Total profit for the five primary agricultural sectors in Iceland increased by 24% in 2022, rising to 1.9 billion ISK from 1.5 billion in 2021 and with improved results in all regions except the Northwest and Westfjords. The increase in profit was entirely due to sheep farming and dairy farms but other cattle farms and fur farming reported losses and profits stayed unchanged in growing of crops and plant propagation.
Despite overall growth in revenue there were signs of negative effects of inflation and rising interest rates as goods and raw material costs increased significantly and financial expenses rose by 38%. Furthermore, the number of farms continued to decline and since 2008 their number has decreased by 434 or 15%.
Increased profits in dairy and sheep farming
Three of the five primary agricultural sectors earned a profit in 2022. Dairy farms reported a profit of 1.2 billion ISK in 2022 which was a rise of 44% from 2021 when they earned 827 million ISK. Sheep farms earned 539 million ISK compared with 438 million the year before (23% increase).
On the other hand, other cattle farms reported a loss for the fifth year in a row and fur farming had negative results for the 8th time in the last 10 years. In growing of crops and plant propagation the overall result was unchanged (profit of 308 million ISK) but its subsectors had mixed results. For example, there was a record profit in growing of flowers (164 million ISK) and growing of fruit bearing vegetables (192 million ISK) but record loss in growing of other crops (-137 million ISK).
Total revenue increased by the most since 2011
Total revenue in agriculture increased by 11% in 2022 to 56.9 billion ISK which was still only 3% beyond the annual rate of inflation which was 8.3% for the year. Revenues grew in all sectors but fur farming (-19%) with the most proportional increase happening in other cattle farming (20%). Sheep and dairy farming were nonetheless the main sources of revenue in agriculture with an annual growth of roughly 11% in 2022.
Dairy farming was the largest agricultural sector in Iceland with revenue of 30.4 billion ISK in 2022 compared with 27.3 billion in 2021 while sheep farming followed suit with revenue of 15.3 billion ISK compared with 13.7 billion in the previous year. Despite the revenue growth for agriculture as a whole the total revenue was only 4% above the average of the years 2008 to 2021 and still below the top of 58.7 billion ISK reached in 2016.
Rising costs
Total operating expenses increased in all sectors and by 9% overall (from 46.3 billion ISK in 2021 to 50.4 billion in 2022). In percentage terms the greatest increase was in other cattle farming and fur farming which largely explains the loss for the year in both those sectors. Of specific cost items there were most notable significant increases in goods and raw material cost and financial expenses. Goods and raw material costs for all five sectors in agriculture amounted to a total of 15.4 billion ISK in 2022 (16% increase from the year earlier) of which 3.6 billion ISK were due to sheep farming (23% increase) and 9.4 billion to dairy farms (18% increase). Additionally, financial expenses rose by 38% from 3.3 billion ISK in 2021 to 4.6 billion in 2022.
In total, the effects of rising expenses were felt in all sectors of agriculture except growing of crops and plant propagation where costs grew in tandem with inflation. Total operating expenses for all sectors in agriculture as a whole have never been higher but as mentioned before the revenue in 2022 was still below its highest level. Thus, earnings in agriculture have been depressed in recent years and continued to be so in 2022.
The number of farms continues to decline
The number of farms declined in all sectors of agriculture in 2022. In all, the number of entities dropped by 98 or 4% in the year, totalling 2.513 compared with 2.611 a year earlier. Sheep farms experienced the greatest decline in number or 47 (3%) and since 2008 the number of entities in the subsector has decreased by 17% (306). Dairy farms were fewer by 34 (5%) in 2022 compared with 2021 and in total there were 668 operating in 2022, a decline of 91 (12%) since 2008.
The decline in number of farms was spread relatively evenly across regions. In the Southern part of the country, where most farms operate, the number declined most or by 33 (5.4%). In total, there were 579 farms operating in that part of the country compared with 612 in 2021. Proportionally, the number of farms declined the least in the Northwest or by 2.2%. Since 2008 the overall number of farms and entities in agriculture has declined by 15% or 434.
Improved financial position
The balance sheet of agriculture improved year over year with total equity increasing by 24% due to rising profits and mostly unchanged debt balance. Equity increased in all sectors except fur farming with dairy farms and growing of crops and plant propagation being the clear winners, growing equity by 46% and 41% respectively. Total equity in fur farming has been negative for five years in a row where in 2022 assets decreased by 8% while liabilities increased by 9% as the industry reported a loss.
In total, assets of the five main agricultural sectors grew by 5% to be 86.1 billion ISK in 2022 compared with 82 billion previously. Roughly 60 billion ISK were fixed assets. On the other hand, liabilities increased by only 2% resulting in a significant improvement to the balance sheet and a lowering of the debt-to-assets ratio from 88% in 2021 to 86% in 2022. Thus, in total the main sectors in agriculture have never been less indebted in the period from 2008 to 2022.
About the data
The data and methodology behind the income and balance sheet for agriculture were revised prior to this publication. Overall, the changes were minimal. The number of entities increased in most years but the general trend remained unchanged and other numbers stayed within the same range as before according to the previous methodology.
The new methodology removed all approximations and focused entirely on presenting the data “as is”. For this reason, a new category (“Unspecified”) was introduced in the sorted-by-size financial statements of dairy farms, sheep farms and other cattle farms that includes all farms that do not report the number of livestock.
Revenue: Breakdown of revenue was discontinued in 2017 due to cessation of the RSK 1.09 tax statement in 2016 that detailed revenue segments.
Classification: Farms with mixed operations are classified according to their revenue, e.g. if the majority of a farm’s revenue comes from sheep farming it is considered to be a sheep farm even though it has significant dairy farming or cattle operations as well.
Number of farms: Data on the number of farms includes all types of tax-filing entities operating in the sector. The data can include entities that had no revenue in the year and only assets or liabilities.