Record food exports can't mask scale of over reliance on UK
Published 07/09/2016 | 02:30
Irish food and drink exports clocked up a sixth consecutive year of growth in 2015, despite the steep decline in dairy prices.
Data from Bord Bia shows favourable exchange rates last year plus better beef, seafood and beverage prices helped lift the total value of food sold abroad to €10.8bn - an all-time high.
The data can be deceptive, however, as a rise in milk volumes helped mask the lower dairy prices but did nothing to improve margins for suppliers or processors.
The euro weakened 16pc relative to the US dollar and 10pc relative to sterling in 2015, flattering Irish competitiveness.
This year, while the dollar remains strong, overall currency volatility has become far less benign.
Ongoing pressure on the dairy sector and the dramatic weakening of sterling associated with the UK vote in June to quit the European Union means strong sales won't necessarily translate into Irish profits. Since June sterling has fallen about 10pc against the euro, shrinking margins.
Brexit claimed its first Irish business victim in August when Schiele and McDonald Mushrooms in Tipperary Town was forced to shut operations, laying off 70 staff.
Owner Peter McDonald blamed the Brexit vote. "We weren't able to cope with the devaluation of the English pound as a result of the Brexit vote," Mr McDonald said. "It's a business with a very tight margin as it is."
Margins were already tight in the mushroom industry, he said.
Currency swings linked to the referendum cost his business between €10,000 and €12,000 a week, he said.
That decline in sterling is particular challenge to competitiveness in the prepared foods and beverages sectors where in many cases Irish manufacturers compete on price with UK-based rivals.
With some sectors reeling, the Irish Exporters Association this week called on the Government to help small business in particular to hedge their currency risks. It wants policy makers to examine setting up a fund to provide subsidised currency protection to the most vulnerable exporters under the umbrella of the National Treasury Management Agency (NTMA).
Premium products - ranging from whiskey to prime beef and seafood - are likely be more resilient to volatile currency markets.
Worryingly though, the Bord Bia data shows the UK remains by far Ireland's biggest market for food and drink. In 2015 a huge 41pc of the total of Irish exports went to Britain - an estimated €4.4bn.
The UK market was up in 2015, boosted by the then strength of sterling. In that same period sales to the rest of the European Union were flat.
Beyond Europe, dairy products are the main Irish food export, including infant formula to the growing markets of China and India and high value added whey-based, protein rich functional products to markets including the US.
Though smaller than the other big agriculture segments, seafood exports hit €560m last year. Unlike dairy, where volumes were up but unit prices lower, the value of seafood exports rose 4pc in money terms in 2015 despite declining volumes in some key segments.
Seafood is also less reliant on the UK than meat and dairy. France, followed by Spain, UK, Italy and Germany, accounted for 55pc of the total fish market. The UK and non-EU markets make up the balance, including a growing trade with Africa.