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Friday 20 April 2018

Foreign taste for in-vogue butter sends food exports soaring to record €12.6bn

Bord Bia CEO Tara McCarthy. Photo: Chris Bellew/Fennell Photography
Bord Bia CEO Tara McCarthy. Photo: Chris Bellew/Fennell Photography

Louise Hogan, Farming Editor

The dramatic revival of butter has seen exports soar by 60pc in value, as the rapidly-expanding dairy industry helped Ireland's food and drink sales hit record highs of €12.6bn for the first time. However, Bord Bia CEO Tara McCarthy cautioned they were facing in to a year where the impacts of sterling volatility and food inflation remained a key risk in the important UK market.

It comes as Agriculture Minister Michael Creed said businesses coping with the impact of Brexit will be able to tap into a low-cost loan scheme delivering up to €300m working capital finance from March.

Launching Bord Bia's 'Export Performance and Prospects' report for 17/18, Mr Creed said the eighth successive year of growth in the Irish agri-food export sector, which hit €13.5bn when forestry is included, was impressive particularly in light of the difficulties of Brexit and weaker sterling.

Last year's 13pc surge in the value of Irish food, drink and horticulture exports was driven by a 19pc rise in dairy exports to over €4bn, now one-third of all food and drink exports. Beef accounts for a fifth of all exports at almost €2.5bn, while prepared food was up 17pc to €2.3bn and beverages rose on the back of whiskey exports to €1.5bn.

"Within the dairy sector, the value of Ireland's butter exports rose by a remarkable 60pc this year alone, to reach €879m. This growth accounted for over half of the total increase in dairy exports," said Ms McCarthy, with the dairy fat now 'in vogue'.

However, the rise in dairy in volume terms was significantly lower at 6pc to 8pc on the back of the country's expanding milk pool post-quota.

After a butter bubble that saw French bakers furious at the cost of the key ingredient of their croissants hitting record levels of €6,000 a tonne, Ms McCarthy pointed out the high prices had a significant influence on the record exports. However, prices did fall back by around €2,000 a tonne late in 2017.

"The dairy market has recovered from very poor prices in previous years so that has to be compensated into it as well," added Ms McCarthy.

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Mr Creed said his concern on butter was that consumers were unwilling to pay the high prices which could have a spiral effect on dairy prices.

Ms McCarthy pointed out the continued emphasis on diversification to different markets.

Exports to other EU countries rose 16pc to over €4bn, while shipments to international markets grew 17pc to over €4bn for the first time, while the dependence on the UK dropped by two points to account for 35pc of export share.

Goods to the US surpassed the €1bn mark for the first time, while China rose 5pc to €700m. Dairy accounted for 45pc of all sales to international markets, with beverages providing 19pc.

Ms McCarthy highlighted the challenge of inflationary pressures in the UK and consumer sentiment as growth forecasts are revised downwards.

With a third of food exports destined for the UK and a further third for international markets trading in dollars, she pointed out the "constant currency challenges".

Bord Bia has predicted 2018 will deliver a ninth year of consecutive growth. However, Ms McCarthy cautioned it would be at "lower levels".

"Our key categories of beef and dairy will experience volume growth and will be the powerhouse," she said.

Looking at 2018, Ms McCarthy pointed out Brexit would be a "constant challenge" for meat exports, while there is a risk of market oversupply in the dairy sector.

After a year that saw the whiskey market soar 20pc to almost €600m, she pointed out they expect the demand to continue with production forecast to double from 2015-2020.

On working capital for Brexit-squeezed businesses, Mr Creed said the loan scheme at a proposed rate of 4pc would help deliver affordable finance for SMEs and mid-cap businesses.

He confirmed at least 40pc of the fund delivered by the Strategic Banking Corporation of Ireland through commercial lenders will be "available to food businesses" due to their unique exposure to the UK market.

In addition, the Department will be providing funding of €25m for new Brexit response loan schemes this year for farmers, fishermen and for longer-term capital for food businesses.

Ms McCarthy said working capital was key for smaller business particular as they cope with the volatility of sterling.

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