2020 has certainly been unpredictable to date. Covid-19 has had a massive impact globally with foodservice impacted in a particularly negative way and Asia the first to suffer. Throughout the spring Bord Bia Covid-19 Market Insights reported on huge backlogs at ports in China, Philippines and elsewhere as lockdown limited the workforce available to process documentation and unload ships. What’s more, international shipping costs escalated massively as passenger numbers reduced on airlines, routes were suspended and cargo costs for space still available escalated. These issues came on the back of a global shortage of refrigerated containers, driven by the demand for protein in China to counteract the shortage caused by the global African Swine Fever issue.
Given all of this market turbulence you may be surprised to learn that, according to CSO statistics, for the first 5 months of this year Irish exports to Asia increased by 7%. This is all the more unexpected when you consider that 2019 was a record year with Irish exports to the continent reaching €1.36bn, or 10.3% of all food and drink exports worldwide. Indeed, YTD exports to Asia to end of May are estimated at €570m in comparison to €534m for the same period last year. Let’s look at some of the key drivers by sector and market.
Exports are up 59% year to date at a total value of €55m. China, Japan and Philippines are the main drivers of this growth. Additional market access granted for Irish plants to China in 2019 means that up to 20 plants are approved for export since May of last year. This additional access has helped drive exports to €29m so far this year, an increase of €7.3m YTD. This market temporarily closed in June of 2020 for technical reasons but the indications are of strong sustainable demand when the market returns. Japan, a long-standing important market for beef offal, now perhaps encouraged by a lower tariff agreement via the EU Japan Economic Partnership Agreement has really started buying into prime Irish beef in 2020 with €7m additional exports YTD. Philippines, Ireland’s 12th largest export market for beef, continues to perform strongly delivering just under €7m growth also.
Dampening this performance slightly is the YTD figures on beef offals which are back by €6.3m.
Irish dairy exports to Asia are up 10% (€31m) YTD. There appears to be growing demand for butter and cheese from Ireland in China, albeit coming off a low base, with the subsectors up 62% and 183% respectively. The IMF sector in China, which accounts for over 80% of Irish dairy exported into the market is performing positively with exports up 13% YTD. Cheese continues to perform strongly in Japan with imports from Ireland up 40% year to date and strong demand for casein and butter also starting to materialise. Exports to Malaysia are relatively flat with increased demand for SMP counterbalancing a drop in exports of FFMP. Performance in Singapore, one of the few dairy markets in Asia where multiple Irish dairy brands can be readily found available, is strong across all major categories but in particular butter, cheese and buttermilk. Thailand is one of the only markets in Asia demonstrating strong demand YTD for FFMP from Ireland with an additional 1700 tonnes shipped to the market so far this year. The Vietnamese market has doubled in value YTD driven primarily by IMF.
The impact of African Swine Fever globally has been well documented and is easily recognised in the trade figures between Ireland and Asia on pigmeat. YTD value exports to the region are up 36% (€27m) with volumes up just 1%. This clearly highlights an increasing price available across Asian markets and, in particular, China where value has increased by 54% (€29.8m) YTD and volume by just 11%. This premium available in China has therefore seen the market take a larger proportion of Irish pigmeat exports in 2020 with volumes into Japan down 27%, Philippines down 60% and South Korea down 51%. Bucking the trend, Vietnam has taken additional volumes versus 2019 but off a very low base and potentially to be traded back into the Chinese market.
Asia is a particularly important sector for Irish seafood, taking 15% of all export volume and value. Unfortunately, and in contrast to the other sectors previously mentioned, 2020 has not been a positive year so far in terms of market performance with exports back 68% (€30m) YTD. The shellfish trade, which accounts for about one–third of exports has suffered from technical access issues for brown crab to China while the premium oyster business, so dependent on air freight access and vibrant tourist and business hotels has felt the full force of covid-19 impacts. These factors have contributed to a decline in value for shellfish exports of €9m YTD. The pelagic subsector is back even further showing a decline of 71% YTD (€20.9m) driven by China and Japan. A key driver of this decline is the shipping container availability and cost issue that started to emerge in Q4 of 2019. This sector is a high volume, low margin business and seafood exporters are choosing to export closer to home or put product into storage for when market and logistics conditions are more favourable.
The fundamentals driving demand for Irish produce in Asia over the last number of years remain robust , even in the midst of Covid unpredictability. Populations in Asia are growing, urbanising and demanding high quality and safe food. However, Covid 19 has brought the strength or weakness of supply chains sharply into focus. In China, traces of Covid 19 found on European salmon and on shrimp from Ecuador have prompted a media backlash against imported foods that may take a while to overcome. As mentioned in the opening paragraph, Asia was the first to suffer from Covid. However, the region also had the opportunity to be the first to react to the virus and looks, in most countries, to be implementing structures and procedures to ensure they emerge quickly and contain any second waves and normality is returning to many cities.
My personal prediction is that it is highly unlikely that the 7% growth YTD will maintain for the full year as some of the negative effects in terms of market access, foodservice channel performance and logistics are still to be absorbed. However, I would hope that Asia can continue to deliver some growth and counter-balance predicted declines in other regions.
2020 YTD Irish Food and Drink Exports to Asia. Source: www.bordbiaperformanceandprospects.com