independent

Friday 25 April 2014

Saudi the land of milk and money for our produce

I was standing in the milking parlour of the largest dairy farm in the world, where 22,500 cows were being milked daily. It was about two hours into the Arabian desert from the Saudi capital of Riyadh, where temperatures reach 50C.

Its scale was breath-taking and the Irish management are doing a fine job.

But man has no business producing milk in a desert where water has to be pumped from wells that are up to 1.25 miles deep. When these run dry, as they do, the back-up is desalinated water that is piped from a sea, hundreds of miles away.

It is the copious volumes of oil under the same sands that allow the impossible to continue, for now. But these harsh realities are also the reason why an Irish food trade delegation spent last week in the Middle East.

The group was only half the size of the one that went to China 18 months previously, and there were fewer big-bang deals signed off during the latest trip, but my feeling is that the Gulf may be a better opportunity for Irish food exporters.

China's population of 2bn may dwarf the 45m that reside in the Gulf and despite its huge food deficits, key Irish businesses such as the Irish Dairy Board (IDB) still haven't managed to crack the Chinese market. In contrast, we've got form in the Middle East.

Back in the 1980s, Dawn meats was built on the back of contracts to supply beef to the Kuwaitis and Saudis. Larry Goodman's ABP was also very active in Iraq.

During the 1990s we were the number-one exporter of beef in Saudi, supplying up to 40pc of the market with 24,000 tonnes of beef worth €100m a year at today's prices.

The Cavan-born Frank McGovern, who manages the King of Saudi's massive 3,000-acre farm just outside the capital, Riyadh, had an interesting perspective on why the Irish get on well in the region.

"The King believes that there's still a lot in common between Ireland and Saudi culturally. Family has been central to both cultures and it's not so long ago that women in the west of Ireland wore shawls and sat on one side of the church and men on the other," he said.

So even though asking after an Arab's wife can be a major faux pas, in addition to showing the soles of the feet or giving or receiving with the left hand, Irish people get on well in the Middle East. Regular direct flights from Dublin are already allowing small Irish companies such as Keoghs, Donnellys and Nestbox to export perishables such as bagged salads, potatoes and eggs.

The IDB's €20m investment in a joint venture in Riyadh is also a major "flag in the ground", as CEO Kevin Lane puts it.

He's coupled patented technology developed by Teagasc in Cork with a market opportunity to supply soft cream cheese into the region. It provides a vital outlet for the big bulge of Irish milk that is expected when quotas go in 2015.

The Irish product should be able to undercut the import competition on two fronts. By using Irish milk powder concentrate that is subsequently recombined into cheese, transport costs are minimised – there's no 'water' being shipped 5,000km from Ireland to Riyadh.

TARIFFS

The manufacturing process also allows the Irish product to circumvent a 5pc import duty. In addition, using Riyadh as a distribution base allows product to avoid additional tariffs when it is sold into neighbouring countries around the Gulf.

The prospects for beef and lamb may be more limited, given that we'd be going head to head with all the low-cost players such as the Australians, US and South Americans.

But the repositioning of Irish meat over the last decade as a premium and ultra-sustainable product should appeal to the wealthy ex-pat community and high-end hotels and restaurants that are mushrooming in the booming Emirati cities of Qatar, Abu Dhabi and Dubai.

These are economies with GDPs of up to $103,900 (€76,500) per capita (Qatar) and populations that have grown by 56pc in the last decade.

It's no wonder that the Minister for Agriculture, Simon Coveney, is excited. "I've seen an ambition and a willingness to do business that I've never seen before," he told an audience in Riyadh.

Forget the Mandarin. It's time to brush up on the Arabic.

Irish Independent

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