Is global food production sustainable in the hands of a few superpowers?

This week we publish our AgriBusiness report, produced in partnership with KPMG. With markets more open than ever, the focus is on how agribusinesses function on a global stage. The report follows on from work carried out by Prof Alan Renwick of UCD.

Eoin Lowry details the concentrated network of companies that operate on either side of the farm gate. An aggressive strategy of mergers and acquisitions has established a small number of global superpowers, each with the necessary scale, access to capital and R&D capacity to influence global market trends. Just four companies now control 75-90% of grain traded on the global market, while the world’s largest retailer, Walmart, engages with 245m customers weekly – about half the EU population.

The question facing global leaders is whether or not primary producers and consumers are best served by this structure? Internally, we see Irish producer-owned co-ops face Competition Authority investigations if they try to influence market prices, yet global giants in, for example, the oil and fertilizer industry face no supervision.

When we look at the sheer dominance of these superpowers and their ability to influence the markets in which they operate, we realise the challenges that globalisation of agriculture presents for Ireland. Irish companies, which on an EU scale appear to be influential players in the market, are dwarfed when compared to global competitors.

The New Zealand dairy giant Fonterra processes four times the volume of milk processed by Glanbia, Dairygold, Kerry and Lakeland combined. Meanwhile, the world’s largest beef processor, JBS, has the capacity to slaughter the entire annual cattle kill in Ireland in just seven days.

This lack of scale, while challenging, should not be seen as a roadblock preventing Irish agriculture from capitalising on the opportunities that a global market presents – a market with an increasing appetite for high-quality meat and dairy proteins. The announcement this week that US Secretary Of Agriculture Tom Vilsack is to visit Ireland demonstrates the global interest in Ireland as a leading food exporter.

The scale challenge merely reinforces the need for us to ensure we are leveraging our strengths to maximum effect – both inside and outside the farm gate.

As the global food market becomes increasingly competitive, sustainability of supply is now a major consideration when countries with significant import requirements are seeking strategic alliances. One of our key strengths is our export capacity which, at present, is over 80% of production for both the dairy and beef sectors.

While export capacity within dairying will increase further post-quota, export capacity for prime beef will largely depend on future profitability of the sector.

Education, innovation and efficiency throughout the entire production chain are key areas in which we must excel. College and university curriculums must be focused on delivering graduates with the capacity to drive innovation at production and processing level.

We cannot ignore the brand challenge any longer. Through Kerrygold, we have experienced the potential for branding to deliver a premium for Irish butter. However, we have struggled to leverage this experience across a wider range of dairy products and across other sectors, including beef and lamb.

Brand building is a costly process and one which requires significant ongoing investment (Kellogg’s invests $1 billion annually in brand advertising). However, we must have a clear and coherent message on what Irish food stands for. There is no doubt we have an excellent story in relation to the health attributes and sustainability of our grass-based production systems combined with leading processing standards and food safety, but are we merely telling it to ourselves?