Irish food/ drinks exports in 2015 - far below potential
Another Irish public agency had a good news story to tell on Wednesday on performance in 2015 with many superlatives deployed to please ministers. Media headlines have noted that Irish food and drinks exports rose to a record in the year and it certainly beats a decline in value. However, the sector is underperformimg and last summer a senior academic in agriculture told Irish beef farmers that they would be better off by growing trees.
An estimated growth of 3% in 2015 resulted in an exports value of €10.8bn according to Bord Bia — that is less than 5% of the likely value of total Irish exports in 2015 (the 2014 total value was €208bn).
Simon Coveney, agriculture and food minister, complimented the industry for achieving a record sixth consecutive year of export growth.
The food and drink industry has been a driving force in our economic recovery since 2009 (this means from 2010 - Finfacts), delivering cumulative export growth of 51%.
On the other hand...the rise since the recession took hold post December 2008 was 30%.
In the ten years 2005-2014, government data show that enterprise agency supported jobs in food processing, drinks, and agriculture, fisheries, forestry (primary production) fell from 55,100 in 2005 to 53,800 in 2014. In addition, the total number employed in 'Agriculture, forestry and fishing' grew by 5,000 since 2005 to 112,000.
Since the publication of a government report, Food Harvest 2020, on the potential of the food sector, a nonsense statistic that does not appear in the report, has become a mantra among politicians and people in the food/agriculture sectors.
Simon Coveney, said in a speech at a farming conference in Oxford in January 2014:
For Ireland, with a population of only 4.5m, food security is not a critical national problem. We are in the fortunate position of being able to produce enough food to feed 35m people and this will rise to over 50m in 2020.
In 2015 a KPMG-Farmers Journal report states:
Ireland has come from a situation where it was unable to feed itself in the 19th century to providing food to feed 50m people globally today
Here we have the 50m people that could be fed, put in 2015 rather than 2020.
Enterprise Ireland said in a report in 2011:
Ireland currently produces enough food to feed 36m people. By 2020, Ireland wants to be in a position to provide enough food to feed 50m.
The state agency says 36m while Coveney said 35m but at least it cites a source.
A June 2011 report by Seán MacConnell in The Irish Times was cited by Enterprise Ireland but the late agriculture correspondent had not cited a source in his report. Three days after MacConnell's piece, The Guardian reported the feed statistic and referenced an update of the Food Harvest 2020 report but that wasn't correct as the statistic had been lifted from The Irish Times — we present this rigmarole here as 1) Finfacts goes to the trouble of trying to verify received wisdom 2) We are an exception as repetition often gives dubious claims the veneer of facts.
Based on food exports of €7bn in 2010 (ex-drinks), feeding 35m would amount to €200m per head and €68 net of imports!
Netherlands, Denmark, UK and Ireland
In 2013 a Dutch institute reported that the agricultural sector could sustain the 17m population but substantial changes would be required in production and diet.
Ireland was the only EU28 member that had an increase in the number of farms in 2003-2013.
In 2013 Ireland had 140,000 farms; Denmark had 39,000 and the Netherlands had 67,500 farm units.
The Netherlands is the world's second biggest agri-foods exporter after the US and the second biggest beer exporter after Mexico.
Dutch food and drinks exports were valued at €82bn in 2014 and about €19bn related to re-exports via the port of Rotterdam and Schiphol and €3bn related to transit cargo, according to the Port of Rotterdam:
Re-export means that the product is first imported and becomes the property of a Dutch company, undergoes minor processing and, possibly after being repackaged and regrouped, is exported to another country. This happens, for example, with tropical fruit in the port of Rotterdam, with imported grains and with oil-bearing seeds. With transit cargo, products are not cleared when entering the Netherlands, but go straight on in the same container to a client in another country.
The Dutch are among the world's biggest exporters of potatoes, in particular frozen chips.
Denmark has the highest labour costs in Europe and in 2014 its food and drinks export value was more than €15bn.
Denmark which has a population of 5.6m hosts the world’s 2nd largest meat exporter along with the 6th largest dairy company and the 4th largest brewery.
The Dutch economic affairs ministry asked a local think-tank to benchmark the Netherlands against seven other countries for innovation in the agri-food industry and Denmark was selected as the most innovative and the Netherlands got a third rank.
In 2014, a University College Dublin study also ranked Denmark as No. 1 and it concluded: "Ireland has a number of truly world class innovative companies, however the problem is there are simply not enough of them and there are too few new innovative companies emerging from which world leading companies could emerge."
According to Invest in Denmark, the inward investment agency, within ingredients for the food industry, Denmark holds a strong global position: 14% of all food ingredients supplied to the global industry come from Denmark.
Food ingredients, such as enzymes, cultures, and proteins are currently the biggest growth segments in the Danish food industry.
Ireland's Kerry Group has been ranked by FoodDrink Europe on a revenue basis at 16 of 25 European food and drinks companies. Kerry says it is "the largest and most technologically advanced manufacturer of ingredients & flavours in the world, we supply more than 15,000 ingredients & flavours to many of the world’s biggest names in the food, beverage and pharmaceutical markets."
The Economist's Schumpeter columnist wrote in January 2014:
Denmark is a tiny country, with 5.6m people and wallet-draining labour costs. But it is an agricultural giant, home to 30m pigs and a quiverful of global brands. In 2011 farm products made up 20% of its goods exports. The value of food exports grew from €4bn ($5.5bn) in 2001 to €16.1bn in 2011. The government expects it to rise by a further €6.7bn by 2020.
Why, in a post-industrial economy, is the food industry still thriving? Much of the answer lies in a cluster in the central region of the country. Policymakers everywhere are obsessed by creating their own Silicon Valleys. But Denmark’s example suggests that the logic of clustering can be applied as well to ancient industries as to new ones. In central Denmark just as in California, innovation is in the air, improving productivity is a way of life, and the whole is much greater than the sum of the parts. Entrepreneurs see the future in meat and milk.
In recent years, a restaurant in Copenhagen has been selected as the world's best! Denmark has also become a leader in the production of organic food.
In 2011 in an online debate in the Economist on the importance of manufacturing for growth between Dr Ha-Joon Chang of Cambridge University and Prof Jagdish Bhagwati of Columbia University, the former said:
Take the case of the Netherlands. Unbeknown to most people, it is world's third largest agricultural exporter [now the second after the US - Finfacts], despite having little land (it has the world's fifth highest population density). This has been possible because the Dutch have 'industrialised' agriculture by, for example, deploying hydroponic agriculture (growing plants in water) that uses computer-controlled feeding of high-quality chemicals — something that would not have been possible if the Netherlands did not have some of the world's most advanced chemical and electronics industries. In contrast, despite being the world's second most high-tech exporter (measured by the share of high-tech products in manufactured exports), the Philippines has only $2,000 per person income because it makes those products with other people's technologies."
A quarter of British food exports are shipped to Ireland, double the exports to its second biggest customer — France. Irish food and drink exports to the UK in 2015 accounted for 41% of the value.
The traditional food and drinks trade surplus with the UK had been narrowing in recent times and effectively evaporated in 2014 despite a weaker euro vs sterling rate in the second half of the year — 2015 data not yet available.
The larger number of Irish farm holdings resulted in European Common Agricultural Policy (CAP) payments in 2007-2013 to Irish farmers at €11.7bn; €7.7bn to Danish farmers and €7.5bn to Dutch farmers.
Some Irish farmers are in effect getting welfare from Brussels while retaining non-economic farm units. This has a knock-on impact on land sales which in Ireland are very low and result in Irish land prices being amongst the highest in the world. Selling sites for building also boosts income.
The number of Irish annual sales transactions has fallen as low as 0.2% of agricultural land compared with a peak of 2.1% in 1978 and Irish agricultural land prices are about quadruple French prices.
Irish land prices among highest in world — The Dutch and Danish can counter high costs with innovation and they both sell food technology overseas. Ireland's main indigenous resource is food production and the price of agricultural land is a hindrance to progress.
The value of Irish meat and livestock exports were at €3.7bn in 2015.
Last June Alan Matthews, professor emeritus of European agricultural policy at Trinity College, said most beef farms in Ireland are not financially viable without EU subsidies. He recommended that they switch to forestry.
Food and drink companies in the EU directly employ 4.25m people. "This is the largest EU manufacturing sector for direct employment (15%)," according to FoodDrink Europe, a lobby group.
2015 report: Ireland has 4,000 exporters, Denmark has 30,000
2015 report: Irish dairy farmers seek return of EU safety-net — Last April 1st, the end of a three-decade milk production quota regime in the European Union was hailed by the Government as "a great day for the rural Ireland" with the potential for agriculture in Ireland to move forward into broad, sunlit uplands with the opening of new markets and the creation of thousands of jobs in the agri-food sector.
2015 report: Irish fisheries industry and myth of EU stealing our fish — Indigenous processing is about 5% of total catch in Irish waters and an estimated 80% of exports are commodity traded.
Department of Agriculture and Food 2015: Food targets and aspirations to 2025