‘The majority of people there support the co-operative, and if they found out we were criticising it, there might have been more complications.” Iceland’s buzziest director, Grímur Hákonarson, is talking about how he decided where to shoot his new film, The County. The shady agricultural co-operative it depicts was not completely fictional, he admits, so filming in Skagafjördur, the area concerned on the country’s north coast, didn’t seem prudent.

“It allowed me to concentrate on the art and not worry about being stabbed.” Surely it never would have got that bad? “No, no,” Hákonarson says. “It’s just a metaphor.”

Being a whistleblower isn’t a joking matter in a small society – The County makes that much clear. After her husband swerves off the road to his death, dairy farmer Inga (Arndís Egilsdóttir) is shocked to learn he worked as an informer for the co-operative that control all of business in the territory – threatening farmers, for example, if they think about selling produce to outside parties.

Grief-ravaged but newly awake, she goes on an Erin Brockovich-style crusade to bust open this monopoly. The film, according to Reykjavík Grapevine magazine, delivered a long overdue reality check: “It reflects a hard truth about Icelandic farmers and their fear of big, bad EU regulations, while they barely survive within the closed Icelandic system, which allows monopolies to ensure a handful of people are always getting richer.”

The film’s co-operative is loosely based on Kaupfélag Skagfirðinga, a company with holdings in many Icelandic businesses, including its main newspaper; it has recently faced legal action for its part in the country’s milk monopoly. Founded in 1889, it’s one of the remnants of a co-op system once established to share profits for farmers, before it turned plutocratic. “It’s supposed to be owned and controlled by the people. But they’re behaving as capitalists,” Hákonarson explains, on the phone from Reykjavík.

He originally planned to make The County in documentary form, but during initial scouting in Skagafjördur no one wanted to go on camera – so he went down the fiction route instead. The depiction of the co-op in the film, he says, is based on unofficial stories circulating about Kaupfélag Skagfirðinga. “If the film was about a bigger society, like the US or Russia, they probably would use violence. But in my film it’s only mental violence – threatening to take people’s farms.”

The 43-year-old’s last film was the faintly biblical and enjoyably sardonic Rams, a parable about two brothers feuding over their stud sheep; it was deservedly slapped with the Un Certain Regard rosette at Cannes in 2015. The County, broodingly shot but ultimately uplifting, makes him the poet laureate of Icelandic rural life. The country’s otherworldly landscapes provide frequent gnarly wallpaper for Hollywood blockbusters, but even many Icelanders are unacquainted with what’s actually going on for people out there.

“There’s a division between Reykjavík and the surrounding area, and the countryside,” says Hákonarson. “City people will maybe talk badly about people in the countryside and vice versa.” For a Reykvíkingur, he has an uncommon empathy for the sticks: his grandparents were farmers, and his parents sent him to work on cattle and sheep farms as a teenager during the summer.

Lead actor Egilsdóttir, impressively harrowed in the film, did a week’s worth of farming bootcamp to appear believable. For an early scene, she had to deliver a calf twice, because she wasn’t convincing enough first time round. “She was not spiritually prepared for it,” says Hákonarson. “She hadn’t done it before. So when she pulled the cow out, she wasn’t very convincing because she was a bit scared.”

He wanted a female lead to represent a shift in formerly “male-dominated” Icelandic agriculture, with more women running farms. Picking at the co-operative issue, The Country slots neatly into the recent crop of films – such as The Levelling, Dark River and God’s Own Country – spelling out the difficult realities of 21st-century farming in Europe, a simmering political consciousness below it all.

Rams wore its ideology more lightly, but Hákonarson insists he is a fundamentally political film-maker. He was an activist in his 20s, arrested twice for street violence during protests against the Keflavik Nato base and the Iraq war. He channelled this idealism into cinema, taking a step up from the DIY splatter films he shot with friends as a teenager to “movies with something to say, a message”. He battled to make several documentaries covering, among other things, a guitarist selling his soul to make commercial pop, gay wrestlers, and the birth of Icelandic environmentalism. However his feature debut – 2010’s Summerland, about the country’s belief in elves – was a commercial flop.

The success of Rams changed everything for him, says Hákonarson, who managed to get the audience for its Cannes premiere to baa like sheep en masse. An Australian remake, starring keen farmer Sam Neill, is on the way. Doors have opened elsewhere in cinema: he is currently working on an American-set feature that he won’t reveal anything about other than it’s “urban”. But on the home front, not everyone was happy for Hákonarson. “Film-making is a small community here. There is a competition and a jealousy. I felt that,” he says, guardedly.

Isn’t the Icelandic creative scene supposed to be tight-knit? “That’s the official version, but the reality is different. When you’re from a country like Iceland, it’s a bit different to being a film-maker from Germany. Because you’re from an exotic country. So when you’re talking to the foreign press, you’re always giving the best version of yourself and of the film industry. And I’m telling you it is not like that. It’s just at the surface.”

He won’t let me in any further to the backstabbing heart of darkness that is Icelandic cinema by naming any names. It’s not exactly the same thing, of course, but there is a faint echo of the omertà out in the Icelandic pastures. Maybe the circumspection and modesty Hákonarson shows throughout our interview is the social cost of living and working in a small country – and what can sometimes inhibit progress.

In The County, there is no easy resolution; it works the same way in real life. Attempts to create independent farming ventures in Skagafjördur some 25 years ago were nipped in the bud by the co-operative. There was talk that Kaupfélag Skagfirðinga might use its weight to quash the film’s funding, but it never happened – nor has it responded to the film. The County prompted a brief resurgence of debate on social media, and the odd newspaper article, about how the area operates. But the fuss has died down, replaced by the background noise over global warming – or, lately, shock over the coronavirus.

“I was disappointed, yes,” says Hakonarson. “But I never expected the film to make any change in Skagafjördur. It would have been too much to ask that it start a revolution.”

• The County is available on Curzon Home Cinema.