Export Performance & Prospects - 2019-2020 Irish Food, Drink & Horticulture - Bord Bia
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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.
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
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
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
7 Export Performance & Prospects 2019–2020 CATEGORIES DAIRY MEAT & LIVESTOCK 34% 30% PREPARED FOOD ALCOHOL 18% 11% SEAFOOD HORTICULTURE 5% 2%
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
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
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
€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.
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