Hoppa yfir valmynd

Ræða eða grein fyrrum ráðherra

12. desember 2000 MatvælaráðuneytiðGuðni Ágústsson, landbúnaðarráðherra 1999-2007

Ræða á fundi landbúnaðarráðherra Norðurlanda og Eystrasaltsríkja, Kaupmannahöfn, 11-12.12.2000

Nordic-Baltic Meeting of Ministers of Agriculture and Forestry
Copenhagen, 11-12 December 2000

Priorities of Icelandic agriculture, forestry and rural development

Mr. Gudni Agustsson, Minister of Agriculture, Republic of Iceland



I would like to begin by welcoming this opportunity to meet fellow Ministers from the Nordic and Baltic countries with a view to strengthening our friendship and cooperation in the fields of agriculture and forestry. I similarly wish to express my gratitude to the Government of Denmark for hosting this important event.

The promotion of mutual understanding and cooperation in our region is made all the more valuable by the fact that the international environment in which our agricultural sectors operate has an ever-increasing impact on their development. This certainly applies to a country so historically isolated as Iceland. Factors such as geographical remoteness and the absence of animal and plant diseases common in most other countries have contributed to the pursuit of food security through self-sufficiency, a goal attained with respect to all animal products. Scientifically-backed sanitary regulations remain strict with a view to maintaining the appropriate level of protection from disease, but imports of agricultural products still constitute about half of the domestic consumption in calorific terms.

As a high-cost, low-potential activity, agricultural production in Iceland has been largely dependent on direct and indirect government support which ranks among the highest in the OECD. This is dictated by factors such as the harsh climate, difficult topography and low population density. The sector has nevertheless undergone a process of structural reform in recent years, not least in light of commitments undertaken under the WTO Agreement on Agriculture and the EEA Agreement.

The development of the EEA and relations with the European Union may play a major role in determining the future agricultural outlook, although no significant shifts in Iceland's policy are on the horizon.

But what is certain is that the continuation of the reform process under the WTO and the closer integration of agriculture into the multilateral trading system will result in increased market access opportunities and hence competition with foreign producers, parallel to further reductions in domestic support and greater rigour in the disciplines it is subjected to. Increasing efficiency, promoting rationalization and preparing domestic producers for greater competition from abroad are priority objectives in this context.

While world market competitiveness may prove an elusive goal, the key to our success in adapting to these changes lies in the quality and wholesomeness of Icelandic agricultural products and enhancement of our pure nature and clean environment. The promotion of education, new technologies, research and development are vital ingredients in this process.

The Icelandic economy is based mainly on the exploitation of its renewable natural resources: geothermal and hydroelectric energy, fishing grounds and natural amenities. The fishing industry has remained the backbone of the economy, while the share of agriculture has progressively declined.

A century ago, an estimated 73% of the population was engaged in agriculture in rural Iceland. This percentage had fallen to 32% in 1940, 8% in 1980 and presently stands at a mere 4%. Rural depopulation and migration to the capital area remain sources of serious concern and these can partly be addressed through appropriate agriculture policies, e.g. diversification of the rural economy and farmers' activities in particular. Government policy is to maintain the multifunctional role of agriculture and safeguard the provision of the public goods deriving therefrom.

The agriculture sector now contributes an estimated 2% to GDP, down from some 3% in 1990 and 5% in 1980. Assistance to agriculture is the equivalent of some 1.5% of GDP. Less than 4,000 farms exist in Iceland.

This has to be seen against the backdrop that only about a fifth of the total land area of Iceland is suitable for fodder production and the raising of livestock. About 6% of this area is presently under cultivation, with the remainder either devoted to the raising of livestock or left undeveloped. The main agricultural activities are cattle and sheep farming, which account for about two-thirds of the agricultural output by value. The principal crops are hay and potatoes. Abundant geothermal energy has promoted hothouse cultivation of various fruit, flowers, vegetables and other plants.

The main features of the current agricultural policy in Iceland are laid out in Act no. 99/1993 on the production, pricing and sale of agricultural products. This legislation establishes official objectives for Iceland}s agricultural policy and provides the general policy framework for Icelandic agriculture and its regulation. The main objectives are to:

a) promote structural adjustment and increase efficiency in agricultural production and processing industries for the benefit of producers and consumers;

b) ensure that the level of production of agricultural products will be as close as possible to domestic demand and to guarantee at all times sufficient supply of agricultural products;

c) ensure that export opportunities for agricultural products will be utilized to the extent that is considered feasible;

d) ensure that the income of farmers will be equitable with the earnings of other comparable occupations;

e) utilize domestic inputs to the extent possible in agricultural production, with respect to security of production and employment;

f) facilitate equality between producers with respect to output prices and access to markets;

g) integrate environmental issues with agricultural policies.

The desire to promote greater efficiency, rationalization and market orientation is further elaborated in the two agreements between the Government and the Farmers' Association as concerns dairy and sheep products. These agreements provide producers with a stable and predictable operating environment through 2005 and 2007, respectively, a period we must use wisely to chart the way ahead.

The Government sets milk prices both at the producer and the wholesale level, while supply controls include production quotas. These quotas are now freely transferable, thus promoting more efficient production while facilitating retirement of those producers that so wish. Direct support payments are based on output with a linkage to production.


The dairy agreement of 1998 aims to

a) secure an environment for the production and processing of dairy products which leads to increased proficiency;

b) increase potential profit in dairy production to encourage vital recruitment and a regular investment renewal;

c) utilize to its fullest the operating environment for dairy production on the domestic market and other markets considered profitable, and to retain the stability already achieved between production and demand.

While implementation of the agreement has proceeded in accordance with expectations, there is still a concern that fundamental constraints will hinder the ability of Icelandic dairy producers to effectively compete in future with foreign imports. One such possible constraint is the native dairy cattle breed, which is smaller and less productive than those favoured by dairy-exporting countries. A limited experiment involving the importation of selected embryos from Norwegian NRF-cattle to be fostered at a quarantine facility in Iceland was recently permitted by the Ministry of Agriculture. A special research programme has been designed to provide policy-makers with a sound basis to make an informed decision within the next decade as to whether possible productivity and efficiency gains warrant such breeding on a general scale.

With respect to sheepmeat production, government policies have aimed to decouple direct payments from the level of production and encourage retirement to promote efficiency. A new agreement is to enter into force on 1 January 2001. It aims to

a) strengthen sheep farming as a sector of the economy and to improve profits to sheep farmers;

b) increase rationalization of sheep farming methods;

c) ensure that sheep farming is carried out in consideration of environmental protection, land quality and desirable utilization of land;

d) maintain a balance between production and sales of sheepmeat;

e) increase the level of professionalism, knowledge and development in sheep farming.

These objectives are i.a. to be reached by directing Government support more strongly toward quality control of production, strengthening research, training, instruction and development of the field and providing assistance to those sheep farmers who wish to cease production. For the purpose of rationalization the Government has embarked on the purchase of support entitlements from retiring producers. The Agreement also envisages the free transfer of such support entitlements between rightholders to promote retirement and efficiency gains.

As much emphasis is being devoted to efficiency and rationalization, no less is being given to a range of non-trade concerns such as food safety and quality, animal welfare, environmental protection and resource sustainability, and regional development.

With respect to food safety and quality, great care is taken to ensure that the positive sanitary situation remains unchanged through strict import regulations that comply with Iceland}s international obligations. Domestic production takes place against the very highest quality standards to safeguard public health and consumer welfare. Animal welfare plays an important part throughout the production process and no antibiotics or growth-promoting substances are permitted in feed. Iceland banned the use of meat and bone meal in ruminant feed over two decades ago. Domestically-produced fish meal is an important source of protein in feed. The implications for Icelandic agriculture and fishmeal producers of EU regulations in response to the threat of BSE and dioxin are a source of serious concern, but our hope is that science and reason will prevail.

Land conservation and rehabilitation is a priority task for Iceland, given the extensive deforestation, desertification and soil erosion that has occurred since settlement. This is indeed the country's greatest ecological problem. Government policy is that all Icelandic agriculture should meet the requirements of sustainable development. Significant steps have been taken in the last few years towards this objective. One can name that a comprehensive survey and mapping of soil erosion has been completed, paving the way for improved control over grazing and sustainable land use and ambitious afforestation and revegetation programmes have been greatly strengthened, partly in an effort to sequestrate carbon dioxide from the atmosphere to counter global warming.

Participation in farm afforestation increases farmers' awareness of their own land use practices in general, thereby promoting sustainable development. An increasing number of farmers are engaged in afforestation and land conservation projects, parallel to a reduction in the number engaged in traditional production. These projects have a significant positive impact on rural development. Some regional afforestation projects have timber production as a primary goal.

Rural and farm tourism has grown significantly in recent years and has proven to be an important source of income to many a farmer, sometimes surpassing the supplemental to the central. Fish farming represents another important opportunity to diversify the rural economy, and indeed that of the nation as a whole. In spite of negative past experiences, conditions are generally thought to be favourable and there is at present great interest in rearing Norwegian salmon in marine cages in several of Iceland's fjords considered ideal for this type of activity. Legislation must provide the necessary rigour and discipline for any activity of this nature to be carried out in safety and in full consideration of the environment, not least the possible effects on the wild Icelandic salmon stock. No decision has yet been taken to license proposed projects, but necessary amendments to the legal framework have been submitted to Parliament.

To conclude, we have full faith in our capacity to meet the challenges and seize the opportunities confronting Icelandic agriculture. We thank you for providing us with this occasion to share our thoughts with you and look forward to our cooperation in the years to come.


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