From boat building to farming, all together in the bio-economy

In 2012, 279 aquaculture businesses, mostly along the west coast, employed 956 people and produced 36,000 tonnes of fish, of which 22,000 tonnes were shellfish.

Food beverages and tobacco sector second only to pharmaceutical for value added in manufacturing

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How important are agriculture, fishing, forestry and “the marine” to the Irish economy.

Not at all important. according to some figures; but other figures indicate that they are vital.

Let’s start with the discouraging bit. Agriculture, fisheries and forestry accounted for only 2.5% of the income generated in the economy in 2010, while food production and processing together accounted for about 4.5%, giving a total of 7% for the sector.

Farming as a proportion of the total has been in decline for decades. It is a mark of every developing economy that the share of agriculture declines.

The direct contribution of these sectors to employment was somewhat larger, at 7.7%.

Of this employment, 55% was in farming, 35% in food processing, 4% in drinks processing, 3% in wood processing, 2% in forestry, and 1% in fishing.

Agricultural output has grown by 1.9% per annum from 2008 to 2013, while the national income had declined by 2% per annum over the same period. But in the past two years, things have begun to change again, with a projected increase of 5% in the overall national income this year, on top of an increase of more than 3% last year.

Of the value added in manufacturing industry in 2013, “food beverages and tobacco” accounted for just short of 25% of the total, and the sector is second only to the pharmaceutical industry in that regard.

The value generated in the food and drink sector increased by 30% during the recession years since 2008, while the overall value added in manufacturing declined by 4%.

Now let’s look at exports.

Agriculture and food account for about 40% of net foreign earnings.

In 2008 (and it would not have changed since), every €100 of exports from the sector generated €52 in net foreign earnings. In contrast, every €100 of exports from the “non-bio” sector generated only €19 of net foreign earnings.

This difference arises because agriculture and food have a low import requirement, are mostly home-owned, with no repatriation of profits abroad, and have much higher purchases of goods and services from the local economy.

A related issue which appears to disadvantage agriculture and food, compared with multinational investments, is the relatively low increase in direct labour associated with an increase in agriculture or food output.

However, because of the links with other businesses in rural areas, the increase in indirect labour associated with an increase in agricultural output is much higher than for many other enterprises, but may be ignored or forgotten in the bureaucratic debates.

New Economic Model

Many of these issues came up in discussion at the launch last week of a new “bio-economic” model of the economy, which seeks to quantify the scale and interactions between the “green economy” (agriculture and forestry), and the “blue economy” — everything associated with the sea.

Much of the latter has not been quantified before, but there is now a collaboration between Teagasc economists and those in a new institute in NUI Galway, called SEMRU (Socio-Economic Marine Research Unit) to model these two predominantly rurally based sectors.

All economic models are wrong (like weather forecasts!), but some are useful.

The aim of this new model is to calculate the impact of policy changes.

The Government has set out targets for both the agri-food and the marine sectors.

The first task with the new “bio-economic” model is to calculate the overall impact on the economy, and in particular on employment, if these targets are met.

Foodwise Targets

We are familiar with the Food Harvest targets to 2020 for the agriculture and food sectors, but these have been added to in recent times by new targets for 2025, in a report called “Foodwise”.

These targets are ambitious, and include

* increasing the value of exports by 85%

* increasing the value added (or income generated) in farming, fishing and forestry by 65%

* increasing the value added in the processing industry by 70%

* adding 23,000 jobs in the farming and food processing industries.

All of these increases are relative to the average figures in the period 2012 to 2014.

Teagasc researchers have set out to calculate the impact on the economy and in particular on employment, if these targets were achieved.

The researchers do not question the validity of the targets (despite pressure to reduce greenhouse gas emissions in the beef and dairy sectors; it is also questionable whether ambitious targets for doubling the output of the poultry sector can be achieved, given our lack of an obvious competitive advantage in this area).

The best research estimate is that if Foodwise targets were achieved, 23,200 extra jobs would be generated, of which 11,900 would arise in farming, 10,000 in processing and 1,300 in other sectors of the economy.

Dairy growth accounts for about two thirds of the increase in employment.

The econometric models behind these projections are at an early stage of development, and researchers readily admit, for example, that data on forestry is poor, and out-of-date, and environmental implications are not being captured in models.


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