Food firms need to hedge their bets globally

Global political sabre-rattling makes the world a difficult place to do business.

Food firms need to hedge their bets globally

The term global village was coined some 50 years ago to describe what was seen as a shrinking world where cultures would become more enmeshed, as airline travel made access between different parts of the globe a matter of hours rather than weeks or months, and technological advances started to make real time interaction a fact.

Today, it is difficult to visit any major world city without it appearing that your local main street had been transposed to the other side of the globe. It’s comforting in one way, but oh so boring in another. Businesses in Ireland and elsewhere also see the rest of the world as an opportunity to market their goods and services.

It was interesting to note a report by Cónall O Fatharta in this paper on the growth of Irish sales in China over the last few years. China is our sixth largest market overall for agri-food exports and our second-largest market for dairy products. Food and drink exports have trebled over the last three years and are now worth over €40m per year.

The largest market on the other hand remains the UK which accounts for 42% of food and drink exports, and the rest of Europe, 32%. Other main markets include the US, Middle East and Africa.

It says much about the success of Irish exporters, particularly of products such as food and drink. Accessing those markets is difficult and maintaining them is even more difficult. So hopefully, it all represents a ‘balanced portfolio’ from an Ireland Inc perspective.

Operating on the global stage is not easy and in recent years, it’s been made even more difficult by those who would use any advantage in their battles to get their way. The impact on trade is just collateral damage.

Over the last several months, we’ve seen Russian President, Vladimir Putin taking exception to criticism of his blatant support for ‘Russian’ separatists living in the eastern part of Ukraine and his annexation of the Crimea — and now his stated intention to dramatically increase the size of his navy based there.

Among his reactions to US and European sanctions was to find problems with aspects of the importation of certain fruits and vegetables from the EU and promptly stopped those imports. This impacted on Irish suppliers.

Europe is a major user of Russian gas, so became a hostage of the situation. Major countries such as Germany are major users of this gas and are particularly vulnerable, as is Poland.

It is very clear that any decision to place sanctions on Russia will result in the same or greater sanctions being made against European countries.

Ireland’s attitude to Putin’s retaliation was not unique. The message was clear. Please do nothing to upset Putin and ruin my sales. However, it was particularly pathetic to see countries like Germany doff its cap to a Russian bully. It does prove though the importance of hedging ones bets.

China may well be an enormous market of 1.2bn and with enormous opportunity. However, it would be a mistake to see China’s need for foreign food products as having greater priority in the minds of the Chinese leaders as having control over the sea all the way down to the Philippines, whilst barely missing Vietnam. There’s just potentially too much oil and gas in those seas. How would we or any other of its suppliers react to sanctions or even to criticism of its actions should it go a step too far, such as setting up shop on a Filipino island?

More power to those who have climbed the proverbial mountain and have succeeded in making sales to far- flung locations. However, we and they should never forget that there are also associated risks. Just like buying shares or investing money, it’s important to have a balanced portfolio.

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