Good news for the suits from down on the farm
AND now for some good news. In a week when global equity markets continued to tumble, there was a further ray of sunshine from the Irish food sector last week, with Kerry reporting an 8 per cent increase in first half profits and tillage farmers in line for a record harvest. Glanbia is also expected to unveil a bumper performance when it announces its half-year results this week.
The export sector has staged a strong recovery. Services exports are now running at an all-time high while merchandise exports are back to peak levels.
That's the good news. The bad news is that this recovery in the export sector has so far failed to feed through to the domestic economy. Instead we are experiencing something similar to the "jobless growth" last seen in the early 1990s.
This week brought some of the first signs that this may be about to change. While most attention has been focused on the strength of multinationals' exports, indigenous exporters, the food and drink sector in particular, have also been doing good business overseas.
Buoyed up by strong international food commodity prices, farm incomes are expected to rise strongly again this year after recording a rise of 48 per cent in 2010. Farm advisory body Teagasc announced this week that, weather permitting, Irish tillage farmers are in line to reap a record harvest.
High international commodity prices and strong farm incomes are good news for Ireland. Most of our agricultural output is exported but, unlike the IT products, software and pharmaceuticals exported by the multinationals, most of the value of food and drink exports is retained in this country.
The most recent figures from Forfas show that while 43 per cent of the 2009 sales of Irish-owned companies went on the purchase of Irish raw materials and services, only 10pc of the sales of multinational companies did. The proportion of the sales of Irish food and drink companies spent on Irish suppliers was even higher at 61 per cent.
This means that every euro of indigenous exports is worth the same as every €4 of multinational exports to the Irish economy. While their relatively low purchases of Irish goods and supplies means that a surge in multinational exports is slow to feed through into the domestic economy, any increase in indigenous exports, particularly those of food and drink, has an immediate impact.
Having been one of the first sectors to enter the recession, will food and drink now be the one that serves as the vanguard of the Irish economic recovery?
Sunday Indo Business