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There are ambitious new plans for Ireland’s most important indigenous industry

New targets for the Agri-Food sector could have a signifiant impact on Ireland’s economy.

Cathal O’Donoghue

MINISTER COVENEY HAS announced a new Agri-Food strategy, Food Wise 2025, setting out the ambitions of the sector for the next ten years. The Sstrategy was written by an industry group, containing representatives from agri-businesses, farm organisations, NGOs and government agencies and was chaired by John Moloney, former CEO of Glanbia.

The main focus of the strategy is to set out a path for the agri-food sector of sustainable growth over the next ten years. It predicts that Ireland can increase the value of exports by 85% to €19 billion, increase the value added to the sector by 70% to €13 billion and increase the value of primary production by 65% to €10 billion.

The new strategy builds upon the success of the current strategy to 2020, Food Harvest 2020. Since the economic crisis in 2009, the Agri-Food sector has seen exports grow faster than any of the other main merchandise export sectors.

Meanwhile opportunities created from the abolition of milk quota in 2015 allow for the expansion of Ireland’s most profitable agri-food sector, the dairy sector. Teagasc research has shown that the dairy industry, based upon Ireland’s natural and efficient grass based system is very competitive internationally.

Ireland’s most important indigenous industry

Some of the reasons why growth in the Agri-Food sector is important for Ireland are that it is Ireland’s most important indigenous industry, generating high multipliers in the rest of the economy and important local impact in rural areas.

Research by the Department of Agriculture, Food and the Marine, estimates that the Agri-Food sector contributes almost 40% of net foreign earnings, from 19% of exports. In terms of Balance of International Payments, every €100 of exports from the sector generated €52 in net foreign earnings. In contrast, exports from other sectors contributed only €19 in net foreign earnings for every €100 of exports.

The main reasons for this disproportionately large contribution to net foreign earnings include:

  • Relatively low import requirements per unit of output
  • A low share of international ownership and repatriation of profits
  • High local multiplier on other sectors
  • Significant inflows of funds from the EU

New opportunities for employment 

Given this embeddedness of the Agri-Food sector within the Irish economy, targeted output growth will have an important impact on Ireland. Another important attribute of the Agri-Food sector is that it is located in rural Ireland. Growth in these sectors can help deliver on the rural employment objectives within the CEDRA (Commission for Economic Development in Rural Areas) report.

Teagasc undertook an economic analysis estimating the number of new jobs that can result from reaching these targets at 23,000. The impact is balanced inside and outside the farm gate (and fishing), with the increase proportionally bigger impact elsewhere in the value chain in the processing, agribusiness and input sectors.

Delivery of the new targets will require a relentless focus on the underlying productivity factors on our farms and in our food companies that underpin the aggregate targets on growth, value add, jobs and exports set by the Food Wise 2025 committee.

Delivering this growth will require productivity improvements in a number of areas. Teagasc have identified areas that provide the biggest opportunities for gain. These are divided into technological and practice improvement, supported by research, training and skills for farmers and industry professionals.

The health and fertility of Ireland’s soils needs to be improved

The single largest competitive advantage of the Irish Agri-Food sector is the efficient, low-carbon grass-based production system used in Ireland. Competitive gains can be had by continuing the improvement in the amount of feed that can be generated from a hectare of grass and sustainably improving more marginal lands. For this to happen, the health and fertility of Ireland’s soils needs to be improved.

Most of Ireland’s food exports are derived from animals whether it is through meat or dairy products. Sustained genetic improvement in the national herd allows for more output with fewer inputs. In other words this can generate win-wins of higher farmer income, while having a lower more sustainable environmental impact and healthier animals. Implementation of these new technologies will require ongoing life-long learning and skills improvement.

As farms operate and expand in a more volatile market environment, it is essential that financial management and business planning becomes part of the farm toolkit. Twenty-three industry partners launched the Getting Farm Financially Fit campaign this spring, to improve planning in the sector.

Collaborative farming approaches need to become the norm

A key challenge to the sector, which has an ageing farmer population, is a transition over the medium term to the next generation, who have been attending Teagasc’s agricultural colleges in record numbers in recent years. Collaborative farming approaches need to become the norm for all farm succession which allow for a managed transition between generations, sharing responsibilities and facilitating learning.

Sustainable food production can help to achieve win-wins for both farmer incomes and the environment and has been identified as a comparative advantage in the strategy. Keeping ahead of competitors, who are also making improvements in this area, and demonstrably doing this, will require ongoing farm improvements, backed up by research, skills and infrastructure to facilitate these improvements.

For many farmers, particularly those working in some of the lower income sectors or with small farms or on poor land, it will be necessary to re-skill to take advantage of increasing opportunities in off-farm employment to supplement farm income.

At processor level, we have already seen substantial investments and plans for expansion by the Dairy co-ops. More value can be generated from scientific developments into more value, for example in translating the “Food for Health” scientific into practice. Improving the technology absorption capacity of job rich Food SME sector can help it to develop at a faster pace, generating more exports based upon greater value added generation.

Deploying Teagasc’s integrated research, education and extension model to optimum advantage in partnership with other rural professionals will be essential to supporting the sector in realising these gains.

Prof Cathal O’Donoghue is Head of Teagasc Rural Economy and Development Programme 

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About the author:

Cathal O’Donoghue

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