Irish food & drinks exports rose by 5% in 2014 and the end of European Union milk production limits (quotas) on March 31, 2015 is being hailed as a great opportunity for Ireland. Simon Coveney, agriculture minister, has termed it "one of the most significant opportunities for the Irish economy that we’ve seen in many years, in the most important indigenous industry for our economy" and he forecast last November that the post-quota scenario would be “extraordinarily exciting” — Irish ministers love superlatives!
It may well be and the manta that there are 1.3bn people in China can be reassuring or deluding while Kevin Bellamy, the senior dairy analyst at Rabobank, the Dutch bank, who in 2012 highlighted the favourable factors for Ireland, was quoted by Darragh McCullough in the Irish Independent at the end of January: "We're still pessimistic about any improvement in milk prices in Europe before July"
McCullough also reported that "forecasters still predict a below-cost price of 27c/l for Irish dairy farmers in 2015."
Irish food & drinks exports were valued at €10.4bn in 2014 (Irish population 4.6m) compared with €15.4bn from Denmark (5.6m) and €81bn from the Netherlands (16.8m). Surpluses as a ratio of exports were at 34%, 33% and 35% respectively.
The UK accounted for 40% of Irish food and drinks exports in 2014 and in 2013 Ireland and France were the UK’s biggest food and drink export markets by both overall value and value gained, rising by +7% to £3.21bn and +10% to £1. 5bn respectively.
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 - Bord Bia estimated Irish food and drinks exports at over €4bn in 2014 while Ireland accounted for 24% of UK food and non-alcoholic drinks exports in the year with France in second place at 11%. We used CSO import data for the value of UK alcohol imports.
In recent years Irish officials and industry boosters have been regularly using the claim that Ireland produces food annually that could feed 35m people while there is a target for 50m in 2020. It has become a mantra without the need to cite the basis while the Danes who have a bigger food output than Ireland, claim to produce enough food to feed 30m.
According to European Commission data, the number of Irish farm holdings at 139,900 compares with 42,100 in Denmark and 72,300 in the Netherlands. The larger number of holdings resulted in 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 land price is about quadruple French prices.
Focus on Irish food industry's bigger potential than chemicals or high tech — the price of Irish agricultural land is quadruple the level in France.
Dysfunctional development land systems in UK and Ireland - Part 2
This is why talk of a generational opportunity following the end of milk quotas should be treated with caution.
Vegetables and horticultural products (including flowers) accounted for 35% of Dutch primary output of €24bn in 2013; potatoes 7%; fruits 3%; milk 21% and pigs/cattle 20%. Denmark's €11bn was broken down as crops 35%; pigs 29%; milk 17% and cattle 4% while Ireland's €7bn comprised crops 25%; milk 29%; cattle 30% and pigs 7%.
Of employment of about 105,000 in the Agriculture, fisheries and forestry sector, 11,000 people work in fishing and processing and about 1,000 in forestry. The total Irish workforce at end December 2014 was at 2.152m.
Annual exports of seafood are valued at over €500m.
Irish value added was at €1.9bn; Dutch value added was at €9bn and Danish value added was at €3.9bn.
CAP subsidies accounted for 59%, 33% and 16% of 2013 factor income in Ireland, Denmark and Netherlands respectively while since 2005 overall agricultural income fell 17.7% and rose by 82% and 21% respectively.
Falling income and a big reliance on public subsidies is not a positive story for Ireland.
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.
Last year, 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.
The growing global demand is expected to further strengthen the development of Danish strongholds such as bio ingredients, probiotics, sweeteners, proteins and emulsifiers.
Between them, Chr Hansen of Denmark and DuPont, the US company, have an 80% share of the global market for cultures. While DuPont and Novozymes of Denmark are responsible for 75% of global food enzyme sales – important for fresh-keeping bread, full-bodied beer, high-yield juice and many other uses.
Ireland's Kerry Group 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 numbers directly employed in the food & drinks industry producing final products is about 50,000 in Ireland, 55,000 in Denmark and 125,000 in the Netherlands.
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."
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.
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Bord Bia food & drinks statement on 2014