Agri-food sector keeps making a strong contribution to growth

During the years of excess in the Irish economy in the post-2000 period, I always had a strong sense that the agri-food sector, ranging from primary production to food manufacturing, never got the respect it deserved and was instead regarded as irrelevant and unimportant by many people.

Property development, rampant consumerism, and banking excesses were regarded as the only game in town and, accordingly, received lots of support and attention.

This was a big mistake as the agri-food sector is a high value-added indigenous industry with a very strong regional footprint.

More importantly, it is an industry Ireland is actually good at and has some semblance of competitive advantage.

When construction, banking, and the mad excesses of the Irish consumer were no more and the overall economy collapsed, those looking for salvation latched on to the agri-food sector.

Suddenly, commentators and others who would not know the difference between a plough and a harrow jumped on the bandwagon of our most traditional industry and suddenly farming and food production became sexy, and rightly so.

The Irish economy is now back in strong recovery mode and all sectors are starting to make a strong contribution to growth.

However, the role that the agri-food sector played in keeping the economy, and particularly the rural economy, afloat should not be underestimated.

It was a beacon of light in an otherwise depressing landscape.

This week, Bord Bia published its annual report on food and drink exports for the year just gone and it makes for positive reading.

In 2015, exports of food and drink increased by 3.4% to reach a record level of more than €10.8bn.

Since 2009, exports from the sector have grown by a cumulative 51%.

This is impressive.

While the export growth last year is well behind the growth rate in overall merchandise exports, the performance has to be judged in the context of the global environment in which the sector operated.

Commodity prices fell heavily last year. Global food commodity prices fell by 19%, with dairy prices down by a massive 28%.

This decline in food commodity prices largely reflects the sharp slowdown in demand from China; massive over production, particularly in the dairy sector; difficulties in many emerging economies; and the strength of the dollar.

The loss of the Russian market was also significant for EU exports in general. Despite these negatives, the sector in general expanded by 3.4% and the value of dairy exports rose by an impressive 4.3%.

The weakness of the euro, particularly against sterling, was very helpful for Ireland’s food exporters.

The euro fell by 10% against sterling during 2015, helping deliver growth of 7% in the value of exports to the UK.

That market accounted for 41% of total exports last year.

Last year presented significant challenges for the Irish agri-food sector, which it coped with admirably.

However, there is no doubt but that 2016 will provide even more challenges.

Global equity markets are in serious trouble at the moment, largely driven by the ongoing decline in the Chinese economy and extreme difficulties in many other emerging markets.

This will, undoubtedly, damage overall global growth.

This, in turn, is likely to result in continued downward pressure on all commodity prices, including food prices.

The Russian market will also remain closed.

Apart from these concerns, the early days of 2016 are already posing significant difficulties for Ireland’s export prospects to the very important UK market.

Sterling has already shed more than 5% of its value against the euro, amid the very worrying global economic and financial turmoil that has characterised the past couple of weeks.

A further challenge for sterling and, indeed, in Ireland’s ability to sell in the UK could be presented by the ‘Brexit’ referendum.

Any possibility of UK exit will likely keep sterling in a state of extreme nervousness, while an actual exit could have profound longer-term implications for Ireland’s trade with the UK.


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