In recent times this report has justifiably been greeted with fanfare. 2015 marked the sixth consecutive year of growth with the value of Irish food and drink exports more than 50pc ahead of 2009 levels, albeit much of the growth in 2015 was driven by the weak euro rather than significant increases in the volumes exported.
This year’s report is likely to conclude that 2016 was more challenging. First, dairy product prices remained depressed for most of 2016 and second, and more significantly, the Brexit referendum has resulted in a considerable weakening of the sterling against the euro.
In the months following the referendum, the euro/ sterling exchange rate averaged at £0.86, meaning that Irish exports destined for the UK were 20pc more expensive than the previous year.
Significant for Ireland given that 41pc of Irish food and drink exports went to the UK market in 2015. IBEC reported that by Q4 2016, the value of Irish food exports to the UK was down 5.6pc year-on-year.
Developments further afield also contribute to future uncertainty for Irish food and drink exports, in particular the election of Donald Trump to the White House.
Although less than 10pc of Ireland’s agri-food exports currently enter the US market, the indirect effect of Trump’s policies on international trade may be substantial given that the US is the world’s largest exporter of agricultural products.
During his election rhetoric, Trump pledged to dismantle NAFTA – the North Atlantic Free Trade Agreement which exists between the US, Canada and Mexico.
The agricultural economies of the three countries are highly integrated with over one-third of the food and agricultural exports from the US going to Canada and Mexico.
A recent Rabobank report concluded that any change to NAFTA would have far-reaching ramifications for global trade dynamics and prices.
Brexit and the other issues around international trade policy in general calls into question the feasibility of the Food Wise target to increase the value of Irish food exports by 85pc to €19bn by 2025.
Indeed some politicians in the opposition benches have called for a review of the Food Wise targets in light of the Brexit referendum. Aidan Cotter, CEO of Bord Bia, remains confident and says the strategy is to grow exports to non-EU countries in the longer term.
This may be challenging. Even if the value of exports to the UK was to grow by 10pc between now and 2025, which is contrary to most of the recently published economic analyses, and if exports to the rest of the EU, an already mature market, were to grow by 20pc, then the non-EU market would need to almost triple in value or achieve an annual average growth rate of 11pc for Ireland to meet the Food Wise 2025 targets.
It is certainly ambitious but the non-EU market, which is dominated by trade of dairy products, has grown by 37pc since 2011, so perhaps it is not an outrageous target.
Chinese imports of dairy products will increase by between 30pc and 40pc in the next 10 years, while dairy imports to other parts of Asia are projected to grow by about 25pc, according to the European Commission’s Agricultural Outlook.
Clearly Ireland needs to secure some of this growth and to focus on value added products.
The US will also be keeping a close eye on growth prospects in the Chinese market.
US exports of food and agricultural products to China more than tripled in the 10 years to 2015 and the US is China’s most important trading partner.
However, in the lead up to the election, Trump «promised» to slap a 45pc tariff on Chinese imports to the US, a move that would be in breach of WTO agreements.
If Trump’s views are not tempered between now and inauguration day, China may well choose to retaliate by imposing similar trade taxes, thus making US ag and food imports less competitive, which in turn may present opportunities for Ireland’s food exporters.
Source: Independent
Link: http://www.independent.ie/business/farming/agri-business/asian-markets-could-make-or-break-irelands-ambitious-agrifood-targets-35335901.html