Practical post-quota planning vital for the sector

The agri-food industry in Ireland has traditionally been a cornerstone of our economy.

In recent years, as agri-food exports have increased there is more widespread recognition that this sector is built on strong market fundamentals.

The sector has performed well throughout the economic downturn maintaining, on average, a strong cashflow performance. As a banking partner to the sector over many decades, AIB has always been convinced of the importance and sustainability of the sector. The medium-to-long-term outlook for the sector is positive.

FAO/OECD forecast that prices for most commodities will average higher in both nominal and real terms in the period 2012 to 2020 than in the previous decade, underpinned by strong demand and tighter global supply.

Ireland is possibly unique in having an agreed national strategic plan for the development of the sector: ‘Food Harvest 2020’. The plan is ambitious and it details a clear direction and targets for the industry and the individual production sectors. Among others, it recognises the key opportunity that the removal of the milk-quota system in 2015 presents. It is the first real opportunity for the Irish dairy sector to expand since quotas were introduced. There will of course be challenges ahead, including continued commodity price volatility, CAP reform, land mobility and succession. It is therefore correct and important that we plan for the development of the industry both at national and individual farm level.

We are seeing a continued strong demand for credit from farmers for ongoing investment in farm development, upgrading of machinery and equipment and also for farm expansion. Agri-lending makes up a significant proportion of our new business lending in the SME sector. We would encourage any farmer seeking finance to talk to their local AIB branch about their proposal. We have a team of six regional agri advisors who support our branches and business centres in understanding farming.

We have always taken a strategic view of the sector, recognising that it is a cyclical business in which there are good years and bad. There have been difficult and challenging periods in farming which have put pressure on particular sectors and individual farmers; 2012 was one such year. We would encourage customers experiencing cashflow difficulty to make early contact with the bank to identify an appropriate solution.

As we plan ahead, it is important that we take a multi-annual view of farming, looking at the average performance as opposed to very good or bad years.

Ireland is well positioned to take advantage of the opportunities that exist in agriculture and food production. Our grass-based production system is a real competitive advantage in the production of meat and dairy products.

In comparison to our European counterparts farming in general is relatively lowly geared, which is a strength that farmers should seek to maintain. As the industry moves forward, we need to be cautious in our approach, continually seeking to develop, but in a practical and planned manner. We must be mindful of maintaining our core strengths and increasing our efficiency and competitiveness, managing our cost base and remaining agile enough to withstand price and income volatility.

AIB recognises the strong positive outlook for the agri-food sector. The sector has always been a very significant part of our business. It remains our strategy to support the continued growth and development of the agri-food industry.

* Anne Finnegan is agri strategy manager at AIB