Anyone trying to understand the structure and potential of the Irish food industry has a challenge.
Ireland is a producer and significant exporter of food and beverage on the world stage and, at the same time, it is home to a group of globally successful agri-food and beverage companies that have operations spread across the world.
Disentangling these two threads and debating their futures requires plenty of data.
It is one thing to advocate a strategy that boosts physical output and exports of food and drink from the island of Ireland.
It is another to discuss how we should foster the development of a cluster of agri-food companies that are based in Ireland but thrive around the world.
Fortunately, Bord Bia addresses one of these issues with a finely produced and highly informative annual publication that I would encourage anyone who cares about Irish food and drink to study carefully.
The report, ‘2015-16 Exports and Performance’, effectively explains the scale and component parts of the food and drink industry in Ireland, together with detailed explanations of where that produce is sold.
Imagine the entire Irish food and drink sector in Ireland as a single company.
Bord Bia’s report is the equivalent of an annual review that provides a snapshot of that sector. Its data is focused on exports which account for the vast bulk of production given the relatively small domestic population.
First, almost €11bn of food and drink was exported from Ireland last year, 3% above 2014 levels.
Dairy products accounted for 30% of the overall exports, with beef generating 22%, prepared foods 17% and beverages 12%.
Those four sectors deliver 81% of all food and drink exports.
Regarding exports, the UK remains a core market for the Irish food and beverage industry and it bought 41%, or €4.4bn, of total exports last year.
Other EU markets took 31%, with Holland on €700m possibly including trans-shipment volume, and Germany on €600m being the dominant geographies.
Important markets outside Europe include North America on €900m and China, where exports rose 16% in 2015.
Taking these big picture, we can consider what the challenges and opportunities might be for 2016.
The first red flag on my dashboard is sterling.
It proved to be a huge winner for Ireland over the past three years as it shifted from 1.15c to 1.40c.
In just two weeks, that trend has reversed, with sterling dropping 8% against the euro.
If that persists, possibly aggravated by ‘Brexit’ concerns and poor UK data, it will make it more difficult for the exporters of €4.4bn of food into Britain.
The second big theme is dramatically weaker commodity markets.
Oil on its own would, in fact, be a positive for Ireland as we are net importers of energy. However, the collapse in oil prices recently has been triggered by rising concerns over the fate of developing markets.
Currencies in South Africa, China, and Brazil have been in freefall as this ugly scenario has unfolded.
Emerging markets are an important buyer of agricultural commodities and particularly milk.
So, too, are oil revenue-dependent states such as Nigeria and the Gulf states.
If these are troubled during 2016, it could delay any recovery in commodity milk prices.
Last year, Irish farmers did not experience real price weakness until the peak milk season had passed and volume grew materially to offset lower market returns.
This year, those low market prices could persist for longer that we all like.
The hurdles outlined above should not tarnish what is a remarkably dynamic and growing industry segment within the overall economy.
Instead, they should be seen as part of the ebb and flow that defines free markets and within which primary producers and processors must shape their businesses and indebtedness to manage volatility which we have not experienced for a number of years.
I suspect a bout of further consolidation and scaling at farm and factory level will develop if the trends evident in early 2016 continue.
Joe Gill is director of corporate broking at Goodbody. His views are personal.
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