Harnessing the opportunity Justin McCarthy Editor, Irish Farmers Journal
SWOT analysis of Irish Agriculture
• Strengths
• Opportunities
• Weaknesses
• Threats
What are our strengths?
• Dairy cows grazing quality grass
Ireland’s Grass Advantage
Grassland Area
Ireland Europe
80% 40%
Production (t DM/Ha)
Ireland Europe
15 11
Ireland’s sustainable production system
A myth or a reality
• Inset slide showing how much food we produce compared to population
Where dairy Ireland ranks globally
• 28 in global milk output league
• Rank 10th globally in dairy exports value
• Value 2012 €2.66 billion
• Top 5 achievable post quota abolition with volume and value growth
An expanding portfolio of high-end retail and foodservice
businesses
Premium market penetration across Europe
World leading food processors and marketing bodies
• Glanbia, Kerry, Dairygold, Lakeland, Aurivo, ABP Dawn Meats, Kepak, Bord Bia, Irish Dairy Board
• Teagasc / UCD
Independent research and advisory function
Independent research & advisory function
• Glanbia, Kerry, Dairygold, Lakeland, Aurivo, ABP Dawn Meats, Kepak, Bord Bia, Irish Dairy Board
What are our weaknesses?
• Large cohort of farms not financially viable – particularly in the beef sector
Gross margins €/ha
What are our weaknesses?
• Large cohort of farms not financially viable – particularly in the beef sector
• Land fragmentation
• Age profile of farmers
• Concentrated network of suppliers and buyers
Weaknesses at processing level
1. Lack of scale reducing efficiency
2. Competing against ourselves
3. Losing the value added
4. Duplication eg transport, 15 milk testing laboratories
5. Low R & D/NPD investment
Opportunities for Irish Agriculture?
• We are in the business of producing premium proteins
• Demand for these proteins is set to rise
• Our consumer is no longer European
Irish farmers are now producing premium proteins for a global market place
Projected Population Growth (U.N. medium projections)
Region 2012 2050 • World 7,053 9,150 + 30% • Africa 1,072 1,998 + 86% • Asia 4,216 5,231 + 24% • Latin America 596 729 + 22% • North America 346 448 + 29% • Europe 740 691 - 7%
The Global Market
• The Global market as a village of 100 people – 12 EU
– 60 Cities
– 67 illiterate
– 50 malnourished
– 16 live on less than $1 per day
– 80 Live in standard housing
– 33 do not have access to safe water
– 1 in higher education
Opportunities will be outside of Europe
• 25% of Indian population with the highest IQ
• Higher than the total population of US
• China is now the largest English speaking country in the world
Population growth & economic growth to drive demand
• 25-30% demand growth from increased population
• 70-75% driven by economic growth
• 40% of the worlds population living in countries that are recoding economic growth of 8% per annum.
• The number of middle class in China and India forecast to increase by 1.2 billion over next 20 years
Economic growth effects
Income level per capita
Effect of economic growth on food consumption
<$2 per day Eat more (increase calorie intake)
$2-$10 per day Switch from grains to meat and dairy
>$10 per day Increase spending on services/quality (convenience, brands, fresh/cooled)
Economic growth effects
• Increase demand for dairy products will require a New Zealand every 10 years
• 10% increase in income equates to a 5% increase in beef consumption
W O R L D
B E E F M A R K E T
E.U. E X P O R T S
BEEF MAIN EXPORTERS
Un
ited
Sta
tes
Un
ited
Sta
tes
Ru
ssia
Ru
ssia
Ch
ina
+ H
. K
on
g
Ch
ina
+ H
. K
on
g
Jap
an
Jap
an
Mex
ico
(u
p t
o J
an 1
2)
Mex
ico
(u
p t
o J
an 1
2)
So
uth
Ko
rea
So
uth
Ko
rea
EU
EU
Can
ada
Can
ada
Turk
ey (
up
to
Jan
12)
Turk
ey (
up
to
Jan
12)
0
20
40
60
80
100
120
2012 (up to February) 2013 (up to February)
Qty
in
10
00
To
nn
es
.
Main Importers of BEEF Products (up to February)
No 2103 figures available for : Mexico, Taiwan, Chile, ...
* Excluding live animals (0102), fats, preparations of several types of meat (0209, 0210 99 and 1602 90)
Economic growth effects
• 50% of population in China now in Urban areas
– Growing at a rate of 10 million per year
– High level of disposable income
• Relaxation of the one child policy
Opportunities at farm level
• Abolition of milk quotas post 2015
– Opportunity to increase efficient production bases
Opportunities at farm level
• Improved efficiency at farm level
– Increased global competiveness
• Shift in land use policies
Potential threats to future profitability
• Availability of shale gas in the US
– Lower the base line protein price
– Increased global production of premium protein at a lower cost
Potential threats to future profitability
• Price volatility
– Global market much more volatile
• Weather
• Food scares
• Government policies
– Limited range of cushioning measures applicable for family farms
– Government intervention logical – Australian model
Potential threats to future profitability
• Farmers failing to respond to the new challenges
– Debt management
– Risk management
– People management
• Increased costs of NZ dairy production
Conclusions
• Ireland is ideally positioned to continue to grow agri-food exports from a profitable production base
• Irish farmers are in the business of producing luxury proteins for a global consumer
• Population growth and economic growth will drive demand for luxury food proteins
• At farm level focus must remain on cost competiveness
• All stakeholders must engage to address the issue of price volatility