Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia

 
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
Export        Irish Food, Drink
              & Horticulture
Performance
& Prospects   2019–2020
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
Ireland’s
Agri-Food Sector

Ireland’s agri-food sector encompasses primary
production (agriculture, fishing and forestry) as well
as food, beverage and horticulture production and
wood processing.
According to the most recently available annual data
(2018) from the Department of Agriculture, Food and the
Marine (DAFM), employment in the agri-food sector accounts
for approximately 173,000 jobs or 7.7% of total employment
in Ireland.
It represents 7.7% of modified Gross National Income and
10% of total exports. Data from the Central Statistics Office
(CSO) shows that the food and beverages sector accounts
for 21% of all industrial turnover and 23% of all
manufacturing industry turnover.

DISCLAIMER
This publication has been produced solely for information purposes and has been prepared on the
basis of information that is publicly available, internally generated or from other sources, which are
believed to be reliable. Projections and forecasts are estimates only, based on assumptions involving
subjective judgement and based on analysis that may or may not be correct. Reasonable care has
been taken in the preparation of the information in this publication and we do not guarantee the
accuracy or completeness of the information contained therein.
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
DAFM and the CSO statistics for the agri-food sector include
food, drink and edible horticulture along with non-edible
items such as live horses, animal foodstuffs, forestry and
amenity horticulture, and animal hides and skins.
Exports of non-edible agri-food sector goods are
estimated by DAFM at €1.5bn in 2019.
Adding this estimate to the Bord Bia figures for the food,
drink and horticulture sectors, which are the focus of this
report, indicates that total agri-food sector exports in 2019
amounted to €14.5 bn.

  AGRI-FOOD
  SECTOR                        PEOPLE                          NON-EDIBLE
  EXPORTS                       EMPLOYED                        ITEMS

  €14.5bn                       +10k                            €1.5bn
  In 2019                       Since 2010                      In 2019
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
Contents

Executive Summary                  8
Overview                          16

Dairy                             22

Meat and Livestock                30
Beef                              33
Pigmeat                           35
Sheepmeat                         37
Poultry                           40
Live Animals                      42

Prepared Consumer Foods
and Prepared Food                 44

Alcohol                           50

Seafood                           54

Horticulture                      60
Edible Horticulture and Cereals   62
Amenity Horticulture              63
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
6   Export Performance & Prospects 2019–2020

Irish Food
& Drink Exports

DESTINATIONS                                                  INTERNATIONAL MARKETS

                                                              31%

                           EU MARKETS                         UK MARKET

                           35%                                34%

                           MARKETS WORLDWIDE   Irish food and drink is sold in more

                           +180                than 180 markets worldwide

                                               FOOD
                                               & DRINK                    10th
                                               EXPORTS                    YEAR OF
                                                                          EXPORT
                                               €13bn                      GROWTH

                                               Up 67%                    in volume
                                                                         terms since
                                               Since 2010                2010
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
7   Export Performance & Prospects 2019–2020

CATEGORIES

                           DAIRY               MEAT & LIVESTOCK

                           34%                 30%

                           PREPARED FOOD       ALCOHOL

                           18%                 11%

                           SEAFOOD             HORTICULTURE

                           5%                  2%
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
8   Export Performance & Prospects 2019–2020

Executive
Summary

                                               KEY DRIVERS OF EXPORT PERFORMANCE
                                               1. Global consumer spending remained strong
    FOOD & DRINK
                                               2. Increase in demand for proteins globally
    EXPORTS
    €13bn                                      3. Lower EU demand and supply challenges reducing beef and sheepmeat exports

                                               4. Brexit uncertainty curtailing GDP growth and business confidence in the UK

    7% INCREASE                                5. Weakening Euro improving competiveness for Irish exports internationally

    Up 67%                                     PERFORMANCE AND OUTLOOK
                                               The estimated value of food, drink
                                                                                             protein and dairy driving sustained
                                                                                             increase in demand for Irish product.
                                                                                             This was achieved in an increasingly
    Since 2010                                 and horticulture exports from Ireland
                                                                                             complex trade environment where
                                               for 2019 is €13bn - capping a decade
                                                                                             weakening confidence in the global
                                               of extraordinary growth where the
                                                                                             economy, volatility in key currencies
                                               value of Irish food and drink exports
                                                                                             and shifting commodity prices played
                                               increased 67%. This has been achieved
                                                                                             instrumental roles. It was also a year
                                               through sustained, incremental
                                                                                             when the increased use of tariffs as an
                                               increases in value and volume across
                                                                                             expression of trade policy by the US
                                               Ireland’s food and drink categories,
                                                                                             government impacted directly on Irish
                                               and across its key markets. In adding
                                                                                             food and drink exports. This complex
                                               to this picture, the 2019 figures also
                                                                                             overall environment can be seen to have
                                               reverse one aspect of the previous
                                                                                             impacted on sectoral performances
                                               year’s performance, with the value of
                                                                                             in different ways.
                                               growth once again outpacing volume
                                               increases. The 2019 exports were 7%           Dairy exports grew more than 11%,
                                               higher than the 2018 figure, while            despite a weakening in some of the
                                               volume output grew by 5%.                     key commodity prices. For the beef
                                                                                             industry, the repercussions of a difficult
                                               Irish food and drink sustained its
                                                                                             2018 as well as weakening demand in
                                               position as by far the most global of
                                                                                             key markets brought the issue of the
                                               Ireland’s indigenous industries, with
DESTINATIONS                                   its products finding markets in over
                                                                                             price being paid to producers to the fore
                                                                                             in the latter half of the year. This led to
                                               180 countries. It was a year when
                                                                                             circumstances where exports of beef
                                               diversification gained pace and, across
                                                                                             and sheepmeat were heavily curtailed
                                               many categories, there was significant
                                                                                             for a number of weeks, reducing exports
                                               growth in markets that, at the start of
                                                                                             in both categories in 2019.
                                               the decade, would have been seen as of
                                               only the most marginal interest for Irish     As a result of African Swine Fever’s
                                               exporters. This is growth very much in        effect on global animal protein demand,
                                               line with Bord Bia’s long-term strategy       pigmeat prices were significantly up,
                                               for the industry and towards which the        leading to a record high in that sectors
                                               organisation’s resources continue to be       export value.
                                               geared. Ireland’s enduring reputation
                                                                                             Prepared Food grew 12%, driven by
                                               as a source of high quality, safe and
                                                                                             strong demand in the UK market, while
                                               sustainable food and drink provides
UK 34%                                                                                       alcohol’s 8% growth was to a great
                                               a strong foundation for future
                                                                                             extent the result of Irish whiskey’s
Rest of EU 35%                                 development in this regard.
                                                                                             continued success in the US. Seafood
International 31%                              Strong growth of 7% to reach that             exports grew 6% as Asian demand for
                                               record export value of €13bn was              high value products delivered returns.
                                               achieved because of a positive global
                                               supply/demand dynamic for animal
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
9   Export Performance & Prospects 2019–2020                                               Executive Summary

A DECADE OF EXTRAORDINARY GROWTH                                                                Value
2010-2019
                                                                                                Volume

MARKET CHALLENGES                              It was also a year when trade               countered sluggish demand across
                                               disputes between the world’s major          the EU, as the European Commission
Significant challenges presented
                                               trading economies continued to sap          estimates per capita consumption of
themselves at all levels of the
                                               confidence in global markets. The           meat to fall by 0.5% in 2019.
global economy in 2019. The issue
                                               introduction of ad valorem tariffs
of Brexit presented by far the most                                                        A trade milestone with particular
                                               by the US on EU imports in October
immediate threat to the food, drink                                                        resonance for Irish agriculture was
                                               spilled over into real disruption for the
and horticulture industry, as the risk                                                     reached in mid-2019 when, following
                                               Irish dairy and alcohol industries. The
of the departure of the UK from the                                                        two decades of negotiations, the EU-
                                               tariffs present a significant challenge
EU without any deal in place became a                                                      Mercosur Association Agreement was
                                               for Ireland’s butter, cheese and cream
critical concern on occasion.                                                              concluded. If ratified and implemented,
                                               liqueur producers in particular as they
                                                                                           it will result in significantly increased
It was, however, in anticipation rather        plan for the year ahead.
                                                                                           flows of beef from South America to
than in occurrence that Brexit was
                                               Further trade stand offs between            the EU. However, ratification in its
ultimately of consequence, with
                                               the US and China did little to assuage      current form remains an open question
stocking forward, currency volatility
                                               fears that a global slowdown was            as Brazil’s environmental record in
and weakening business sentiment
                                               approaching, while China’s internal         meat production raised concerns at
proving significant to a number of
                                               difficulties with African Swine Fever       intergovernmental level in the EU in
category performances in Ireland’s
                                               (ASF) have had a decisive impact on         2019.
most important export market. The end
                                               global agriculture prices.
of the year brought ratification of the                                                    Climate change continued to be
Withdrawal Agreement. The agreement            The world’s second largest economy          a disruptive force in agricultural
anticipates a trade deal in place by the       opened its doors wider to protein           production around the world, with
end of 2020. Most observers consider           imports while it sets about rebuilding      drought, flooding, and hurricanes
this an extremely challenging timeline.        its pigmeat sector. That opportunity        among the climate and environmental
Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
10 Export Performance & Prospects 2019–2020                                                Executive Summary

Executive
Summary

ALL MARKETS                                   pressures limiting production of key         This is also the first year that a larger
                                              commodities in many major production         proportion of Irish food and drink
SECTORAL PERFORMANCE                          hubs. According to EU data, drought          exports went to continental EU than
                                              was a significant contributor to the         those that went to the UK.
                                              EU milk collection growing by just
                                              0.5% compared to 2018. In Ireland, the       DAIRY
                                              issue of climate proved more benign in       Ireland’s dairy sector maintained its
                                              2019 than 2018 as favourable weather         position as a pillar of Irish food and
                                              conditions prevailed, benefitting            drink exports, growing in value by 11%
                                              increased output. However, with UN           in 2019 to €4.4bn in value. This was
                                              data showing July to have been the           the third consecutive year in which
                                              hottest month ever recorded and              the value of dairy exports exceeded
                                              climate change expected to exert             the €4bn mark and was achieved
                                              growing pressure on global agricultural      despite weakening prices for key dairy
                                              productivity in the coming decades, it       categories internationally.
                                              remains an issue of primary concern.
Dairy 34%                                     The year’s events served as a reminder       Driving this was exceptional
Meat & Livestock 30%                          that volatility in global agriculture is     performance in butter, cheese and
                                              here to stay, and set to be governed by      dairy powders including skimmed milk
Prepared Food 18%                             increasingly extreme and unpredictable       powder (SMP), whey and casein - with
Alcohol 11%                                   events. How such events impact on            value growth well ahead of volume in
                                              Irish food and drink production and          all these dairy powder categories.
Seafood 5%                                    exports may not always be immediate
                                              or obvious but will need to be factored      In value terms, butter continued to
Horticulture 2%                                                                            lead the way with 13% growth lifting
                                              into future planning.
                                                                                           the value of category exports to €1.1bn
                                              After an exceptionally difficult 2018,       for the year. This was despite a fallback
                                              the better weather in 2019 delivered         in prices, felt particularly in EU markets.
                                              a welcome boost to Irish farming in          The growth reflects some stocking
                                              terms of better grass growth, yield and      forward in the US in anticipation of
                                              animal thrive, and a reduction in the        the tariffs that impacted the sector in
                                              requirement for bought-in animal feed.       Q4 2019. It was a strong year for Irish
                                              Teagasc estimates that the average           cheese exporters who saw increasing
                                              farm income increased by 7% in 2019,         diversification deliver promising results
 DAIRY                                        although the figure needs to be set
                                              against the 21% decline experienced in
                                                                                           for the sector. As a result of the clearing

 €4.4bn
                                                                                           out of intervention stocks and the
                                              2018. Beef farmers recorded marginal         highest commodity prices since 2014,
                                              increases in income, largely the result of   SMP exports increased in value 55% to
                                              the exceptional aid provided by DAFM         €332m. It is expected that the positive
                                              in the middle of the year and lower feed     demand dynamic will continue into at
                                              inputs. Farm gate prices were lower

 Up 11%
                                                                                           least Q1 2020.
                                              in dairy, beef, and sheepmeat, as a
                                              consequence of weakening commodity           Although the UK remains the primary
                                              prices, while pigmeat and poultry            market for Ireland’s cheese exports –
 In 2019                                      exporters benefitted from robust             and cheddar is the mainstay of this –
                                              export demand. Ireland’s seafood and         there was a strong performance in
                                              horticulture exporters also benefitted       continental Europe, contributing to
                                              from a shift in production to higher         an overall increase in exports of 21%.
                                              value outputs.                               The value of cheese exports to the US
                                                                                           and China also grew strongly, albeit
                                              The ongoing diversification of Irish
                                                                                           from a small base. The former linked
                                              food and drink exports was reflected
                                                                                           to growing consumer interest in non-
                                              in an overall division of market share
                                                                                           domestic offerings and the latter to
                                              that saw the UK as the destination for
                                                                                           demand in the foodservice sector,
                                              34% of food and drink exports, Rest of
                                                                                           where it is a key ingredient in pizza.
                                              EU account for 35%, with International
                                              markets accounting for 31% - higher
                                              than 30% for the first time.
11 Export Performance & Prospects 2019–2020   Executive Summary

MARKET DISTRIBUTION OF                            2019            2010
IRISH FOOD AND DRINK EXPORTS
                                                  2018

GROWTH IN INTERNATIONAL MARKETS 2010 v 2019
% INCREASE IN EXPORTS
12 Export Performance & Prospects 2019–2020                                                    Executive Summary

Executive
Summary

  FY 2019 ESTIMATES

  CATEGORY                                                FY 2018                              FY 2019                          CHANGE
                                                                €                                    €                               %

  Dairy                                             3,991,660,648                        4,430,022,242                                 11%

  Meat and Livestock                                4,041,982,772                        3,981,845,838                                 -1%

  Beef inc offals                                    2,417,780,083                       2,246,302,269                                 -7%

  Pigmeat                                            835,490,602                          940,993,138                                  13%

  Sheep                                               315,366,109                          293,966,537                                 -7%

  Poultry                                             291,125,661                         305,681,944                                    5%

  Live Animals                                        172,402,463                          167,034,694                                 -3%

  Other Meat                                             9,817,854                           9,326,961                                 -5%

  Prepared Food                                     2,068,339,067                         2,322,117,873                                12%

  Alcohol                                            1,338,714,079                       1,448,550,314                                   8%

  Seafood                                             570,273,630                         605,288,756                                    6%

  Horticulture                                        248,353,551                         266,831,438                                    7%

  Total                                            12,259,323,747                      13,054,656,459                                    7%

MEAT AND LIVESTOCK                            €990m. Exporters countered some                  strongly as the year progressed,
                                              of this by turning supply to the Rest            with record returns achieved in
It was a mixed year for Irish meat and
                                              of EU, which grew by 1% and through              some instances as the year ended.
livestock exports, the second pillar of
                                              a trebling of exports to International           The impact of ASF on supply across
industry exports. A 1% decline in the
                                              markets, which were worth €147m.                 large swathes of Asia and reaching
value of meat and livestock exports
                                              The mainland Chinese market, for                 into Central and Eastern Europe,
to €3.9bn reflects a challenging year
                                              which access was only gained in 2018,            contributed to this upward trend as
for beef and sheepmeat which more
                                              when combined with Hong Kong, now                exports for the year were valued at a
than offset a strong performance
                                              represents the largest international             record €941m.
in pigmeat. Beef and sheepmeat
                                              outlet for Irish beef, with China and
continued to grapple with difficulties                                                         Increased demand also benefitted
                                              Hong Kong absorbing €31m and €27m
created in the previous year, as                                                               poultry producers who delivered
                                              respectively.
production volumes were down and                                                               another year of export growth, rising
the issue of declining farmer returns         The sheepmeat sector also                        5% to €306m. The UK remained a
came to the fore.                             encountered a difficult year. This was           strong primary outlet, where much of
                                              driven by sustained pressure on prices           the supply is destined for processing
Beef production declined by 1.5%, with
                                              in continental Europe as a result of             and onward export. The Rest of EU
a 3% fall in throughput countered by
                                              aggressive supply from the UK, and               also saw strong growth on the back
a 1.5% increase in carcase weights,
                                              by challenges in supply created by the           of a successful diversification effort,
a result of better grazing conditions
                                              blockade of key processing facilities in         with the French market leading the
over the year. Beef prices in the key UK
                                              August and September.                            way. Internationally, exports to South
market continued to tighten as a result
                                                                                               Africa remained strong in spite of
of weakening demand, and overall the          Pigmeat prices started the year under
                                                                                               expectations of a significant fallback
market fell back by 15% to be worth           downward pressure but rebounded
                                                                                               this year. Exports of live animals fell
13 Export Performance & Prospects 2019–2020                                               Executive Summary

DESTINATIONS
OVER PAST 10 YEARS
(€ VALUE)

      International
      Rest of EU

      UK

back 3% to be worth €167m. The year           export output. However, 2019 also saw       with customers and supporting the
was characterised by a strong increase        growing traction for the sector in the      innovation pipeline through the work
in calf export numbers, which are of          Rest of EU markets, which now account       of The Bord Bia Thinking House.
lower value than adult animals.               for 25% of PCF exports, worth €666m.
                                                                                          The PF sector, which is defined to
                                              Opportunities in the private label sector
PREPARED CONSUMER FOODS (PCF)                                                             include enriched dairy powders but
                                              have influenced growth, with successes
AND PREPARED FOOD (PF)                                                                    excludes some PCF categories such
                                              in the UK often key to unlocking this.
                                                                                          as value-added meats, seafood, dairy,
PCF represents a broad category               Internationally, markets such as US
                                                                                          and juices, also delivered a strong
of value-added convenience foods,             and UAE also delivered growth for the
                                                                                          performance in 2019, with exports up
and takes in elements of the meat,            sector. Recognising the value of strong
                                                                                          12% to be worth €2.32bn in 2019. The
beverage and dairy categories. The            customer relationship management in
                                                                                          enriched powders category delivered
sector delivered a strong performance         the UK market at this critical time, Bord
                                                                                          a strong performance with a 9%
in 2019 with export growth of 2%              Bia has supported the more tailored
                                                                                          value increase to €725m and its six
delivering overall value of €2.66bn.          marketing and supply strategies being
                                                                                          key markets – Netherlands, Nigeria,
The UK retains a central role in the          advanced within the PCF sector, as well
                                                                                          Germany, Poland, Iraq and Senegal –
success of this sector absorbing 67% of       as assisting in relationship building
                                                                                          encompass three continents.
14 Export Performance & Prospects 2019–2020                                                Executive Summary

Executive
Summary

ALCOHOL                                       terms of delivering overall export sales     HORTICULTURE AND CEREALS
                                              of 7.9m cases. Cider producers enjoyed
Irish alcohol exports grew by 8% in                                                        Mushroom exports constitute 42%
                                              a strong export performance in 2019 as
2019 to be worth €1.45bn. Historically,                                                    of edible horticulture exports from
                                              a result of high demand and stocking
a category with a broad global                                                             Ireland. The value of mushroom
                                              forward in the key UK market, while
footprint, Irish whiskey continued to                                                      exports in 2019 was €104m, a 4% rise
                                              beer production, increasingly diverse
be the pathfinder of new growth for                                                        on 2018’s value.
                                              in both range and markets, enjoyed 1%
the entire sector, and of the €137m in
                                              growth, with strengthening demand in         It was a challenging year for
beverage export growth achieved in
                                              continental Europe. In the more niche        mushroom producers with continued
2019, some 50% was in this category.
                                              categories of gin and vodka, there were      consolidation of the sector and an
Strong demand in the US, driven by
                                              also good export performances, the           increased focus on productivity gains
its positioning in the premium and
                                              former on the strength of sustained          to help insulate against currency
super-premium segment has been
                                              popularity of gin in the UK and the          volatility and other cost increases.
instrumental to this. Overall, the value
                                              latter accounted for by the positioning      Producers have been focusing on new
of Irish whiskey exports grew by 11%
                                              of Irish offerings in the premium            and more profitable varieties including
in 2019 to €727m, with the industry’s
                                              segment.                                     brown mushrooms.
buoyancy reflected domestically in
a pipeline of new distillery openings         SEAFOOD                                      In the UK, the destination for
and the strong emergence of whiskey                                                        effectively all mushroom exports, the
                                              Against sometimes difficult trading
heritage tourism. For the cream liqueur                                                    retail environment observed a decline
                                              circumstances, and a reality of reduced
sector, the year brought less to cheer                                                     in value of flat mushrooms, which carry
                                              quotas, Ireland’s seafood industry
about as the imposition of tariffs on                                                      lower profit margins, and stronger
                                              delivered a story of growth in 2019 as
EU dairy in the US and pressure from                                                       performances in brown, button
                                              overall export values increased by 6%
domestic suppliers in Canada impacted                                                      and Portobello mushrooms - more
                                              to €605m. Reduced quotas impacted
the key North American market.                                                             profitable varieties.
                                              on the ability to supply pelagic fish,
However, the category held its own in
                                              including mackerel and horse mackerel,       Exports of cereals from Ireland were
                                              but was countered by strengthening           worth €94m in 2019, with €74m of
                                              prices internationally. The threat of        that going to Northern Ireland. Grain
                                              a no-deal Brexit and its implications        production in Ireland was 2.37m tonnes
                                              for access to waters drove a large           in 2019, a 30% increase on 2018’s
                                              proportion of the pelagic fleet to catch     harvest, while the price environment
EXPORTS TO                                    its quota in the early months of the year.   was challenging.
INTERNATIONAL MARKETS                         Whitefish exports suffered both              Amenity horticulture exports stayed
                                              reduced quotas and declining                 flat in 2019 at €18.5m. The UK is the
                                              international demand. Meanwhile,             only major destination for these
                                              a strong year for Irish farmed               exports and work continues for
                                              salmon exports ended abruptly as             producers in diversifying away from
                                              environmental and animal health              that market. Hardy nursery stock had
                                              issues forced the ceasing of supply          a strong year increasing the value
                                              for the final two months of the year.        of exports to €8.3m - growth of €1m
                                              For Irish shellfish producers, it was a      which was limited by strong domestic
                                              year of challenges as langoustine and        demand.
                                              mussel suppliers competed in crowded
                                              markets and prices for Irish brown crab      AGRI-FOOD INDUSTRY
                                              fell on the back of weak demand in the       The most recently available figures
                                              Chinese market. In contrast, oyster          (2018) show that the agri-food sector in
Dairy 44%                                     producers had a strong year with a           Ireland employs over 173,000 people,
Meat 4%                                       refocus on European markets including        which is 7.7% of the total working
                                              the UK.                                      population and an increase of more
Pigmeat 7%
                                              In December 2019, quotas for 2020            than 10,000 since 2010. Outside
Prepared Food 15%                             were confirmed and those included            Dublin and the mid-east region, the
Alcohol 22%                                   a significant (40%) uplift in mackerel       sector provides between 10% and 14%
                                              quota for Irish fish, alongside a 15%        of total employment.
Seafood 4%
                                              decline for prawn.
Other 2%
15 Export Performance & Prospects 2019–2020                                               Executive Summary

DESTINATIONS                                   INTERNATIONAL MARKET PERFORMANCE
2019 was a year when value growth
returned to Irish food, drink and              COUNTRIES                                            € VALUE        % GROWTH YOY
horticulture exports. It was also one
where diversification confirmed its            North America                                         1,319m                    +21%
role in both driving future growth and
balancing risk. The UK remains the key         Asia                                                  1,340m                    +18%
destination for Irish food and drink
exports. However, the total percentage         Africa                                                 688m                     +10%
of exports destined there was 34%,
the lowest proportion since Bord Bia           MENA                                                   330m                      +2%
began tracking export destinations.
The Rest of EU accounted for 35% of            Other                                                   219m                     -9%
the country’s €13bn in food and drink
exports. Difficulties encountered by           Central/South America                                    83m                    +16%
exporters in the UK, which were largely
the result of weakening economic               Oceania                                                  81m                    +18%
sentiment, were in many instances
mitigated by diversion of supply to the
Rest of EU and International markets.
The latter accounted for some 31%,
of all Irish food and drink exports.           MAJOR EU PRIORITY MARKET PERFORMANCE
2019 was the first year that exports to
markets outside of the UK and the EU           COUNTRIES                                            € VALUE        % GROWTH YOY
accounted for more than 30% of
the total.                                     Netherlands                                           1,147m                    +19%
Brexit remained an issue of cardinal
importance in 2019 and brought                 France                                                 884m                     +11%
continued uncertainty to Irish
exporters. However, it has undoubtedly         Germany                                                 773m                     +5%
also resulted in many food and drink
                                               Italy                                                   352m                     +5%
suppliers bringing a new focus on their
customer relationship management
strategy, which will play a role in
navigating the post-Brexit terrain both
in the UK and in markets elsewhere.
Bord Bia’s risk analysis tool - the Brexit
Barometer – continued to supply               way in delivering this growth although      of this growth. The 2019 growth
valuable information on the industry’s        declines were seen in sheepmeat,            has also been aided by impressive
preparedness for Brexit and at the            pigmeat and prepared foods. The             performances in other priority
start of 2019 recorded a pronounced           industry’s performance in International     markets that hold significant potential
acceleration in planning and mitigation       Markets added a sense of momentum           for the future. While issues such as
activities. Bord Bia also continued to        to the increased diversification of Irish   tariffs, transfer pricing decisions, and
offer its customised support services         food and drink exports. Impressive          plateaus in demand present distinct
in response to the knowledge gaps that        growth of 15% lifted the value of           and significant challenges, there is
were identified by the Barometer. This        exports to rest of world markets to         significant scope for continued export
has left Irish companies more informed        just over €4bn, a figure that now           value growth to be balanced between
about customs procedures, capable             represents some 31% of total food and       the established markets and the
of managing a tighter supply chain            drink exports. This is a 131% increase on   emerging markets. Bord Bia’s ongoing
and understanding the particulars of          2010’s value, a year when just 24% of       market prioritisation work will fully
sanitary and phytosanitary controls.          Irish food and drink exports left the EU.   support this.
Exports to continental Europe grew            In different sectors, and for different
by €400m in value, to reach €4.5bn,           reasons, the world’s two most powerful
representing 7% year-on-year growth.          economies, the US and China have
Dairy, poultry and seafood led the            been drivers of some key elements
16 Export Performance & Prospects 2019–2020

Overview

THE GLOBAL ECONOMY                            to come close to recession during         sufficient in food production, a figure
AND IRISH EXPORTS                             2019, largely as a result of weak         that has declined from 75% in 1991. In
                                              industrial growth, resilience in the      addition, the UK retail sector has made
GLOBAL ECONOMY
                                              services sector served to sustain         clear its concern about the risk to food
The International Monetary Fund’s             it on the path of moderate growth.        security should current supply chains
(IMF) most recent prediction is that          Unemployment rose during the              be disrupted.
global growth for 2019 will be 3.2%,          year but remained under the 4%
                                                                                        It is well to note that, in the midst of
expecting to pick up in 2020 to 3.5%.         threshold while wage growth at 3.8%
                                                                                        this uncertainty, Irish food and drink
While Brexit, US trade protection             ran ahead of the country’s inflation
                                                                                        exports to the UK have grown by
measures, the increased use of tariffs,       rate of 1.7%. Consumer spending in
                                                                                        some €400m in the three years since
and heightening geopolitical tensions         the UK is forecast to grow by 1.6%
                                                                                        the 2016 Referendum result. More
have contributed to this performance          in 2019, a figure appearing to show
                                                                                        recently, the industry has made great
and outlook, emerging economies               more confidence in the economy at
                                                                                        strides in preparation for post-Brexit
as well as reasonable economic                personal level than by business. It is,
                                                                                        scenarios, with strategies in place to
performance in the US and EU have             nevertheless, a modest expansion that
                                                                                        defend market share and grow new
buttressed performance. Notably,              has come with some intense pressure
                                                                                        business. The industry’s world leading
while business confidence has fallen          on the UK retail sector.
                                                                                        positions in the areas of sustainability,
and investment decisions are being
                                              In terms of currency movements, an        via the Origin Green programme, and
deferred, concerted monetary policy
                                              underlying weakness in sterling since     food safety and food quality through
accommodation has to date provided
                                              the 2016 Brexit Referendum result has     the Bord Bia’s Quality Assurance
something of buffer. Consumer
                                              been punctuated by occasional rallies     Scheme play important support
spending and employment also
                                              that have generally coincided with        roles in this.
remained resilient, largely as a
                                              expectations of progress on Brexit.
result of strong performances in
                                              In December 2019, sterling hit a 2.5
the services sector.
                                              year high against the euro based on
UK OUTLOOK                                    the return of a Conservative majority
                                              in the December General Election,
While the political uncertainty               reaching above 85p to one euro. Rates
surrounding Brexit on occasion                of 90p to one euro have been more
reached crisis point in 2019, the             typical over the period since 2016.
world’s fifth largest economy, and
the most important market for Irish           A slow growing UK economy presents
food and drink, remained resilient if         its own risks and threats to Irish
subdued during the year. Overall GDP          exports quite apart from the ongoing
growth for the UK during the year is          challenge of Brexit. This impacted
predicted at 1.2-1.5%, with the Bank          on the performance of the industry
of England reporting in November              during 2019, with a 2% contraction in
2019 that ‘underlying UK GDP growth           export value. Ireland’s Economic and
slowed materially in 2019 as weaker           Social Research Institute was among
global growth and Brexit-related              a number of voices arguing that the
uncertainties weighed on spending’.           impact of a no-deal Brexit would be
Following the UK elections of                 for such a contraction to spread to the
December 2019 which returned                  entire Irish economy. However, this
a Conservative majority, ratification         scenario was avoided in 2019.
of the proposed withdrawal
                                              In the event that the UK Houses of
agreement progressed in Parliament
                                              Parliament ratify the EU Withdrawal
before Christmas.
                                              Agreement as now seems likely,
An orderly departure from the EU in           debate will move to the future
2020 is expected to see GDP growth            trading relationship. There is general
moderate to 1%, with predictions by           agreement that the current date set
the IMF and the UK’s Office for Budget        for implementation of this, December
Responsibility that GDP growth                2020, is highly ambitious. Agriculture
will reach 2% by 2022 in the most             and food may prove to be among the
favourable of circumstances.                  most contentious areas of negotiation
                                              as data from the UK government
Although the UK economy appeared              shows the country to be 60% self-
17 Export Performance & Prospects 2019–2020                                             Overview

The aggregate euro area
unemployment rate in 2019
was 7.6% and is expected to
decrease to 7.3% by 2021

EURO AREA                                     performance. The unemployment rate        on the euro area economy than was
                                              for the EU-28 fell to 6.3 % in October    seen in 2019.
The European Commission’s economic
                                              2019, the lowest recorded since EU-
forecast for 2019 predicts the world’s                                                  The value of the euro against the dollar
                                              wide figures began to be measured in
largest trading bloc delivering its                                                     continued to decline over 2019. Having
                                              January 2000. Total employment rose
seventh consecutive year of growth,                                                     started the year buying $1.14, one euro
                                              to 241m, its highest level ever.
with labour markets remaining                                                           was worth $1.10 by December. This
strong and unemployment declining.            The aggregate euro area                   contrasts to $1.20 at the beginning of
Nevertheless, it notes that both the          unemployment rate in 2019 was 7.6%        2018, with some analysts arguing the
European and global economies have            and is expected to decrease to 7.3%       euro is now significantly undervalued.
weakened in the last year and expects         by 2021. Wages across the EU also         In the absence of any correction, the
euro area GDP growth to slow to 1.1%          continued to rise during the year, a      weakening of the euro is good news for
in 2020 from 1.9% in 2019, and only           trend that was more pronounced            exporters in 2020, particularly those
marginally improving to 1.2% by 2022.         in Central and Eastern European           that now need to factor in tariffs to
The Commission also expresses the             countries and resulting in greater wage   their supply costs.
hope that, by 2021, the economy will          convergence across the EU.However,
have absorbed the most significant            while this increase has helped to
disruptions, stating that ‘some of the        sustain consumer spending, private
shocks that have dampened activity            consumption growth in the euro area
in the euro area are expected to fade         is expected to moderate to 1.1% in
over the forecast horizon’. Its forecast      2020, from 1.4% in 2019, and remain
also notes that, with the exception of        at this level as both employment and
Ireland, investment growth in the euro        income growth slow. A moderation
area will be weak up to 2021.                 in consumer spending may impact
                                              Irish food and drink exports to the
Inflation remained low in the euro
                                              euro area, which have increased
area over 2019, reaching just 1% in
                                              significantly in recent years. In
November, below the European Central
                                              addition, the impact of weakened
Bank target of 2%. However, the
                                              demand in manufacturing and
resilience of labour markets in spite
                                              industry, if sustained in 2020, may
of weakening business sentiment has
                                              have more pronounced consequences
supported the EU’s overall economic
18 Export Performance & Prospects 2019–2020                                               Overview

Overview

USA                                           OTHER ASIAN ECONOMIES                       soybeans and maize rise, with lower
                                                                                          energy prices reducing input costs.
Growth in the US economy slowed               The significance of Asia as an engine
in 2019 after a strong 2018, as               for economic growth is reflected in         GLOBAL FOOD PRICES
manufacturing weakened and business           IMF data showing that China and India
                                                                                          The Food and Agriculture Organisation
sentiment was impacted by growing             collectively accounted for more than
                                                                                          (FAO) predicts global milk production
US-China economic tensions and                half of global growth in 2019. While
                                                                                          to reach 852m tonnes over the year, an
uncertainty surrounding trade policy.         India has seen its own deceleration in
                                                                                          increase of 1.4%. This is a lower rate of
Policy easing by the US Federal               growth, matching China with a 6.1%
                                                                                          growth than expected earlier in the year
Reserve reduced borrowing costs               increase in GDP in 2019, it will see this
                                                                                          and is the result of lessening supply
and while not sufficient to stimulate         rise to 7% in 2020 on the back of a new
                                                                                          in India and the EU. It estimates world
business investment to the degree             economic stimulus package. Japan is
                                                                                          meat production to fall to around 335m
required, it served to buttress already       currently experiencing more moderate
                                                                                          tonnes in 2019, 1% down on 2018. It
resilient consumer spending. On the           growth of 0.9% in 2019 and expecting
                                                                                          assesses this as the first fall in total
strength of strong growth in services,        just 0.5% in 2020 as consumer
                                                                                          production recorded in two decades
the unemployment rate continued to            spending falls. For the ASEAN-5
                                                                                          and a demonstration of the impact of
decline in 2019 to 3.5%. Overall, the         countries (Indonesia, Malaysia,
                                                                                          ASF on China and other Asian countries.
US economy is expected to see growth          Philippines, Singapore, and Thailand),
                                                                                          The FAO Food Price Index (FPI), which
of 2.3% in 2019 before moderating             the IMF sees weakening external
                                                                                          tracks agricultural commodity prices,
to 1.8% and 1.6% in 2020 and 2021             demand impacting on GDP, which will
                                                                                          averaged 177.2 points in November
respectively, as investment remains           stabilise at 4%-5% for the year.
                                                                                          2019, up 15.4 points or 9.5% from
weak. Consumer price inflation is
                                              GLOBAL COMMODITY MARKET                     November 2018. The November 2019
expected to grow modestly over
                                                                                          figure, driven by an increase in meat
this time, as the impact of tariffs on        Commodity prices followed broadly
                                                                                          and vegetable oils prices, was also
imports is set to be felt.                    downward trends in 2019, led by
                                                                                          the highest in over two years. The FAO
                                              energy, which the IMF projected to
CHINA                                                                                     Vegetable Oil Price Index averaged
                                              fall by 15% over the year, as economic
                                                                                          150.6 points in November, its highest
The broad-based deceleration of the           tensions and weaknesses, coupled
                                                                                          level since May 2018, while the FAO
Chinese economy continued in 2019,            with falling goods trade, reduced
                                                                                          Dairy Price Index averaged 192.6 points
with the IMF predicting growth of 6.1%        confidence in manufacturing and
                                                                                          in the same month, some 6% above the
over the year. Data from the first nine       lowered investment. These end of year
                                                                                          year earlier figure. The FAO Meat Price
months of 2019 showed a moderation            projections represented a substantial
                                                                                          Index was up 8.4 points in November,
of GDP expansion of 6.4%, 6.2% and            reassessment from the IMF’s spring
                                                                                          the largest month-on-month increase
6% over the first three quarters of the       review, and the decline is projected to
                                                                                          since May 2009 and raising the index
year. External pressures, most notably        continue into 2020.
                                                                                          some 28 points (17.2%) above its year
escalating trade tensions with the US,
                                              This weakening will see oil prices fall     prior level. The increase in meat prices
and weakening domestic demand have
                                              from an average $60 a barrel in 2019        was concentrated in the last quarter
played their part in this. Consumption
                                              to $58 in 2020, reflecting the weak         of 2019. It is still 21.5 points (9.4%)
remains a growth driver but, as
                                              outlook for the global economy. Built       below the peak reached in August 2014.
with GDP, has been on a downward
                                              into this is the assumption that the        Persistent strong import demand,
trajectory during the year, as a
                                              production cuts announced by OPEC           particularly from China was key to this
slowdown in the economy brings with
                                              in December 2018 will continue into         recent upturn.
it more cautious consumer behaviour.
                                              2020. Geopolitical threats in 2019,
Decreased demand for imported                                                             This global dynamic hides regional
                                              including mounting tensions between
goods and a higher propensity to                                                          specific dynamics. European meat
                                              the US and Iran, and the attack on
save have also fed into lower levels of                                                   prices have been depressed throughout
                                              Saudi Arabian oil processing facilities,
business investment. Growth is set to                                                     2019, countering the overall global
                                              offer reminders that this downward
drop to 5.8% in 2020 and 5.6% in 2021                                                     trend reflected in the index.
                                              trend in prices could be reversed due
as tensions with the US and the overall
                                              to sudden supply shortages. The IMF
global slowdown impact on export
                                              also predicts metal prices will fall 5%
performance, business sentiment and
                                              in 2019 and remain on a downward
investment.
                                              trajectory over 2020. Following
                                              projected falls in 2019, agricultural
                                              prices are expected to remain stable
                                              in 2020. A positive outcome to US
                                              China trade talks could see prices for
19 Export Performance & Prospects 2019–2020   Overview

EURO v GBP, 2019

EURO v DOLLAR, 2019

EURO v RMB, 2019
20 Export Performance & Prospects 2019–2020                                              Overview

Overview

In spite of some fractures in
the global economy, consumer
purchasing power on the whole
remained strong in 2019

PROSPECTS FOR IRISH FOOD AND                  are likely to be a contentious part of     shy of demand. US trade tariffs aimed
DRINK EXPORTS IN 2020                         the negotiations on the long term          directly at EU dairy exports remain a
                                              relationship between the UK and the EU.    challenge for butter and cream liqueur
While the world economy is gearing
                                                                                         exporters if no political resolutions
towards a slowdown, shifts in                 Rabobank sees ASF and global trade
                                                                                         are found.
consumer preferences in developing            disputes as presenting the key areas
economies towards dairy and animal            of risk and uncertainty for global food    In spite of some fractures in the global
protein consumption, combined with            production in 2020. It notes, however,     economy, consumer purchasing
production constraints impacting              that the issue of sustainability           power on the whole remained strong
across global agriculture, provide            remains as an enduring challenge for       in 2019. A prolonged weakening of
reasons for cautious optimism that            global agriculture. Ireland’s food and     economic indicators in 2020 could
Irish food and drink exports can              drink industry, supported by Bord          undermine this. However, the potential
sustain the path of growth in 2020.           Bia’s Origin Green, the world’s first      for progress in Brexit and a resolution
In the key UK market, this will be            national sustainability programme,         of trade tensions between the US and
contingent on 2020 delivering a firm          is well positioned to speak to buyers      China may provide the much needed
step forward in the Brexit debate, with       increasing needs on sustainability         stimulus to improve global economic
consumer and economic sentiment               and to continue to evolve as the           sentiment. With its strengthening
likely to be emboldened by a clearer          challenge demands.                         global footprint and its credentials
picture of how the future relationship                                                   as a high quality, sustainable offering,
                                              The impact of weakening EU prices
between the EU and the UK will take                                                      the Irish food and drink industry
                                              on beef production is also likely to be
shape.                                                                                   is well placed to capitalise on this
                                              felt by Irish producers. The European
                                                                                         opportunity.
Passage of the Withdrawal Agreement           Commission predicts that the 0.5%
bill in Parliament prior to Christmas         fall in per capita meat consumption
far from removes all challenges from          in the EU in 2019 will go unchanged in
the table for Irish food and drink            2020. Against this, the stabilising or
exports. The Agreement provides for           falling of feed prices will deliver some
maintenance of the status quo for just        opportunities to recover margins,
12 months at which point a full trade         and new export opportunities in Asia
deal is anticipated between the UK and        will help offset weakened demand for
EU. Most observers see that timeline as       beef in the EU. Closer to home, clarity
being extremely optimistic. This opens        around Brexit and greater investment
the possibility of no-deal Brexit being a     by the new UK government in 2020
reality again in twelve months time.          may provide significant boosts to
                                              consumer sentiment and spending.
Britain will remain dependent on food
and drink imports, and that fact will         The global dairy market is expected
be some context in future relationship        to hold firm through to the first half
negotiations, however food standards          of 2020, as global supply remains just
21 Export Performance & Prospects 2019–2020                     Overview

FAO FOOD PRICE TOTAL INDEX HISTORICAL VIEW
BASE 2002-2004 = 100

FAO FOOD PRICE INDEX 2019                     Food price                   Dairy Price
BASE 2002-2004 = 100                          Cereals Price Index          Meat Price
DAIRY
€4.4bn
The value of dairy exports,
an increase of 11% on 2018

+55%
SMP export +55% to €332m

The top 5 markets
Are the UK, the Netherlands,
China, the US and Germany

€584m
Value of exports to China,
the largest International
priority market
24 Export Performance & Prospects 2019–2020

Dairy

OVERVIEW                                      unique dynamics, Irish dairy exports            Much of the credit for the 2019
                                              grew in value by 17.6% while the volume         performance, however, rests with the
Ireland’s largest food export sector
                                              of those exports grew 12%, illustrating         industry itself and the central dynamics
continued on its path of global growth
                                              the greater value being captured by             in the year’s performance may be
in 2019, delivering an 11% increase
                                              Irish industry.                                 identified as
on 2018 export values. It was an
assured performance from the Irish            The issue of falling butter prices was          • continued growth in domestic
dairy industry, and was delivered in          a pronounced one across the EU in                 milk production
spite of some considerable market             2019, with suppliers exposed to the
                                                                                              • an intensifying industry focus on the
challenges. These included a significant      downside of volatile trading conditions
                                                                                                development of new markets, and,
weakening in butter prices, the               for dairy ingredients. The year closed
imposition of tariffs by the US on EU         with a striking if predicted 50% fall           • an enhanced portfolio of value-
dairy imports, and the ongoing market         in EU butter prices, given the 2017/18            added products and customer-
pressures created by uncertainty              spike was widely recognised as                    focused applications
surrounding Brexit. Given the                 unsustainable.
central place of the UK for Irish dairy
                                              The issue of EU price declines were,
exports, the protracted uncertainty
                                              however, counterbalanced by
around the UK’s withdrawal from the
                                              constraints to supply among Ireland’s
EU is creating a range of logistical
                                              key competitors, among them New
challenges that cannot be effectively
                                              Zealand, the US, Australia and the Rest
resolved without clarity on the future
                                              of EU, resulting in a tightening of global
trading relationship between the two
                                              milk supply and setting the stage for
countries.
                                              a strong performance by the Irish
There is significant evidence of Irish        industry.
industry capturing greater value. When
leaving aside the specialised nutritional
powders category, which has its own

IRISH MILK PRODUCTION                                                     2015         2019
PRE QUOTA 2015 VERSUS POST QUOTA 2019
Source: CSO Ireland
25 Export Performance & Prospects 2019–2020                                               Dairy

Dairy

GLOBAL OUTPUT                                 Key market performances:
Global dairy supplies remained tight in       NEW ZEALAND                                         DAIRY EXPORTS
2019, with farmers in many producer
                                              The world’s largest exporter of
countries unable to take advantage
                                              dairy products, New Zealand has a
of higher farm gate prices. Regional
                                              national dairy herd of some 6.4m
constraints included extreme weather
                                              and the sector has enjoyed sustained
conditions, rising costs of production,
                                              growth in recent years. Total dairy
and environmental limits on farm
                                              production in 2018 stood at 3.21m
expansion.
                                              tonnes, representing growth of 2% on
IRISH OUTPUT                                  2017. Rabobank predicts that, while
Irish milk production increased by
                                              prices will remain strong, the 2019/20
                                              season will conclude with either a
                                                                                                  €1.2bn
approximately 6% year-on-year in                                                                  Butter exports continue to
                                              minor contraction (-1%) or zero growth
2019, approaching a record 8bn litres.                                                            surge ahead, increasing by
                                              in output.
This strong performance was a result                                                              13% in 2019
of both rising dairy herd numbers and         AUSTRALIA
improvements in productivity. The Irish
                                              With a national dairy herd of some
dairy herd now numbers approximately
                                              1.5m cattle, increasing marginally in
1.5 million head, an increase of 40%
                                              size in 2018/19, Australia has a national
since the ending of the milk quota
                                              milk supply pool of some 9.3bn litres.
system in 2015. Improvements in
                                              However, drought conditions which
productivity are demonstrated in
higher returns in milk solids (fat and
                                              impacted the 2019 performances are
                                              set to continue in 2020. Rabobank
                                                                                                  €998m
protein) which resulted in more output                                                            Cheese exports grew
                                              predicts that Australian milk
and value per litre at processing                                                                 by 22% in 2019
                                              production will decline by 3% for
level. Milk solids have increased
                                              the 2019/20 season.
steadily in Irish milk supply over the
decade, primarily as a consequence            EU
of investment in breeding. Milk fat
as a percentage of content increased          In 2019, the European Commission
from 3.93% in 2010 to 4.22% in 2019.          estimates total EU milk collection to
Year-on-year increases in quality can         grow by just 0.5% on the year earlier
                                              figure. A 1% decline in the EU dairy
also be accounted for by diet and 2019
was a case in point, with excellent grass     herd, estimated at 22.9m in 2018, and               55.2%
growing conditions, particularly in           drought conditions in some areas,
                                                                                                  Skimmed Milk Powder
early spring, resulting in higher quality     are contributing to this. This marginal
                                                                                                  exports rose 55.2% to
outputs. Irish farm gate milk prices          increase contrasts to the 6% achieved
                                                                                                  €332m
averaged close to 33.6 c/l during the         by Irish dairy suppliers during the
year, allowing farmers an opportunity         year. However, Ireland remains a small
to recoup costs and recover from the          player in the overall European context,
financial challenges of 2018 when             accounting for just 5% of total EU milk
heavy feed inputs were required to            production. The sharp fall in the EU
counter the impact of adverse weather         butter prices has made EU butter more
and poor grass growth.                        attractive in international markets.
                                              Cheese shipments have remained
More favourable weather conditions            stable over the year, while exports
in 2019 also allowed for greater silage       of skimmed milk powder (SMP) are
harvests on farms, reducing overall           returning to levels last seen before
input costs for the year.                     the 2015/16 crash.
26 Export Performance & Prospects 2019–2020                                                   Dairy

Dairy

US                                            CATEGORIES                                      some 26% fed into the value of cheese
                                                                                              exports increasing by 22% to €998m.
Milk production levels in the US dairy        BUTTER
states were effectively flat during 2019,                                                     In the context of expected increases in
                                              Butter is the largest category within
largely a consequence of a continued                                                          milk output and a strategic requirement
                                              Ireland’s dairy export portfolio and, in
contraction in the size of the national                                                       to defend existing market share while
                                              2019, accounted for €1.1 billion, or one
herd. A modest pickup is predicted                                                            pursuing new opportunities, investment
                                              quarter of total dairy export value.
in 2020, with Rabobank forecasting                                                            in innovation and new production
supply growth of 1%.                          This is the second year in which Irish butter   facilities will be pivotal. Markets in Asia
                                              exports surpassed the €1bn value mark.          represent a key target and Japan has been
DESTINATIONS
                                              Achieved as a result of a 22% increase in       identified as an opportunity for dairy
Irish dairy exports found markets in          volumes, which were up 48,000 tonnes            growth through Bord Bia’s Prioritising
124 countries in 2019, with growth            on 2018 and despite downward pressure           Markets study. This is due to its affluent
delivered across almost all categories,       on prices. By September 2019, EU butter         and informed consumer base and ongoing
and led by strong performances in             prices were around €3,500 per tonne,            dependence on imported dairy ingredients
butter, cheese and SMP. The top five          compared to a peak of over €6,500 per           and products. The Japan-EU economic
destinations in 2019 were the UK,             tonne in mid 2016.                              partnership has created the context for
the Netherlands, China, the US and                                                            Irish cheese exporters to expand market
                                              Irish butter has enjoyed unprecedented          share and capitalise on new opportunities
Germany.
                                              demand in recent years, particularly in         in the years ahead.
Exports to the UK sustained despite           the US. Kerrygold is now that country’s
a number of hard Brexit cliffedges.           number two butter brand and the US is           The UK accounted for 45% of Irish cheese
Stockpiling activity led to a shortage        Ireland’s second largest overall market for     exports during the year, down from 50%
of warehouse space available in the           butter. Exports worth €218m represented         in 2016. As with other food categories,
UK, diverting some product into               28% growth on the previous year. While          some activity in 2019 can be attributed to
continental Europe.                           consumer demand undoubtedly played a            shipments being maximised in response
                                              part in this, growth was also attributable      to Brexit. EU markets accounted for 32%
In the case of exports to the                                                                 of cheese exports by value with strong
                                              to stocking measures undertaken to
Netherlands, a relatively small amount                                                        performances in Germany and France in
                                              mitigate against prospective tariffs on EU
is for domestic consumption. A good                                                           particular, where exports increased by
                                              dairy goods. This proved farsighted as,
proportion of dairy exports to the                                                            40% and 23% respectively.
                                              following a WTO ruling, a 25% ad valorem
Netherlands is further processed
                                              tariff impacting Irish butters and cheeses
there before reexport to other parts of                                                       The dynamic in the UK, whereby space in
                                              was imposed by the US authorities on
continental Europe and Asia.                                                                  chilled and frozen warehouses was short,
                                              October 18th, 2019.
                                                                                              drove some of the increase in supply into
It was a promising year for dairy                                                             continental Europe
                                              Irish butter exports also grew in Japan and
exports to the US, which increased by
                                              in South East Asia in 2019, with markets
an estimated 30% to be worth more                                                             Cheese exports to the US increased by
                                              such as Singapore, Indonesia, and the
than €411m. This has been driven by                                                           an estimated 36% to 9,500 tonnes and a
                                              Philippines all showing increased demand.
exceptional demand for Irish butter                                                           value of €51m. From a small base, cheese
                                              Butter is a relatively new export product
but also for cheese - in a short period                                                       exports to China continued to grow and
                                              to China, where the bakery sector is the
of time, the US has grown to become                                                           were worth €5m in 2019. The foodservice
                                              main driver of consumption. Irish butter
the fourth largest market for Irish                                                           channel is driving demand, with the
                                              exports increased from an extremely small
cheese export - and for powders with                                                          opportunity for mozzarella, as a key
                                              base in 2019 to be worth €2.23m, with
applications in sports nutrition.                                                             pizza ingredient, leading to considerable
                                              continued growth expected in 2020.
                                                                                              investment in production facilities by
Asian destinations were the location                                                          international suppliers, including Ireland.
                                              CHEESE
of some extraordinary growth figures                                                          Two Irish processors are set to release new
for Irish dairy exports, particularly for     Cheese was Ireland’s second largest             products targeting this and other Asian
ingredients, albeit these are coming          dairy category in value terms in 2019.          markets in 2020.
from a very low base. Dairy exports           While Brexit presents a distinct concern
to priority markets like Indonesia            for suppliers, 2019 was largely positive        DAIRY POWDERS
and Malaysia increased 85% and 50%            in terms of both ongoing UK market
                                                                                              After a number of years of relative
respectively to be worth more than            receptivity and the broader story of
                                                                                              stagnation, the value of Ireland’s SMP
€50m cumulatively.                            diversification. A volume increase of
                                                                                              exports rose by 55% in 2019 to €331m.
27 Export Performance & Prospects 2019–2020                                       Dairy

EU AVERAGE QUOTATIONS OF                      Volatility has been a feature of        Cheddar
                                              EU butter prices in recent years.
MAIN COMMODITIES                              A significant decline was seen
                                                                                      SMP
(IN €/100 KG)                                 in 2019.                                WMP
Source: DG AGRI – Reg. 2017/1185                                                      Butter
Art. 11 – Annex I.7

TOP 5 MARKETS FOR IRISH CHEESE                                                        2018      2019
2018 v 2019
28 Export Performance & Prospects 2019–2020                                              Dairy

Dairy

This was achieved with volume growth          Outside China there are other              and the European Central Bank ended
of 30.2% to 172,000 tonnes. All EU            opportunities in Asia, with notable        2019 by lowering rates and announcing
intervention stocks of SMP have now           growth, albeit from a smaller base,        quantitative easing.
been released. A successful year for          recorded in Vietnam in particular, as
                                                                                         The Irish dairy sector is well positioned
SMP exports was reflected in increases        exports for 2019 increased to €20.9m.
                                                                                         to grow exports further in 2020. At
in most key export markets and across
                                              WHEY                                       production level, conditions at the start
Europe in general. As reflected in
                                                                                         of the pasture season will be crucial to
the growth of value over volume, EU           A category that incorporates a
                                                                                         determining the overall performance
pricing for SMP is currently strong, and      growing range of high specification
                                                                                         of the sector for the remainder of the
increased by 41% in the period January        products, whey powder exports for
                                                                                         year. Brexit will also continue to be
2018 to June 2019. The pricing dynamic        2019 increased by 31% to €131m in
                                                                                         the great uncertainty on our doorstep,
was positive and primarily shaped             value, with a corresponding volume
                                                                                         and there remain permutations and
by exceptional demand from China              rise of 20%. Recent value growth
                                                                                         possible outcomes in 2020 that could
through 2019.                                 has been driven by demand in Asia
                                                                                         seriously impact on the performance
                                              for specialised demineralised whey
SPECIALISED NUTRITIONAL POWDERS                                                          of the Irish dairy sector. The tariffs
                                              powder, which is used in a number
                                                                                         impacting Irish butters and cheeses in
It was a more nuanced year in the             of specialised applications and is a
                                                                                         the US will also have an impact on the
specialised nutritional powders               product with significant opportunity
                                                                                         market performance there.
category, which includes infant               for value capture.
formula, and where a decrease of 10.2%                                                   In spite of many caveats, 2020 offers
                                              PROSPECTS
in value saw exports valued at €929m.                                                    the prospect of strong, continued
Continued changes in accounting               In 2020, dairy supply is expected to       growth – albeit at lower levels than
processes by a key multinational              remain tight internationally, with the     seen in the last few years – based on
manufacturer contributed to this              current general firmness in global         ongoing demand in Europe and key
decline.                                      markets likely to remain in place          international markets for Irish powder-
                                              through to mid-2020. Rabobank              based products, butter and cheese.
China and Hong Kong absorb 90% of
                                              is predicting a production growth
Irish exports to Asia, with China alone                                                  Looking to the future, the Irish industry
                                              increase of just 0.8% for the year, with
accounting for 36% of total exports.                                                     can continue to differentiate itself from
                                              pressure on margins, driven by rising
Here values dropped 10% to €301m                                                         the larger global players. Key to its
                                              costs of production, adding financial
and were again attributable in part to                                                   success will be identifying and pursuing
                                              pressures to dairy farmers across all
accounting procedure changes.                                                            value adding opportunities that show
                                              production regions.
                                                                                         an understanding of the needs of the
While the world-class safety and
                                              Any potential slowing down of the          supply chain and a keen focus on end
quality credentials of Ireland’s
                                              global economy would also have a           applications.
offering have underpinned its success
                                              dampening effect on current demand.
to date, declining birth rates in key
                                              Escalations in geo-political tensions,
markets will ultimately set a limit on
                                              and the deepening of trade wars
the potential for future growth, with
                                              and policy disputes could also bring
the overall market for specialised
                                              uncertainty into the global trading
nutritional powders currently flat.
                                              environment. There are strong
Greater competition from domestic
                                              indications of a slowdown in the global
manufacturers and economic
                                              economy in the second half of 2020,
uncertainty may further dampen
demand for imported product.
You can also read
NEXT SLIDES ... Cancel