Cormac Nolan, Strategic Insight & Planning, Bord Bia – Irish Food Board
In early January, Bord Bia held the media launch for its assessment of the performance of food and drink exports in 2018, and what the prospects for 2019 are.
Context
Export performance for Irish food and drink in 2018 was in the context of a year of extraordinary global volatility. That volatility could be seen in global commodity prices, which declined for food and rose through most of the year for oil. Oil costs influence Irish food and drink exports in terms of supply chain costs as well as logistics. Commodity food prices, tracked by FAO, declined through 2018. The weighted average commodity price at the end of November 2018 was at the same point it was at in May 2016.
In addition to the price volatility, 2018 was the year rhetoric on trade dispute between the US and major trading partners in China and the EU turned to action. Agricultural products were specifically targeted by China in its imposition of tariffs on US soybean. There were knock on effects across the global food supply chain.
Further to the price and trade volatility, unprecedented weather affected production in Ireland and consumption in other parts of the world. And in our largest export destination for food and drink, Brexit continued to play out in an unpredictable manner, necessitating contingency planning across all food and drink exporting businesses. All of these sources of volatility and challenged trading environments will continue into 2019.
Performance
The performance of Irish food and drink exporters in that context was extraordinary. The value of food and drink exports in 2018 is estimated by Bord Bia to be €12.1bn – a 64% increase from the value in 2019.
2018’s value was a slight decline on the €12.5 achieved in 2017, and it is important to note that the volume of food and drink exports leaving the country continued to increase.
Ireland’s food and drink export success is underpinned by meat and dairy exports, which accounted for 66% of the total in 2018.
Beef exports were up 5% in volume terms, and so even though that sector suffered price pressure through 2018, the value of Irish exports increased. This was the case to the UK also, even more notable because beef consumption I the UK declined 2% in 2018.
Dairy exports were worth over €4bn for the second year in a row. This was despite a significant loss in notional value as a result of accounting changes at one of the large manufacturing multinationals involved in the specialised nutrition trade. A large portion of this product goes to china and while the volume was up in 2018, the value realised for the product was down.
Butter exports were worth over €1bn for the first time however, driven by positive commodity prices but also changing consumer demands and increased value capture in Ireland.
Prospects
The volatile global context will continue through 2019 and Irish companies are continuing to trade resiliently through it. Brexit remains the largest strategic threat to the Irish food and drink industry, but 80% of UK exporting companies polled by Bord Bia believe they can increase their exports to the UK in 2019. This optimism is founded in knowledge of the market and the consumer demand for high quality, sustainable Irish food and drink produce.
This demand is seen in each of the more than 180 countries Ireland exports food and drink to, and it is this demand that will continue to shape Ireland’s export performance.
The full P&P report can be downloaded here.