The Department of Agriculture launched the annual review for 2022 this week.
While the numbers in it showing €19bn of agri-food exports are certainly impressive, they probably feel very outdated to many in the industry.
Minister for Agriculture Charlie McConalogue acknowledged that the farming and food industry may not get a lot of value from the publication when he commented that he has “no doubt that it will be a vital tool for researchers, students and practitioners”.
Teagasc annual review
Luckily for us, Teagasc published their annual review for 2023 and outlook for 2024.
We’ll use that here, along with latest trade data from Bord Bia, to get a broad assessment of how the industry is performing and what the strong (and weak) points for 2024 will be.
Export data for 2023 is available up until the end of September from Bord Bia.
In Figure 1, we compare exports (by value) for the first nine months of the year with the previous three years.
It might be surprising, considering the lower prices many farmers are seeing this year, that the value of Irish agri-food exports in the period are less than 2.5%, lower than they were in 2022, and remain considerably ahead of where they were in previous years.
Looking at the growth per sector, the picture does become a little clearer, with nine of the 11 major agri-food sectors tracked by Bord Bia showing reduced values in the nine months to September (see Figure 2).
The biggest growth section, prepared consumer foods (PCF), accounted for more than 20% export value in the period.
The PCF heading in the Bord Bia data covers a vast range of products, from biscuits to processed cheese to sauces. It also, interestingly, includes “value-added” dairy, beef, pigmeat, poultry and seafood products.
According to Bord Bia, these are products, such as value-added ingredients for food service and manufacturing channels, and products such as burgers for retail and food service.
Bord Bia also said the market is a “vitally important outlet for traditionally lower value cuts and trimmings”.
It is interesting, therefore, that the value of value-added poultry under PCF exceeded the value of ordinary poultry exports in the year to September, while the value of value-added pigmeat is close to that of pigmeat sold through traditional channels (see Figure 3).
While much of the expansion of PCF is driven by post-COVID re-opening of key economies – the UK and Europe account for more than 90% of such exports – the value of the sector was already 23% higher than pre-COVID in full-year 2022, implying that PCF values for full-year this year will be significantly ahead of pre-COVID levels.
While increased exports are almost always good news, increase in the value of the PCF channel is unlikely to lead to any extra money for farmers, as the “value added” part happens at the processor level, and therefore, any extra value made on selling the product goes to the processor rather than the primary producer.
This is not to say it is not a good thing for farmers – any increasing outlet for production is welcome – it is just that the extra value from the exports is realised, and kept, further down the supply chain well beyond the farm gate.
Teagasc published its annual review and outlook for 2024 this week. While many of the details are covered on page 4 of this week’s paper, there are some industry trends that are worth noting.
The forecast for higher milk, beef, sheep and tillage margins is welcome news for farmers – after what was a difficult 2023 for many.
The pig sector, once again, looks like losing out, with lower pig prices expected. That industry is also under pressure, as volatile trading conditions in several recent years mean investment on farm level has fallen behind.
As the Teagasc report says, this lack of capital investment “will increase costs in the short term (eg, heating) and reduce sectoral performance efficiencies in the medium term to long term”.
The drop in sow numbers, falling exports and continued high input costs, coupled with this lack of investment, means that the Irish pigmeat industry is, at best, facing a period of retrenchment.
The report overall is based on a relatively benign outlook for the economic backdrop for 2024, with lower fertiliser, feed and fuel prices expected for next year, while production generally will be flat (by volume).
This means that, under the scenario outlined, profitability at the farm gate should increase next year. However, as the old saying goes, it’s difficult to make predictions, especially about the future.
And Teagasc’s recent track record has been abysmal, at best (see Figure 4), getting the direction of farm income growth wrong in both 2021 and 2022; even when they got it right in 2023, they were still wrong by a significant margin.
This is not meant to be a criticism of Teagasc’s forecasting abilities – there are plenty of unforeseen circumstances accounting for how wrong they have been – but rather, a warning for farmers who may be engaging in budget-planning at this time of year.
Teagasc predicting a 30% rise in incomes next year is probably comforting to hear. But be sure, it is almost certainly wrong.