Sweden enjoys a highly productive agricultural sector that enables the country to be nearly self-sufficient in grains, meat and dairy products. The average farm size is relatively small, at about 30 hectares, but is highly mechanized. Sweden has a strong network of farmer cooperatives, which are active in marketing and processing agricultural output.
Agricultural policy. In July 1991, Sweden began to implement agricultural reforms approved in 1990 to move toward a more market-orientated system. The reforms, which are being phased in over five years, were designed to dismantle programs that had resulted in high farm prices and production surpluses.
Major reasons for the policy change included a desire to bring Sweden's system into conformance with the goals of the General Agreement on Tariffs and Trade negotiations and to reduce high foods costs. In 1989, food expenditures accounted for 17% of total consumer expenses, but that figure had dropped to about 15% by 1992.
Another reason for reform was to align Sweden's programs with the European Union's Common Agricultural Policy in preparation for E.U. membership. The reform's first steps included reducing import levies, cutting the value-added tax on food and removing some export subsidies.
In addition, Sweden reduced redemption prices for grains, which are the price levels at which the Grain Marketing Board will buy grain offered by producers. Although the board typically purchases only small amounts of grain, the redemption prices function as a floor for market prices.
Other measures included the introduction of a five-year set-aside program and an area-based compensation program similar to the one contained in the CAP.
On Jan. 1, Sweden formally became a member of the E.U. In general, support levels for Swedish producers under the CAP will be higher than under the previous Swedish reforms.
For example, area compensation under the Swedish program was Swedish kronor 900 per ha, but payments under the CAP could be as much as Swedish kronor 2,500 per ha, depending on yield. In addition, Swedish farmers are eligible to receive agro-environmental aid, nordic or alpine aid and structural support.
Because Swedish grain farming under the CAP is expected to become more profitable than it was under the national programs, some analysts predict that grain production will increase. In addition, oilseed support under the CAP will be smaller than under the old national programs, which could encourage farmers to switch to grains.
Still, other observers expect production to decline, based on a possible loss of export markets. Sweden's location and correspondingly higher freight costs compared with other E.U. exporters could leave the country unable to compete for third-country E.U. export licenses; for example, demand for imported barley in North Africa is more likely to be met by a closer E.U. exporter. Sweden's logistical advantage is limited to trade with Russia and the Baltics.
Although exports do not account for a large percentage of Sweden's total grain disappearance, they helped in the past to absorb production surpluses. Without export outlets, Swedish grain production would need to decline to avoid the build-up of surplus stocks.
The future of Sweden's oats exports is another unknown. The E.U. has no intervention program for oats, and the E.U. agreed to permit Sweden to offer export subsidies. However, under E.U. regulations, Sweden's largest export market, the U.S., will not be eligible to receive these subsidies.
Flour milling. Swedish flour milling is highly competitive and has consolidated considerably in the past 40 years. Annual per capita flour consumption in 1994 was about 56 kilograms, down from 60 kg in 1991.
Currently, nine companies operating 14 large mills are the predominant suppliers of flour, and the mills generally have an annual capacity of 10,000 tonnes or more, wheat equivalent. A number of small, rural mills also are in operation, but they account for only a minimal percentage of total flour production.
Of the major mills, some 75% of milling capacity is integrated with bakers and other flour processors and 15% are integrated only with bakers. The remainder are not integrated.
In the past few years, the baking industry has become more industrialized. Household flour consumption and use by small bakers have declined as a percentage of total consumption.
The milling industry is highly labor efficient. Spurred by high labor costs, most mills have become computerized, and many require little or no human supervision.
In the 12 months from December 1993 through November 1994, wheat grind in Sweden totaled 621,000 tonnes; that compares with 547,000 tonnes in 1991. Flour production in the 1993-94 period was about 500,000 tonnes, compared with 450,000 in 1991, implying an extraction of rate of 81% to 82%.
Typically, more than 90% of Sweden's flour production is consumed domestically, although in the December 1993-November 1994 period, Sweden exported 71,000 tonnes of flour, or about 14% of production. Flour imports generally are minimal; in the 1993-94 period, they totaled a mere 1,800 tonnes.
The future of Swedish flour milling following E.U. accession is unclear. On the one hand, Swedish mills now must compete with the major export mills on the continent, which may seek cross border trade to enter Sweden's domestic market. And as with grain, Swedish flour may be less competitive in third-country export markets.
On the other hand, the Swedish milling industry's efficiency should place it in a good competitive position relative to other E.U. mills. The country's somewhat isolated location also may tend discourage cross border trade within the E.U.
Some observers think long-term changes in Sweden's flour milling industry will be stimulated more from changing food habits and distribution systems than from cross border trade related to E.U. accession.
Feed industry. More than 90% of Sweden's barley and oats crops are consumed for feed each year, and most is used on the farm where produced. Commercial sales of barley and oats to farmers for feed generally total about 300,000 tonnes a year.
Mixed feed production typcially reaches about 1.9 million to 2 million tonnes annually. The exception was the 1992-93 marketing year, when a poor grain harvest forced farmers to turn to the commercial feed market. In that year, mixed feed production was estimated to have reached 2.3 million tonnes.
Grains generally comprise 40% to 50% of total mixed feed, with vegetable and animal protein ingredients accounting for about 24%.