig 
and poultry meat, milk and cereals. The amounts of aid and eligible units have been cut 
accordingly. 

The  controls  are  carried  out  by  the  Member  State  and  according  to  the  national 
authorities  no  significant  irregularities  were  found.  The  required  reports  have  been 
submitted to the Commission as laid down in the Act of Accession. 

The  objective  of  the  Nordic  aid  scheme  is  to  ensure  that  agricultural  activity  is 
maintained  in  the  region.  The  verification  whether  the  Nordic  Aid  has  achieved  this 
objective is difficult as there are other support schemes targeting agriculture that also 
apply  in  the  region.  The  scheme,  including  the  payments  and  individual  amounts  as 
well  as  the  designation  of  the  sub-regions,  has  never  been  verified  after  its 
introduction.  The  Commission  has  therefore  commissioned  a  study  to  obtain  a  more 

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detailed  picture  of  the  scheme  and  its  effectiveness,  efficiency  and  relevance  of  its 
implementation during 1995–2005. The study has also to be carried out in the light of 
the  reforms  of  the  common  agricultural  policy.  The  results  of  this  study  will  be 
available at autumn 2007 and will be used to further develop the Nordic aid scheme. 

On the basis of the information provided by the Finnish authorities, the Commission considers 
that  in  general  the  Finnish  authorities  have  applied  Commission  Decision  95/195/EC  and 
Commission Decision 2002/404/EC on aid to northern regions properly. 

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